SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-83672) UNDER THE
SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 45 [x]
and
REGISTRATION STATEMENT (No. 811-3737) UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 45 [ x ]
Fidelity Advisor Series IV
(Exact Name of Registrant as Specified in Declaration of Trust)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Office)
Registrant's Telephone Number: (617) 570-7000
Arthur S. Loring, Esq.
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 (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ x ] On June 30, 1995 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] On (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and has filed such notice required by such
Rule on January 31, 1994.
FIDELITY ADVISOR CLASS A & CLASS B PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
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1 .............................. Cover Page
2 .............................. Expenses
3 a,b .............................. **
c .............................. Performance
d .............................. Cover Page
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. FMR and Its Affiliates
d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates; Breakdown of Expenses
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. FMR and Its Affiliates
c .............................. Charter
d .............................. Cover Page; Charter
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Transaction Details; Breakdown of Expenses
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
** To Be Filed By Amendment
FIDELITY ADVISOR FUNDS
CLASS A AND CLASS B
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
the applicable fund's most recent financial report and portfolio listing or
a copy of the Statement of Additional Information (SAI) dated June 30,
1995. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA 02109, or
your Investment Professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK
OR DEPOSITORY INSTITUTION, THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. MUTUAL FUNDS ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
EMERGING MARKETS INCOME, HIGH YIELD, STRATEGIC INCOME AND HIGH INCOME
MUNICIPAL MAY EACH INVEST WITHOUT LIMITATION IN LOWER-QUALITY DEBT
SECURITIES, SOMETIMES CALLED "JUNK BONDS." INVESTORS SHOULD CONSIDER THAT
THESE SECURITIES CARRY GREATER RISKS, SUCH AS THE RISK OF DEFAULT, THAN
OTHER DEBT SECURITIES. REFER TO "INVESTMENT PRINCIPLES AND RISKS" ON PAGE
FOR FURTHER INFORMATION.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
ACOM-pro-295
GROWTH FUNDS:
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS:
Fidelity Advisor Equity Income Fund (formerly Fidelity Advisor Equity
Portfolio Income)
Fidelity Advisor Income & Growth Fund
TAXABLE-INCOME FUNDS:
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT/MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
PROSPECTUS
JUNE 30, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
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KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Each class's sales charge (load) and its yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary of each fund's financial
data.
PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL CHARTER How each fund is organized.
INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
31 HOW TO BUY SHARES Opening an account and making
additional investments.
HOW TO SELL SHARES Taking money out and closing your
account.
INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
APPENDIX
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KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to investors who engage an
Investment Professional for investment advice.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, Income & Growth, High Yield,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal and Limited Term Tax-Exempt are diversified funds.
Emerging Markets Income, Strategic Income, and Short-Intermediate
Tax-Exempt are non-diversified funds. Non-diversified funds may invest a
greater portion of their assets in securities of a single issuer than
diversified funds. As a result, changes in the financial condition or
market assessment of a single issuer could cause greater fluctuations in
share value than a diversified fund.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income and Income & Growth are designed for
investors who are willing to ride out stock market fluctuations in pursuit
of potentially high long-term returns. Overseas, Equity Portfolio Growth,
Global Resources, Growth Opportunities and Strategic Opportunities are
designed for investors who want to be invested in the stock market for its
long-term growth potential. These funds invest for growth and do not pursue
income. Equity Income and Income & Growth are designed for those investors
who seek a combination of growth and income from equity and some bond
investments.
Emerging Markets Income, High Yield, and Strategic Income are designed for
investors who want high current income with some potential for capital
growth from a portfolio of debt instruments with a focus on lower-quality
debt securities and income-producing equity securities. These funds may be
appropriate for long-term, aggressive investors who understand the
potential risks and rewards of investing in lower-quality debt securities,
including defaulted securities.
Government Investment, Limited Term Bond and Short Fixed-Income are
designed for investors who seek high current income from a portfolio of
investment-grade debt securities. These funds also invest consistent with
consideration of capital preservation.
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt are designed for investors in higher tax brackets who seek high
current income that is free from federal income tax. Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt also invest consistent with
consideration of capital preservation. High Income Municipal focuses on
lower-quality debt securities and may be appropriate for long-term,
aggressive investors who understand the potential risks and rewards of
investing in lower-quality debt securities, including defaulted securities.
The value of each fund's investments and, as applicable, the income they
generate, varies from day to day, generally reflecting changes in market
conditions, interest rates and other company, political, and economic news.
In the short term, stock prices can fluctuate dramatically in response to
these factors. The securities of small, less well-known companies may be
more volatile than those of larger companies. The value of bonds fluctuates
based on changes in interest rates and in the credit quality of the issuer.
Over time, however, stocks although more volatile, have shown greater
growth potential than other types securities. Investments in foreign
securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to
currency fluctuations.
The investments of Strategic Income, Government Investment, Limited Term
Bond, and Short Fixed-Income are also subject to prepayments, which can
lower a fund's yield, particularly in periods of declining interest rates.
In addition, Overseas, Global Resources, Emerging Markets Income and
Strategic Income may also be appropriate for investors who want to pursue
their investment goals in markets outside of the United States. By
including international investments in your portfolio, you can achieve an
extra level of diversification and also participate in opportunities around
the world. However, there are additional risks involved with international
investing. The performance of international funds depends upon currency
values, the political and regulatory environment, and overall economic
factors in the countries in which a fund invests. These risks may be more
significant for those funds that focus on emerging markets.
Each fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
exchange or hold shares of a fund. Lower front-end sales charges may be
available with purchases of $50,000 or more in conjunction with various
programs. See "Transaction Details," page , for an explanation of how and
when these charges apply.
A contingent deferred sales charge (CDSC) is imposed only if you redeem
Class B shares within 5 years of purchase. See "Transaction Details," page
, for information about the CDSC.
Clas Clas
s A s B
Maximum sales charge on purchases for all Advisor funds 4.75 None
(except Short Fixed-Income and Short-Intermediate %
Tax-Exempt) (as a % of offering price)
Maximum sales charge on purchases 1.50 None
of Short Fixed-Income or Short-Intermediate Tax-Exempt
(as a % of offering price)
Maximum CDSC (as a % of the lesser None 4.00%
of original purchase price or redemption proceeds) [A]
Maximum sales charge on None None
reinvested distributions
Redemption fee None None
Exchange fee None None
Annual account maintenance fee $12.0 $12.0
(for accounts under $2,500) 0 0
[A] DECLINES OVER 5 YEARS FROM 4.00% TO 0%
ANNUAL OPERATING EXPENSES are paid out of each class's assets. Each fund
pays a management fee to Fidelity Management & Research Company (FMR) that,
for Overseas, Growth Opportunities, and Strategic Opportunities, varies
based on performance and incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports.
12b-1 fees for Class A and Class B include a distribution fee and, for
Class B, include a shareholder service fee. Distribution fees are paid by
each class to Fidelity Distributors Corporation (FDC) for services and
expenses in connection with the distribution of the applicable class'
shares. Shareholder service fees are paid by Class B to Investment
Professionals for services and expenses incurred in connection with
providing personal service and/or maintenance of Class B shareholder
accounts. Long-term shareholders may pay more than the economic equivalent
of the maximum sales charges permitted by the National Association of
Securities Dealers, Inc., (NASD) due to 12b-1 fees.
Each class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
Effective August 1, 1994, FMR voluntarily agreed to implement management
fee reductions for Equity Portfolio Growth. The individual fund fee rate
was reduced from 0.33% to 0.30%. If this agreement was not in effect, total
operating expenses would have been 1.71%.
The following table shows projections based on historical expenses of each
class of each fund (except for Strategic Income-Class A and Class B,
Overseas-Class B, and Global Resources-Class B) whose projections are based
on estimated expenses, and are calculated as a percentage of average net
assets of each fund.
EQUITY FUNDS
Operating Expenses Class A Class B
OVERSEAS Management fee 0.80 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.67 n/a
%
Total operating expenses 2.12 n/a
%
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EQUITY PORTFOLIO GROWTH Management fee (after reimbursement) 0.62 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.41 n/a
%
Total operating expenses 1.68%[ n/a
A]
GLOBAL RESOURCES Management fee 0.77 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.65 n/a
%
Total operating expenses 2.07%[ n/a
A]
GROWTH OPPORTUNITIES Management fee 0.69 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.28 n/a
%
Total operating expenses 1.62%[ n/a
A]
STRATEGIC OPPORTUNITIES Management fee 0.67 0.67
% %
12b-1 fee (including 0.25% Shareholder 0.65 1.00
Service Fee for Class B shares) % %
Other expenses 0.47 0.47
% %
Total operating expenses 1.79%[ 2.14
B] %
EQUITY INCOME Management fee 0.50 0.50
% %
12b-1 fee (including 0.25% Shareholder 0.65 1.00
Service Fee for Class B shares) % %
Other expenses 0.49 0.49%[
% C]
Total operating expenses 1.64 1.99
% %
INCOME & GROWTH Management fee 0.52 n/a
%
12b-1 fee 0.65 n/a
%
Other expenses 0.41 n/a
%
Total fund operating expenses 1.58%[ n/a
A]
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[A] A PORTION OF THE BROKERAGE COMMISSIONS THAT THE FUNDS PAID WAS USED TO
REDUCE EACH CLASS'S EXPENSES. WITHOUT THIS REDUCTION, THE TOTAL OPERATING
EXPENSES FOR CLASS A WOULD HAVE BEEN: EQUITY PORTFOLIO GROWTH 1.71%; GLOBAL
RESOURCES, 2.10%; GROWTH OPPORTUNITIES, 1.63%; EQUITY INCOME, 1.67%; INCOME
& GROWTH, 1.59%.
[B] INCLUDES THE EFFECT OF ANNUALIZING A VOLUNTARY REIMBURSEMENT OF FEES BY
FMR.
[C] PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
TAXABLE INCOME
Operating Expenses Class A Class B
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EMERGING MARKETS INCOME Management fee 0.70 0.70
% %
12b-1 fee (including 0.25% Shareholder 1.00
Service Fee for Class B shares) 0.25 %
%
Other expenses (after reimbursement) 0.55%[ 0.55%[
C] C]
Total operating expenses 1.50 2.25
% %
HIGH YIELD Management fee 0.60 0.60
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses 0.35 0.35%[
% C]
Total operating expenses 1.20 1.95
% %
STRATEGIC INCOME Management fee 0.61 0.61
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.49%[ 0.49%[
C] C]
Total operating expenses 1.35 2.10
% %
GOVERNMENT INVESTMENT Management fee 0.46 0.46
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.03 0.03%[
% C]
Total operating expenses 0.74 1.49
% %
LIMITED TERM BOND Management fee 0.46 0.46
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.36 0.36%[
% C]
Total operating expenses 1.07 1.82
% %
SHORT FIXED-INCOME Management fee 0.46 n/a
%
12b-1 fee 0.15 n/a
%
Other expenses 0.36 n/a
%
Total operating expenses 0.97% n/a
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TAX-EXEMPT/MUNICIPAL
Operating Expenses Class A Class B
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HIGH INCOME MUNICIPAL Management fee 0.41 0.41
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses 0.23 0.23%[
% C]
Total operating expenses 0.89 1.64
% %
LIMITED TERM TAX-EXEMPT Management fee 0.41 0.41
% %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.24 0.24%[
% C]
Total operating expenses 0.90 1.65
% %
SHORT-INTERMEDIATE TAX-EXEMPT Management fee 0.41 n/a
%
12b-1 fee 0.15 n/a
%
Other expenses (after reimbursement) 0.19 n/a
%
Total fund operating expenses 0.75 n/a
%
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[C] PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge
or CDSC, as applicable, on a $1,000 investment, assuming a 5% annual return
and either (1) full redemption or (2) no redemption, at the end of each
time period:
EQUITY FUNDS
Examples
Class A Class B Class B
(1) (1) (2)
OVERSEAS After 1 year $68 n/a n/a
After 3 $111 n/a n/a
years
After 5 $156 n/a n/a
years
After 10 $281 n/a n/a
years
EQUITY PORTFOLIO GROWTH After 1 year $64 n/a n/a
After 3 $99 n/a n/a
years
After 5 $135 n/a n/a
years
After 10 $239 n/a n/a
years
GLOBAL RESOURCES After 1 year $68 n/a n/a
After 3 $109 n/a n/a
years
After 5 $154 n/a n/a
years
After 10 $276 n/a n/a
years
GROWTH OPPORTUNITIES After 1 year $63 n/a n/a
After 3 $96 n/a n/a
years
After 5 $131 n/a n/a
years
After 10 $231 n/a n/a
years
STRATEGIC OPPORTUNITIES After 1 year $65 $61[A] $21
After 3 $101 $95[A] $65
years
After 5 $140 $122[A] $112
years
After 10 $248 $224 $224
years[B]
EQUITY INCOME After 1 year $64 $61[A] $21
After 3 $99 $94[A] $64
years
After 5 $135 $120[A] $110
years
After 10 $239 $221 $221
years[B]
INCOME & GROWTH After 1 year $63 n/a n/a
After 3 $95 n/a n/a
years
After 5 $129 n/a n/a
years
After 10 $226 n/a n/a
years
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
TAXABLE INCOME
Examples
Class A Class B Class B
(1) (1) (2)
EMERGING MARKETS INCOME After 1 year $62 $63[A] $23
After 3 $93 $100[A] $70
years
After 5 $125 $130[A] $120
years
After 10 $218 $222 $222
years[B]
HIGH YIELD After 1 year $59 $60[A] $20
After 3 $84 $91[A] $61
years
After 5 $110 $115[A] $105
years
After 10 $186 $190 $190
years[B]
STRATEGIC INCOME After 1 year $61 $61[A] $21
After 3 $88 $96[A] $66
years
After 5 $118 $123[A] $113
years
After 10 $202 $206 $206
years[B]
GOVERNMENT INVESTMENT After 1 year $55 $55[A] $15
After 3 $70 $77[A] $47
years
After 5 $87 $91[A] $81
years
After 10 $135 $139 $139
years[B]
LIMITED TERM BOND After 1 year $58 $58[A] $18
After 3 $80 $87[A] $57
years
After 5 $104 $109[A] $99
years
After 10 $172 $176 $176
years[B]
SHORT FIXED-INCOME After 1 year $25 n/a n/a
After 3 $45 n/a n/a
years
After 5 $68 n/a n/a
years
After 10 $132 n/a n/a
years
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
TAX-EXEMPT/MUNICIPAL
Examples
Class A Class B Class B
(1) (1) (2)
HIGH INCOME MUNICIPAL After 1 year $56 $57[A] $17
After 3 $75 $82[A] $52
years
After 5 $94 $99[A] $89
years
After 10 $152 $156 $156
years[B]
LIMITED TERM TAX-EXEMPT After 1 year $56 $57[A] $17
After 3 $75 $82[A] $52
years
After 5 $95 $100[A] $90
years
After 10 $153 $157 $157
years[B]
SHORT-INTERMEDIATE TAX-EXEMPT After 1 year $23 n/a n/a
After 3 $39 n/a n/a
years
After 5 $56 n/a n/a
years
After 10 $107 n/a n/a
years
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A and Class B of Emerging
Markets Income, Strategic Income, Government Investment, Limited Term Bond,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt to the extent
that total operating expenses as a percentage of each of their respective
average net assets exceeds the following: for Emerging Markets Income 1.50%
(Class A) and 2.25% (Class B); for Strategic Income 1.35% (Class A) and
2.10% (Class B); for Government Investment 0.95% (Class A) and 1.70%
(Class B); for Limited Term Bond .90% (Class A) and 1.65% (Class B); for
Limited Term Tax-Exempt 0.90% (Class A) and 1.65% (Class B); and for
Short-Intermediate Tax-Exempt 0.75% (Class A). If these agreements were not
in effect, other expenses and total operating expenses would have been the
following amounts as a percentage of average net assets:
Other Expenses Total Expenses
Class Class Class A Class B
A B
Emerging Markets Income [D] 1.20% 0.90% 2.15% 2.60%[C]
Strategic Income [D] 1.64% 0.89% 2.50%[ 2.50%[C]
C]
Government Investment 0.76% 1.16% 1.47% 2.62%[C],
Limited Term Bond 0.43% 1.00% 1.09% 2.41%[D]
Limited Term Tax-Exempt 0.38% 0.95% 1.04% 2.36%[D]
Short-Intermediate Tax-Exempt [D] 0.98% n/a 1.54% n/a
[C] REFLECTS LIMITATIONS THAT WOULD HAVE BEEN IN EFFECT UNDER A STATE
EXPENSE LIMITATION.
[D] ANNUALIZED
Interest, taxes, brokerage commissions, or extraordinary expenses are not
included in these expense limitations.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow and each fund's financial
statements are included in its Annual Report. The annual information has
been audited by each fund's independent accountant. Their reports on the
financial statements and financial highlights are included in each Annual
Report. The financial statements, the financial highlights, and the
reports are incorporated by reference into the funds' SAI, which may be
obtained free of charge from FDC.
OVERSEAS
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1.Selected Per-Share Data and Ratios 2. 3. 4.Class 5.
A
6.Years ended October 31 1990B 1991 1992 1993 1994
7.Net asset value, beginning of period $ 10.00 $ 9.55 $ 9.78 $ 9.07 $ 12.93
8.Income from Investment Operations
9. Net investment income .05 .14 .05 .03 .01
10. Net realized and unrealized gain (loss) on investments (.50) .17 (.62) 3.93 1.14
11. Total from investment operations (.45) .31 (.57) 3.96 1.15
12.Less Distributions
13. From net investment income -- (.07) (.14) (.07) --
14. From net realized gain -- (.01)E -- (.03)E (.02)
15. Total distributions -- (.08) (.14) (.10) (.02)
16.Net asset value, end of period $ 9.55 $ 9.78 $ 9.07 $ 12.93 $ 14.06
17.Total returnC (4.50)%D 3.25% (5.88)% 44.13% 8.91%
18.Net assets, end of period (000 omitted) $ 18,161 $ 19,091 $ 18,652 $ 221,37 $ 653,77
0 4
19.Ratio of expenses to average net assets 3.07%A,F 2.85% 2.64% 2.38% 2.12%
20.Ratio of net investment income to average net assets 1.45%A 1.48% .48% (.18)% .05%
21.Portfolio turnover rate 137%A 226% 168% 42% 34%
</TABLE>
A 1.ANNUALIZED.
B 2.APRIL 23, 1990 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1990.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
E INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY
RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
F EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE LIMITATION.
EQUITY PORTFOLIO GROWTH
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.Selected Per-Share Data and Institutional Class A
Ratios Class
4.Years ended November 30
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992C 1993 1994
5.Net asset value, beginning of
$ 8.03 $ 11.09 $ 13.18 $ 9.92 $ 12.02 $ 17.32 $ 15.55 $ 24.28 $ 26.37 $ 29.74 $ 23.78 $ 26.33 $ 29.50
period
6.Income from Investment
Operations
7. Net investment income
.01 .03 .00D .28G .06 .01 .04 .17D .19D .30 .01D (.07)D .08
8. Net realized and unrealized
3.05 2.41 (2.03) 2.59 5.50 .34 8.69 4.55 3.78 .42 2.54 3.82 .39
gain
(loss) on investments
9. Total from investment
3.06 2.44 (2.03) 2.87 5.56 .35 8.73 4.72 3.97 .72 2.55 3.75 .47
operations
10.Less Distributions
11. From net investment
- -- (.02) (.01) (.01) (.26) (.08) -- (.03) (.10) (.11) -- (.08) --
income
12. From net realized gain
- -- (.33) (1.22) (.76) -- (2.04) -- (2.60) (.50) (1.45) -- (.50) (1.45)
13. Total distributions
- -- (.35) (1.23) (.77) (.26) (2.12) -- (2.63) (.60) (1.56) -- (.58) (1.45)
14.Net asset value, end of
$ 11.09 $ 13.18 $ 9.92 $ 12.02 $ 17.32 $ 15.55 $ 24.28 $ 26.37 $ 29.74 $ 28.90 $ 26.33 $ 29.50 $ 28.52
period
15.Total returnE,F
38.11% 22.55% (17.12) 29.77% 47.18% 2.75% 56.14% 21.14% 15.36% 2.46% 10.72% 14.52% 1.58%
%
16.Net assets, end of period
$ 23,44 $ 63,60 $ 43,53 $ 20,18 $ 24,52 $ 27,47 $ 68,76 $ 179,3 $ 296,4 $ 410,45 $ 22,65 $ 377,8 $ 874,17
(000 omitted)
7 7 7 2 3 3 6 25 66 0 5 94 2
17.Ratio of expenses to
1.50%I 1.07% 1.11% 1.47% 1.60% 1.74% 1.13% .98% .94%H .84%H 1.47%A 1.84%H 1.70%H
average net assets
18.Ratio of expenses to
1.50%I 1.07% 1.11% 1.47% 1.60% 1.74% 1.13% .98% .95%H .86%H 1.47%A 1.85%H 1.71%H
average net
assets before expense
reductions
19.Ratio of net investment
.43% .29% -- 1.20% .38% .07% .25% .73% .66% 1.00% .25%A (.24)% .15%
income
to average net assets
20.Portfolio turnover
108% 115% 226% 331% 269% 262% 254% 240% 160% 137% 240% 160% 137%
</TABLE>
GLOBAL RESOURCES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
21.Selected Per-Share Data and Ratios 22. 23. 24. 25.Clas 26. 27.
s A
28.Years ended October 31 1988B 1989 1990 1991K 1992 1993 1994D
29.Net asset value, beginning of period $ 10.00 $ 11.47 $ 12.60 $ 12.30 $ 14.11 $ 13.88 $ 17.59
30.Income from Investment Operations
31. Net investment income (.05) .10J (.10) (.15) (.10) .22 (.11)
32. Net realized and unrealized gain (loss) on
investments 1.52 1.96 .93 2.45 .79 4.91 .76
33. Total from investment operations 1.47 2.06 .83 2.30 .69 5.13 .65
34.Less Distributions
35. From net investment income -- -- (.08) -- -- -- --
36. From net realized gain -- (.93) (1.05) (.49) (.92) (1.42) (.68)
37. Total distributions -- (.93) (1.13) (.49) (.92) (1.42) (.68)
38.Net asset value, end of period $ 11.47 $ 12.60 $ 12.30 $ 14.11 $ 13.88 $ 17.59 $ 17.56
39.Total returnE,F 14.70% 19.63% 6.37% 19.50% 5.97% 41.05% 3.97%
40.Net assets, end of period (000 omitted) $ 916 $ 2,049 $ 4,615 $ 5,940 $ 7,087 $ 40,309 $ 199,36
1
41.Ratio of expenses to average net assets 2.85% 3.23% 3.34%I 3.35%I 3.27%I 2.62%H 2.07%H
42.Ratio of expenses to average net assets before
expense reductions 2.85% 3.23% 3.34%I 3.35%I 3.94%I 2.63%H 2.10%H
43.Ratio of net investment income to average net
assets (.64)% .83% (1.13)% (1.28)% (1.22)% (1.18)% (.67)%
44.Portfolio turnover rate 220% 249% 229% 256% 248% 208% 125%
</TABLE>
A ANNUALIZED
B DECEMBER 29, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G DURING THE PERIOD A SHAREHOLDER REDEEMED A SIGNIFICANT PORTION OF THE
ASSETS OF THE FUND. DUE TO THE TIMING OF THIS TRANSACTION, THE FUND
EXPERIENCED AN UNUSUALLY HIGH LEVEL OF INVESTMENT INCOME PER SHARE.
H FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
I EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
J NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.17 PER SHARE.
K AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
45.Selected Per-Share Data and Ratios Class A
46.Years ended October 31 1988B 1989 1990 1991 1992 1993 1994
47.Net asset value, beginning of period $ 10.00 $ 14.27 $ 16.53 $ 12.99 $ 20.58 $ 21.14 $ 25.39
48.Income from Investment Operations
49. Net investment income .05 .02 .18D .06 .14 .08 .22
50. Net realized and unrealized gain (loss) on
investments 4.22 3.03 (2.50) 7.70 2.04 5.56 1.92
51. Total from investment operations 4.27 3.05 (2.32) 7.76 2.18 5.64 2.14
52.Less Distributions
53. From net investment income -- (.03) (.05) (.17) (.09) (.13) (.07)
54. From net realized gain -- (.76) (1.17) -- (1.53) (1.26) (.84)
55. Total distributions -- (.79) (1.22) (.17) (1.62)
(1.39) (.91)
56.Net asset value, end of period $ 14.27 $ 16.53 $ 12.99 $ 20.58 $ 21.14 $ 25.39 $ 26.62
57.Total returnF,G 42.70% 22.69% (15.05) 60.25% 12.09% 28.11% 8.71%
%
58.Net assets, end of period (000 omitted) $ 8,097 $ 34,351 $ 51,122 $ 213,09 $ 580,59 $ 2,054,9 $ 4,598,6
5 5 88 68
59.Ratio of expenses to average net assets 2.52%A,I 2.45% 2.00% 1.73% 1.60% 1.64%E 1.62%E
60.Ratio of expenses to average net assets before
expense reductions 2.52%S,I 2.45% 2.00% 1.73% 1.60% 1.65%E 1.63%E
61.Ratio of net investment income to average net
assets .82%A .31% 1.49% .47% .80% .43% 1.12%
62.Portfolio turnover rate 143%A 163% 136% 142% 94% 69% 43%
</TABLE>
STRATEGIC OPPORTUNITIES - INITIAL CLASS
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
63.Selected Per-Share Data and Ratios
64.Years ended September 30
1985 1986 1987 1988 1989 1990 1991 1992H 1993 1994 1994C
65.Net asset value, beginning of period $ 11.05 $ 12.70 $ 16.71 $ 19.13 $ 15.65 $ 19.77 $ 17.37 $ 21.55
$ 19.72 $ 22.72 $ 20.23
66.Income from Investment Operations
67. Net investment income
.35 .36 .53 .48 .64 .80 .77 .73 .45 .54J .13J
68. Net realized and unrealized gain (loss) on
1.56 5.05 2.95 (1.80) 4.08 (2.49) 4.26 .58 4.46 (.81) (.74)
investments
69. Total from investment operations
1.91 5.41 3.48 (1.32) 4.72 (1.69) 5.03 1.31 4.91 (.27) (.61)
70.Less Distributions
71. From net investment income
(.06) (.24) (.09) (.25) (.60) (.71) (.85) (.72) (.70) (.51) (.50)
72. From net realized gain
(.20) (1.16) (.97) (1.91) - - - (2.42) (1.21) (1.71) (.26)
73. Total distributions
(.26) (1.40) (1.06) (2.16) (.60) (.71) (.85) (3.14) (1.91) (2.22) (.76)
74.Net asset value, end of period
$ 12.70 $ 16.71 $ 19.13 $ 15.65 $ 19.77 $ 17.37 $ 21.55 $ 19.72 $ 22.72 $ 20.23 $ 18.86
75.Total returnF,G
17.64% 46.10 21.87 (4.63) 31.19 (8.96) 30.01 7.89% 26.98 (1.51)% (3.02)
% % % % % % % %
76.Net assets, end of period (000 omitted)
$ 13,60 $ 31,99 $ 27,80 $ 19,22 $ 19,78 $ 15,98 $ 19,19 $ 17,93 $ 20,70 $ 18,850 $ 17,58
2 1 9 1 0 8 3 3 7 3
77.Ratio of expenses to average net assets
1.50%K 1.50%K 1.30%K 1.49%K .64%L 1.03% 1.00% .87% .89%M 1.14%E 1.11%A,E
78.Ratio of expenses to average net assets before
1.50%K 1.50%K 1.30%K 1.49%K 1.04% 1.03% 1.00% .87% 1.05% 1.15%E 1.14%A,E
expense reductions
79.Ratio of net investment income to average net
2.87% 2.40% 2.88% 3.31% 4.08% 4.21% 4.12% 3.78% 2.74% 2.60% 2.65%A
assets
80.Portfolio turnover
214% 225% 255% 160% 89% 114% 223% 211% 183% 159% 228%A
</TABLE>
A ANNUALIZED.
B NOVEMBER 18, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
D NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.09 PER SHARE.
E FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
F TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
G THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
H AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
I EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
K EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. IN
ADDITION, DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987 FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
L INCLUDES REIMBURSEMENT OF $.08 PER SHARE FROM FIDELITY SERVICE COMPANY
FOR ADJUSTMENTS TO PRIOR PERIODS FEES.
M INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES.
STRATEGIC OPPORTUNITIES
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
81.Selected Per-Share Data and ratios Class A Class B
82.Years ended September 30
1986B 1987 1988 1989 1990 1991 1992I 1993 1994 1994E 1994D 1994E
83.Net asset value, beginning of period
$ 17.81 $ 16.71 $ 19.06 $ 15.53 $ 19.55 $ 17.21 $ 21.38 $ 19.53 $ 22.52 $ 19.96 $ 19.65 $ 19.98
84.Income from Investment Operations
85. Net investment income
.08J .46 .42 .50 .70 .66 .61 .33 .39P .10P .05P .06P
86. Net realized and unrealized gain
(1.18) 2.95 (1.80) 4.08 (2.49) 4.26 .58 4.44 (.81) (.75) .28 (.74)
(loss) on investments
87. Total from investment operations
(1.10) 3.41 (1.38) 4.58 (1.79) 4.92 1.19 4.77 (.42) (.65) .33 (.68)
88.Less Distributions
89. From net investment income
- -- (.09) (.24) (.56) (.55) (.75) (.62) (.57) (.43) (.35) -- (.47)
90. From net realized gain
- -- (.97) (1.91) -- -- -- (2.42) (1.21) (1.71) (.26) -- (.26)
91. Total distributions
- -- (1.06) (2.15) (.56) (.55) (.75) (3.04) (1.78) (2.14) (.61) -- (.73)
92.Net asset value, end of period
$ 16.71 $ 19.06 $ 15.53 $ 19.55 $ 17.21 $ 21.38 $ 19.53 $ 22.52 $ 19.96 $ 18.70 $ 19.98 $ 18.57
93.Total returnG,H
(6.23) 21.28% (4.98) 30.45% (9.49) 29.51% 7.26% 26.33% (2.24)% (3.26)% 1.68% (3.41)%
% % %
94.Net assets, end of period (000
$ 22,14 $ 283,1 $ 191,4 $ 198,1 $ 172,0 $ 199,6 $ 194,7 $ 269,8 $ 385,34 $ 375,69 $ 8,824 $ 17,090
omitted)
1 17 54 74 86 04 10 83 9 1
95.Ratio of expenses to average net
1.50%A,K 1.67%K 1.71% 1.51% 1.59% 1.56% 1.46% 1.57%L 1.84% 1.73%A,I,Q 2.63%A,F 2.53%A,F
assets
96.Ratio of expenses to average net
1.50%A,K 1.67%K 1.71% 1.51% 1.59% 1.56% 1.46% 1.73% 1.85% 1.84%A,I,Q 2.84%A,F 2.58%A,F
assets before expense reductions
97.Ratio of net investment income to
2.77%A 2.36% 3.10% 3.23% 3.70% 3.61% 3.22% 2.06% 1.89% 2.03%A 1.11%A 1.22%A
average net assets
98.Portfolio turnover
- -- 225% 160% 89% 114% 223% 211% 183% 159% 228%A 159% 228%A
</TABLE>
EQUITY INCOME
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99.Selected Per-Share Institutional Class A Class B
Data and Ratios Class
Years ended November 30
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992C 1993 1994 1994D
100.Net asset value,
$ 10.24 $ 11.95 $ 13.54 $ 10.93 $ 11.10 $ 12.27 $ 9.52 $ 11.08 $ 12.88 $ 14.93 $ 12.37 $ 12.86 $ 14.86 $ 15.21
beginning of period
101.Income from
Investment Operations
102. Net investment
.79 .78 .76 .75 .75 .69 .63O .49 .39 .41P .13 .33 .28P .08P
income
103. Net realized and
1.69 1.92 (1.53) 1.81 1.17 (2.42) 1.52 1.79 2.02 1.05 .47 1.97 1.03 .72
unrealized
gain (loss) on
investments
104. Total from investment
2.48 2.70 (.77) 2.56 1.92 (1.73) 2.15 2.28 2.41 1.46 .60 2.30 1.31 .80
operations
105.Less Distributions
106. From net investment
(.77) (.77) (.70) (.74) (.75) (.72) (.59) (.48) (.36) (.32) (.11) (.30) (.21) (.07)
income
107. From net realized
- -- (.34) (1.14) (1.65) -- (.30) -- -- -- -- -- -- -- --
gain
108. Total distributions
(.77) (1.11) (1.84) (2.39) (.75) (1.02) (.59) (.48) (.36) (.32) (.11) (.30) (.21) (.07)
109.Net asset value, end
$ 11.95 $ 13.54 $ 10.93 $ 11.10 $ 12.27 $ 9.52 $ 11.08 $ 12.88 $ 14.93 $ 16.07 $ 12.86 $ 14.86 $ 15.96 $ 15.94
of period
110.Total returnG,H
24.86 23.48 (7.28) 26.99 17.58 (14.90) 22.97 20.91 18.90 9.82% 4.88% 18.03 8.84% 5.25%
% % % % % % % % % %
111.Net assets, end of
$ 349,2 $ 544,2 $ 443,6 $ 436,7 $ 463,6 $ 253,0 $ 168,5 $ 139,3 $ 191,1 $ 197,5 $ 1,462 $ 42,32 $ 179,5 $ 35,37
period (000 omitted)
62 69 03 53 96 49 90 91 38 33 6 01 3
112.Ratio of expenses to
.63% .61% .54%N .55%N .55%N .61%N .67%N .71%N .79%F .71%F 1.55%A 1.77% 1.64%F 2.18%A,F
average net assets
113.Ratio of expenses to
.63% .61% .61%N .65%N .65%N .71%N .77%N .79%N .80%F .73%F 1.55%A 1.77% 1.67%F 2.24%A,F
average net assets before
expense reductions
114.Ratio of net
7.36% 6.06% 5.58% 6.86% 6.09% 6.11% 5.66% 3.77% 3.00% 2.62% 3.39%A 2.02% 1.69% 1.15%A
investment income
to average net assets
115.Portfolio turnover
110%M 107% 137% 78% 93% 103% 91% 51% 120% 140% 51% 120% 140% 140%
</TABLE>
A ANNUALIZED.
B AUGUST 20, 1986 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1986.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
F FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
G TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
H THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD FMR NOT REIMBURSED CERTAIN
EXPENSES DURING THE PERIODS SHOWN.
I AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE AT THE END OF THE PERIOD LESS
THE AMOUNT OF UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE OF THE FUND AT
AUGUST 20, 1986.
K EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. IN
ADDITION, DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987 FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
L INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES
M IN JULY 1985, THE SEC ADOPTED REVISIONS TO EXISTING RULES WITH RESPECT TO
THE CALCULATION OF THE PORTFOLIO TURNOVER RATE. THE REVISED RULES REQUIRE
THE INCLUSION IN THE CALCULATION OF LONG-TERM U.S. GOVERNMENT SECURITIES
WHICH, PRIOR TO THESE REVISIONS, WERE EXCLUDED FROM THE CALCULATION.
N EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992, FMR REIMBURSED .10% OF THE
ANNUAL MANAGEMENT FEE OF .50%.
O INCLUDES $.04 PER SHARE FROM FOREIGN TAXES RECOVERED.
P NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
Q INCLUDES THE EFFECT OF ANNUALIZING A VOLUNTARY REIMBURSEMENT OF FEES BY
FMR.
INCOME & GROWTH
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
116.Selected Per-Share Data and Ratios Class A
117.Years ended October 31 1987B 1988 1989 1990 1991 1992 1993 1994
118.Net asset value, beginning of period $ 10.00 $ 9.44 $ 11.07 $ 12.77 $ 10.41 $ 14.13 $ 14.41 $ 15.91
119.Income from Investment Operations
120. Net investment income .27 .62 1.01G .56 .51 .50 .48 .38
121. Net realized and unrealized gain
(loss) on investments (.63) 1.56 1.27 (1.34) 3.74 .85 2.18 (.79)
122. Total from investment operations (.36) 2.18 2.28 (.78) 4.25 1.35 2.66 (.41)
123.Less Distributions
124. From net investment income (.20) (.55) (.58) (1.06) (.53) (.46) (.56) (.28)
125. In excess of net investment income -- -- -- -- -- -- -- (.02)
126. From net realized gain -- -- -- (.52) -- (.61) (.60) (.49)
127. Return of Capital -- -- -- -- -- -- -- (.04)
128. Total distributions (.20) (.55) (.58) (1.58) (.53) (1.07) (1.16) (.83)
129.Net asset value, end of period $ 9.44 $ 11.07 $ 12.77 $ 10.41 $ 14.13 $ 14.41 $ 15.91 $ 14.67
130.Total returnE,F (3.90)% 23.66% 21.15% (7.15)% 41.73% 10.27% 19.66% (2.69)%
131.Net assets, end of period (000
omitted) $ 34,376 $ 36,224 $ 46,139 $ 60,934 $ 135,53 $ 397,67 $ 1,654,1 $ 3,128,7
3 2 24 76
132.Ratio of expenses to average net
assets 2.06%A 2.06% 1.91% 1.85% 1.71% 1.60% 1.51%H 1.58%H
133.Ratio of expenses to average net
assets before expense 2.06%A 2.06% 1.91% 1.85% 1.71% 1.60% 1.52%H 1.59%H
reductions
134.Ratio of net investment income to
average net assets 3.95%A 5.83% 8.80% 5.29% 4.19% 3.97% 3.24% 3.79%
135.Portfolio turnover rate 206%A 204% 151% 297% 220% 389% 200% 202%
</TABLE>
EMERGING MARKETS INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
136.Selected Per-Share Data Class A Class B
137.Year ended December 31 1994C 1994D
138.Net asset value, beginning of period $ 10.000 $ 9.700
139.Income from Investment Operations
140. Net investment income .356 .167
141. Net realized and unrealized gain (loss) on investments (.073) .227
142. Total from investment operations .283 .394
143.Less Distributions
144. From net investment income (.353) (.220)
145. In excess of net investment income (.150) (.094)
146. From net realized gain (.010) (.010)
147. In excess of net realized gain (.250) (.250)
148. Total distributions (.763) (.574)
149.Net asset value, end of period $ 9.520 $ 9.520
150.Total returnE,F 2.47% 3.67%
151.Net assets, end of period (000 omitted) $ 30,029 $ 5,034
152.Ratio of expenses to average net assets 1.50%A 2.25%A,i
153.Ratio of expenses to average net assets before expense reductions 2.15%A 2.60%A,I
154.Ratio of net investment income to average net assets 6.60%A 5.86%A
155.Portfolio turnover 354%A 354%A
</TABLE>
A ANNUALIZED.
B JANUARY 6, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C 3.MARCH 10, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $ .26 PER SHARE.
H FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
I 1.EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE LIMITATION.
HIGH YIELD
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
2.Selected Per-Share Data and Ratios Class A Class B
3.Years ended October 31
1987B 1988 1989 1990 1991 1992 1993 1994 1994D
4.Net asset value, beginning of period
$ 10.000 $ 9.090 $ 9.860 $ 8.970 $ 8.150 $ 10.120 $ 11.070 $ 12.010 $ 11.300
5.Income from Investment Operations
6. Net investment income
.878 1.165 1.237 1.144 1.115 1.146 .980 .848 .223
7. Net realized and unrealized gain (loss) on
(.910) .770 (.890) (.820) 1.948 .975 1.153 (.537) (.118)
investments
8. Total from investment operations
(.032) 1.935 .347 .324 3.063 2.121 2.133 .311 .105
9.Less Distributions
10. From net investment income
(.878) (1.165) (1.237) (1.144) (1.093) (1.171) (.963) (.851)I (.195)
11. From net realized gain
- -- -- -- -- -- -- (.230) (.250)I --
12. Total distributions
(.878) (1.165) (1.237) (1.144) (1.093) (1.171) (1.193) (1.101) (.195)
13.Net asset value, end of period
$ 9.090 $ 9.860 $ 8.970 $ 8.150 $ 10.120 $ 11.070 $ 12.010 $ 11.220 $ 11.210
14.Total returnE,F
(.81)% 22.14% 3.34% 3.58% 39.67% 21.96% 20.47% 2.64% .93%
15.Net assets, end of period (000 omitted)
$ 9,077 $ 11,900 $ 13,315 $ 15,134 $ 38,681 $ 136,31 $ 485,55 $ 679,623 $ 16,959
6 9
16.Ratio of expenses to average net assets
1.24%A 1.10% 1.10% 1.10% 1.10% 1.10% 1.11% 1.20% 2.20%A
17.Ratio of expenses to average net assets before
2.25%A,G 2.22% 2.17% 2.04% 1.76% 1.16% 1.11% 1.20% 2.20%A
expense reductions
18.Ratio of net investment income to average net
10.74%A 11.86% 12.98% 12.72% 12.20% 9.95% 8.09% 6.92% 5.92%A
assets
19.Portfolio turnover
166%A 135% 131% 90% 103% 100% 79% 118% 118%
</TABLE>
STRATEGIC INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
20. Selected Per-Share Data and Ratios Class A Class B
21.Year ended December 31 1994C 1994C
22.Net asset value, beginning of period $ 10.000 $ 10.000
23.Income from Investment Operations
24. Net investment income .064H .072H
25. Net realized and unrealized gain (loss) on investments (.046) (.078)
26. Total from investment operations .018 (.006)
27.Less Distributions
28. From net investment income (.098) (.084)
29.Net asset value, end of period $ 9.920 $ 9.910
30.Total returnE,F .17% (.06)%
31.Net assets, end of period (000 omitted) $ 10,687 $ 9,379
32.Ratio of expenses to average net assets 1.35%A 2.10%A
33.Ratio of expenses to average net assets before expense reductions 2.50%A,G 2.50%A,G
34.Ratio of net investment income to average net assets 5.80%A 5.06%A
35.Portfolio turnover 104%A 104%A
</TABLE>
A ANNUALIZED.
B JANUARY 5, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C OCTOBER 31, 1994 (COMMENCEMENT OF SALES OF CLASS A & CLASS B SHARES) TO
DECEMBER 31, 1994.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
H NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
I THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
GOVERNMENT INVESTMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36.Selected Per-Share Data and Ratios Class A Class B
37.Years ended October 31 1987B 1988 1989 1990 1991 1992 1993 1994 1994D
38.Net asset value, beginning of
period $ 10.000 $ 9.200 $ 9.260 $ 9.310 $ 9.150 $ 9.590 $ 9.730 $ 10.140 $ 9.100
39.Income from Investment Operations
40. Net investment income .614 .769 .773 .735 .700 .666 .567 .515 .144
41. Net realized and unrealized
gain (loss) on (.800) .060 .050 (.160) .419 .125 .601 (1.031) (.137)
investments
42. Total from investment
operations (.186) .829 .823 .575 1.119 .791 1.168 (.516) .007
43.Less Distributions
44. From net investment income (.614) (.769) (.773) (.735) (.679) (.651) (.558) (.504)H (.157)H
45. From net realized gain -- -- -- -- -- -- (.200) (.130)H --
46. In excess of net realized
gain on investments -- -- -- -- -- -- -- (.030) --
47. Total distributions (.614) (.769) (.773) (.735) (.679) (.651) (.758) (.664) (.157)
48.Net asset value, end of period $ 9.200 $ 9.260 $ 9.310 $ 9.150 $ 9.590 $ 9.730 $ 10.140 $ 8.960 $ 8.950
49.Total returnE,F (1.84)% 9.34% 9.37% 6.48% 12.65% 8.49% 12.53% (5.27)% 0.10%
50.Net assets, end of period
(000 omitted) $ 4,584 $ 6,590 $ 8,203 $ 9,822 $ 13,058 $ 23,281 $ 69,876 $ 114,453 $ 2,062
51.Ratio of expenses to average
net assets 1.29%A 1.10% 1.10% 1.10% 1.10% 1.10% .68% .74% 1.70%A
52.Ratio of expenses to average
net assets before 2.36%A 2.25% 2.75% 2.74% 2.46% 1.79% 1.32% 1.47% 2.62%A
expense reductions
53.Ratio of net investment income
to average net 8.12%A 8.30% 8.45% 8.04% 7.47% 6.98% 6.11% 6.18% 5.22%A
assets
54.Portfolio turnover 32%A 44% 42% 31% 54% 315% 333% 313% 313%
</TABLE>
LIMITED TERM BOND
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55.Selected Per-Share Institutional Class A Class B
Data and Ratios Class
Years ended November 30
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992C 1993 1994 1994D
56.Net asset value,
$ 9.960 $ 10.55 $ 11.24 $ 10.25 $ 10.18 $ 10.41 $ 10.14 $ 10.55 $ 10.64 $ 11.16 $ 10.96 $ 10.64 $ 11.14 $ 10.43
beginning of period
0 0 0 0 0 0 0 0 0 0 0 0 0
57.Income from
Investment Operations
58. Net investment
1.053 1.026 .953 .944 .937 .901 .884 .840 .832 .602 .170 .785 .609 .204
income
59. Net realized and
.590 .710 (.770) (.070) .230 (.270) .411 .102 .531 (.833) (.320) .511 (.876) (.178)
unrealized gain
(loss) on investments
60. Total from
1.643 1.736 .183 .874 1.167 .631 1.295 .942 1.363 (.231) (.150) 1.296 (.267) .026
investment operations
61.Less Distributions
62. From net
(1.053) 1.026 (.953) (.944) (.937) (.901) (.885) (.852) (.843) (.597) (.170) (.796) (.555) (.187)
investment income
63. From Return of
-- -- -- -- -- -- -- -- -- (.062) -- -- (.058) (.019)
Capital
64. From net realized
- -- (.020) (.220) -- -- -- -- -- -- -- -- -- -- --
gain
65. Total distributions
(1.053) (1.046) (1.173) (.944) (.937) (.901) (.885) (.852) (.843) (.659) (.170) (.796) (.613) (.206)
66.Net asset value, end
$ 10.55 $ 11.24 $ 10.25 $ 10.18 $ 10.41 $ 10.14 $ 10.55 $ 10.64 $ 11.16 $ 10.27 $ 10.64 $ 11.14 $ 10.26 $ 10.25
of period
0 0 0 0 0 0 0 0 0 0 0 0 0 0
67.Total returnE,F
17.40 17.04 1.78% 8.81% 12.03 6.46% 13.35 9.21% 13.17 (2.10) (1.37) 12.50 (2.44) .24%
% % % % % % % % %
68.Net assets, end of
$ 253,9 $ 418,6 $ 407,2 $ 418,9 $ 426,8 $ 356,5 $ 327,7 $ 160,1 $ 183,7 $ 172,1 $ 2,583 $ 59,18 $ 141,8 $ 3,156
period (000 omitted)
13 32 28 29 32 64 56 56 90 22 4 66
69.Ratio of expenses to
.65% .53% .53% .54% .54% .58% .57% .57% .64% .61% .82%A 1.23% 1.02% 1.65%A
average net assets
70.Ratio of expenses to
.65% .53% .53% .54% .54% .58% .57% .57% .64% .61% .82%A 1.23% 1.09% 2.41%A
average net assets
before expense
reductions
71.Ratio of net
10.29 9.22% 9.03% 9.16% 9.16% 8.90% 8.59% 7.96% 7.41% 6.45% 7.67%A 6.81% 6.04% 5.42%A
investment income to
%
average net assets
72.Portfolio turnover
88%G 59% 92% 48% 87% 59% 60% 7% 59% 68% 7% 59% 68% 68%
</TABLE>
A ANNUALIZED.
B JANUARY 7, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G IN JULY 1985, THE SEC ADOPTED REVISIONS TO EXISTING RULES WITH RESPECT TO
THE CALCULATION OF THE PORTFOLIO TURNOVER RATE. THE REVISED RULES REQUIRE
THE INCLUSION IN THE CALCULATION OF LONG-TERM U.S. GOVERNMENT SECURITIES
WHICH, PRIOR TO THESE REVISIONS, WERE EXCLUDED FROM THE CALCULATION.
H THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
SHORT FIXED-INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
73.Selected Per-Share Data and Ratios Class A
74.Years ended October 31 1987B 1988 1989 1990 1991 1992 1993 1994
75.Net asset value, beginning of period $ 10.000 $ 10.060 $ 9.940 $ 9.950 $ 9.620 $ 9.870 $ 9.950 $ 10.090
76.Income from Investment Operations .101 .852 .832 .868 .848 .830 .732 .559
Net investment income
77. Net realized and unrealized gain
(loss) on investments .060 (.120) .010 (.330) .270 .071 .146 (.581)
78. Total from investment operations .161 .732 .842 .538 1.118 .901 .878 (.022)
79.Less Distributions (.101) (.852) (.832) (.868) (.868) (.821) (.738) (.464)
From net investment income
80. In excess of net investment income -- -- -- -- -- -- -- (.044)
81. Return of Capital -- -- -- -- -- -- -- (.080)
82. Total Distributions (.101) (.852) (.832) (.868) (.868) (.821) (.738) (.588)
83.Net asset value, end of period $ 10.060 $ 9.940 $ 9.950 $ 9.620 $ 9.870 $ 9.950 $ 10.090 $ 9.480
84.Total returnD,E 1.61% 7.56% 8.89% 5.59% 12.19% 9.44% 9.13% (.22)%
85.Net assets, end of period (000 omitted) $ 3,252 $ 13,433 $ 12,394 $ 13,062 $ 25,244 $ 170,55 $ 654,20 $ 787,92
8 2 6
86.Ratio of expenses to average net assets .90%A .90% .90% .90% .90% .90% .95% .97%
87.Ratio of expenses to average net assets
before expense 2.15%A,F 1.84% 2.22% 1.90% 1.74% 1.03% .95% .97%
reductions
88.Ratio of net investment income to
average net assets 7.65%A 8.39% 8.45% 8.86% 8.50% 7.59% 6.77% 5.91%
89.Portfolio turnover rate 119%A 178% 157% 144% 127% 57% 58% 108%
</TABLE>
HIGH INCOME MUNICIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90.Selected Per-Share Data and Ratios Class A Class B
91.Years ended October 31 1987B 1988 1989 1990 1991 1992 1993 1994 1994C
92.Net asset value, beginning
of period $ 10.000 $ 9.850 $ 10.460 $ 10.820 $ 10.870 $ 11.410 $ 11.650 $ 12.720 $ 11.610
93.Income from Investment Operations
94. Net investment income .092 .750 .800 .811 .803 .774 .710 .689 .188
95. Net realized and unrealized
gain (loss) on (.150) .610 .410 .150 .660 .250 1.100 (1.430) (.400)
investments
96. Total from investment
operations (.058) 1.360 1.210 .961 1.463 1.024 1.810 (.741) (.212)
97.Less Distributions
98. From net investment income (.092) (.750) (.800) (.811) (.803) (.774) (.710) (.689) (.188)
99. From net realized gain -- -- (.050) (.100) (.120) (.010) (.030) (.060) --
100. In excess of net realized
gain -- -- -- -- -- -- -- (.010) --
101. Total distributions (.092) (.750) (.850) (.911) (.923) (.784) (.740) (.759) (.188)
102.Net asset value, end of
period $ 9.850 $ 10.460 $ 10.820 $ 10.870 $ 11.410 $ 11.650 $ 12.720 $ 11.220 $ 11.210
103.Total returnD,E (.58)% 14.22% 12.05% 9.28% 14.02% 9.21% 15.95% (6.03)% (1.86)%
104.Net assets, end of period
(000 omitted) $ 1,275 $ 3,290 $ 6,669 $ 22,702 $ 67,135 $ 156,65 $ 497,57 $ 544,422 $ 9,968
9 5
105.Ratio of expenses to average
net assets .80%A .89% .90% .90% .90% .90% .92% .89% 2.09%A
106.Ratio of expenses to
average net assets before 2.25%A 2.25%F 2.75%F 2.09% 1.24% .96% .92% .89% 2.09%A
expense reductions
107.Ratio of net investment
income to average net 7.24%A 7.33% 7.60% 7.37% 7.08% 6.59% 5.59% 5.78% 4.58%A
assets
108.Portfolio turnover -- 19% 27% 11% 10% 13% 27% 38% 38%
</TABLE>
A ANNUALIZED.
B SEPTEMBER 16, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
D TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
F EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
LIMITED TERM TAX-EXEMPT
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109.Selected Institutional Class A Class B
Per-Share Data and Class
Ratios
Years ended November
1985B 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992D 1993 1994 1994E
30
110.Net asset value,
$ 10.00 $ 10.28 $ 10.99 $ 10.38 $ 10.52 $ 10.61 $ 10.64 $ 10.80 $ 11.08 $ 10.460 $ 11.01 $ 11.08 $ 10.460 $ 9.890
beginning of period
0 0 0 0 0 0 0 0 0 0 0
111.Income from
Investment Operations
112. Net investment
.130 .671 .641 .650 .674 .689 .682 .666 .536 .481 .131 .508 .455 .155
income
113. Net realized and
.280 .760 (.540) .140 .090 .030 .160 .280 .260 (1.030) .070 .260 (1.040) (.490)
unrealized
gain (loss) on
investments
114. Total from
.410 1.431 .101 .790 .764 .719 .842 .946 .796 (.549) .201 .768 (.585) (.335)
investment operations
115.Less Distributions
116. From net
(.130) (.671) (.641) (.650) (.674) (.689) (.682) (.666) (.536) (.481) (.131) (.508) (.455) (.155)
investment income
117. From net realized
- -- (.050) (.070) -- -- -- -- -- (.880) -- -- (.880) -- --
gain
118. In excess of net
-- -- -- -- -- -- -- -- -- (.020) -- -- (.020) --
realized gain
119. Total distributions
(.130) (.721) (.711) (.650) (.674) (.689) (.682) (.666) (1.416) (.501) (.131) (1.388) (.475) (.155)
120.Net asset value,
$ 10.28 $ 10.99 $ 10.38 $ 10.52 $ 10.61 $ 10.64 $ 10.80 $ 11.08 $ 10.46 $ 9.410 $ 11.08 $ 10.46 $ 9.400 $ 9.400
end of period
0 0 0 0 0 0 0 0 0 0 0
121.Total returnF,G
4.12% 14.39% .97% 7.77% 7.50% 7.04% 8.15% 9.01% 8.01% (5.43)% 1.37% 7.72% (5.78)% (3.44)
122.Net assets, end of
$ 94,39 $ 161,0 $ 162,8 $ 132,4 $ 121,4 $ 111,50 $ 100,2 $ 28,42 $ 15,07 $ 11,702 $ 1,752 $ 39,80 $ 57,382 $ 1,682
period
1 45 57 43 18 6 94 8 6 0
(000 omitted)
123.Ratio of expenses
.69%A .58% .59% .63% .65% .62% .61% .66% .65% .65% 1.04%A .90% .90% 1.65%A
to
average net assets
124.Ratio of expenses
.69%A .58% .59% .63% .65% .62% .61% .67% .83% .76% 1.06%A 1.36% 1.04% 2.36%A
to average net assets
before expense
reductions
125.Ratio of net
6.33%A 6.29% 6.01% 6.20% 6.45% 6.53% 6.40% 6.05% 5.01% 4.75% 5.65%A 4.76% 4.49% 3.74%A
investment income
to average net assets
126.Portfolio turnover
103%A 34% 43% 24% 31% 32% 20% 36% 46% 53% 36% 46% 53% 53%
</TABLE>
SHORT-INTERMEDIATE TAX-EXEMPT
<TABLE>
<CAPTION>
<S> <C>
127.Selected Per-Share Data and Ratios Class A
128.Year ended November 30 1994C
129.Net asset value, beginning of period $ 10.000
130.Income from Investment Operations .259
Net interest income
131. Net realized and unrealized gain (loss) on investments (.230)
132. Total from investment operations .029
133.Less Distributions (.259)
From net interest income
134.Net asset value, end of period $ 9.770
135.Total returnF,G .27%
136.Net assets, end of period (000 omitted) $ 16,563
137.Ratio of expenses to average net assets .75%A,H
138.Ratio of expenses to average net assets before expense reductions 1.54%A,H
139.Ratio of net interest income to average net assets 3.74%A
140.Portfolio turnover rate 111%A
</TABLE>
A ANNUALIZED.
B SEPTEMBER 19, 1985 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1985.
C MARCH 16, 1994 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1994.
D COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
E COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
F TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
G THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
H FMR VOLUNTARILY AGREED TO LIMIT THE EXPENSES (EXCLUDING INTEREST, TAXES
BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES) TO .75% OF AVERAGE NET
ASSETS.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results. Average annual total returns covering
periods of less than one year assume that performance will remain constant
for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
This difference may be significant for a fund whose investments are
denominated in foreign currencies.
In calculating yield, a fund may from time to time use a security's coupon
rate instead of its yield to maturity in order to reflect the risk premium
on that security. This practice will have the effect of reducing a fund's
yield.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
Each class of a growth or growth and income fund may quote its adjusted NAV
including all distributions paid. This value may be averaged over specified
periods and may be used to calculate a class's moving average.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, please contact your
Investment Professional.
THE FUND IN DETAIL
S
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. Equity Portfolio Growth is a
diversified fund of Fidelity Advisor Series I, a Massachusetts business
trust organized on June 24, 1983. Growth Opportunities, Income & Growth,
High Yield, Government Investment and Short Fixed-Income are diversified
funds of Fidelity Advisor Series II, a Massachusetts business trust
organized on April 24, 1986. Equity Income is a diversified fund of
Fidelity Advisor Series III, a Massachusetts business trust organized on
May 17, 1982. Limited Term Bond is a diversified fund of Fidelity Advisor
Series IV, a Massachusetts business trust organized on May 6, 1983. Global
Resources and High Income Municipal are diversified funds of Fidelity
Advisor Series V, a Massachusetts business trust organized on April 24,
1986. Limited Term Tax-Exempt is a diversified fund and Short-Intermediate
Tax-Exempt is a non-diversified fund of Fidelity Advisor Series VI, a
Massachusetts business trust organized on June 1, 1983. Overseas is a
diversified fund of Fidelity Advisor Series VII, a Massachusetts business
trust organized on March 21, 1980. Emerging Markets Income and Strategic
Income are non-diversified funds and Strategic Opportunities is a
diversified fund of Fidelity Advisor Series VIII, a Massachusetts business
trust organized on September 23, 1983. Each trust is an open-end management
investment company. There is a remote possibility that one fund might
become liable for a misstatement in the prospectus about another fund.
Overseas, Global Resources, Equity Income, Emerging Markets Income, High
Yield, Strategic Income, Government Investment, Limited Term Bond and
Limited Term Tax-Exempt are comprised of three classes of shares: Class A,
Class B and Institutional Class. Strategic Opportunities is also comprised
of three classes of shares: Class A, Class B and Initial Class. Equity
Portfolio Growth, Growth Opportunities, Income & Growth, Short
Fixed-Income, and Short-Intermediate Tax-Exempt are comprised of two
classes of shares: Class A and Institutional Class. Each class shares a
common investment objective and investment portfolio. The classes may have
different sales charges and other expenses which may affect performance.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. For shareholders
of Overseas, Equity Portfolio Growth, Strategic Opportunities, Emerging
Markets Income, and Strategic Income, you are entitled to one vote
for each share you own. For shareholders of Global Resources, Growth
Opportunities, Equity Income, Income & Growth, High Yield, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt, and Short-Intermediate Tax Exempt,
the number of votes you are entitled to is based upon the dollar value
of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which chooses each fund's investments and
handles its business affairs. FMR chooses the investments for each fund
(except Government Investment, High Income Municipal, Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt) with the assistance of
foreign affiliates.
As of May 31, 1995, FMR advised funds having approximately ___ million
shareholder accounts with a total value of more than $___ billion.
Affiliates assist FMR with foreign securities: Fidelity Management &
Research (U.K.) Inc. (FMR U.K.), in London, England; Fidelity Management &
Research Far East Inc. (FMR Far East), in Tokyo, Japan; Fidelity
International Investment Advisors (FIIA), in Pembroke, Bermuda; Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.), in Kent,
England; and Fidelity Investment Japan Ltd. (FIJ), in Tokyo, Japan.
Bettina E. Doulton has been manager of Advisor Equity Income since August
1993, and VIP Equity-Income since July 1993. Previously, she managed Select
Automotive Portfolio and assisted on Equity-Income Portfolio and
Magellan(registered trademark). Ms. Doulton also served as an analyst
following the domestic and European automotive and tire manufacturing
industry, as well as the gaming and lodging industry. She joined Fidelity
in 1986.
Margaret L. Eagle is vice president and manager of Advisor High Yield which
she has managed since it began in January 1987. Ms. Eagle also manages
several pension fund accounts. Previously, she managed Spartan High Income
and High Income (now Capital & Income). She also managed the bond portion
of Puritan(registered trademark). Ms. Eagle joined Fidelity in 1980.
Daniel R. Frank is vice president and manager of Advisor Strategic
Opportunities which he has managed since its inception in December 1983.
Previously he was an assistant to Peter Lynch on Magellan(registered
trademark). Mr. Frank joined Fidelity in 1979.
Michael S. Gray is vice president and manager of Advisor Limited Term Bond
which he has managed since August 1987. Mr. Gray also manages Investment
Grade Bond, Spartan Investment Grade Bond, and Intermediate Bond. Mr. Gray
joined Fidelity in 1982.
Robert E. Haber is vice president and manager of Advisor Income & Growth
which he has managed since January 1987. Mr. Haber also manages Balanced
and co-manages Global Balanced. Previously, he managed Convertible
Securities. Mr. Haber joined Fidelity in 1985.
John R. Hickling is manager of Advisor Overseas which he has managed since
February 1993. Mr. Hickling also manages Overseas and VIP: Overseas.
Previously he managed Emerging Markets, Europe, Pacific Basin, Japan, and
International Growth & Income. Mr. Hickling joined Fidelity in 1982.
Robert Ives is manager of Advisor Government Investment, which he has
managed since February 1995. Mr. Ives also manages Spartan Government
Income and Government Securities. Previously, he managed Ginnie Mae and
Spartan Ginnie Mae. Mr. Ives joined Fidelity in 1991, after receiving an
M.B.A. from the University of Chicago. Previously, Mr. Ives was a
consultant to the U.S. Air Force for MITRE Corp. and an engineer at Bell
Labs.
Jonathan Kelly is manager of Advisor Emerging Markets Income which he has
managed since January 1995. He also manages Global Bond, New Markets
Income and Canada Emerging Markets Income. He joined Fidelity in 1991,
after receiving his M.B.A. from the Wharton School at the University of
Pennsylvania. Mr. Kelly worked in the money management field prior to
business school.
Malcolm W. MacNaught is vice president and manager of Advisor Global
Resources which he has managed since December 1987. Mr. MacNaught also
manages Select Precious Metals and Minerals and Select American Gold. Mr.
MacNaught joined Fidelity in 1968.
Charles Morrison is manager of Advisor Short Fixed-Income which he has
managed since February 1995. He also manages Spartan Short-Term Bond and
Short-Term Bond. Mr. Morrison is vice president of Fidelity Management
Trust Company. He Joined Fidelity in 1987.
David Murphy is manager of Advisor Limited Term Tax-Exempt and Advisor
Short-Intermediate Tax-Exempt Fund. Mr. Murphy also manages Limited Term
Municipal, Spartan Intermediate Municipal, Spartan New Jersey Municipal
High Yield, Spartan New York Intermediate Municipal, and Spartan
Short-Intermediate Municipal. Previously, he managed Spartan California
Intermediate Municipal. Mr. Murphy joined Fidelity in 1989.
Robert E. Stansky is vice president and manager of Advisor Equity Portfolio
Growth which he has managed since April 1987. Mr. Stansky also manages
Growth Company. Previously, he managed Emerging Growth and Select Defense
and Aerospace. Mr. Stansky joined Fidelity in 1983.
Donald G. Taylor is manager of Advisor Strategic Income, which he has
managed since October 1994. Mr. Taylor also manages VIP II: Investment
Grade Bond. In addition, he manages Income Plus for Fidelity International.
Previously, he managed Short-Term Bond, Spartan Short-Term Bond, Advisor
Short Fixed-Income, Corporate Trust, Qualified Dividend, VIP: Zero Coupon
Bond, and Utilities Income. Mr. Taylor joined Fidelity in 1986.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp., Leader of the Growth Group, and joined Fidelity in 1971.
Guy E. Wickwire is a vice president and manager of Advisor High Income
Municipal which he has managed since July of 1994. Mr. Wickwire also
manages Massachusetts Tax-Free High Yield and Insure Tax-Free. Mr. Wickwire
joined Fidelity in 1981.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs sub-transfer
agent servicing functions for Class A and transfer agent or sub-transfer
agent servicing functions for Class B shares.
FMR Corp. is the ultimate parent company of FMR, FMR Texas, FMR U.K., and
FMR Far East. Through ownership of voting common stock, members of the
Edward C. Johnson 3d family form a controlling group with respect to FMR
Corp. Changes may occur in the Johnson family group, through death or
disability, which would result in changes in each individual family
member's holding of stock. Such changes could result in one or more family
members becoming holders of over 25% of the stock. FMR Corp. has received
an opinion of counsel that changes in the composition of the Johnson family
group under these circumstances would not result in the termination of the
funds' management or distribution contracts and, accordingly, would not
require a shareholder vote to continue operation under those contracts.
Fidelity International Limited (FIL), is the parent company of FIIA, FIJ,
and FIIAL U.K.. The Johnson family group also owns, directly or
indirectly, more than 25% of the voting common stock of FIL.
U M Bank, n . a . (UMB) is the transfer agent for High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt,
although it employs State Street Bank & Trust Company (State Street)
to perform these functions for Class A of each of the funds and employs
FIIOC to perform these functions for Class B of each of the funds. UMB is
located at 1010 Grand Avenue, Kansas City, Missouri 64106. State
Street's address is P.O. Box 8302, Boston, Massachusetts 02266-8302
A broker-dealer may use a portion of the commissions paid by Overseas,
Equity Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Equity Income, Income & Growth and High Yield to reduce each
of their custodian or transfer agent fees for those funds. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
a fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The value of each fund's domestic and foreign investments varies based on
many factors. Stock values fluctuate in response to the activities of
individual companies and general market and econom ic conditions .
The value of bonds fluctuates based on changes in interest rates and the
credit quality of the issuer. In general, bond prices rise when interest
rates fall, and vice versa. This effect is usually more pronounced for
longer-term securities.
The funds' focus on international investing involves increased or
additional risks from those above. International funds have increased
economic and political risks as they are exposed to events and factors in
the various world markets. This is especially true for emerging markets.
Also, because many of the funds' investments are denominated in foreign
currencies, changes in the value of foreign currencies can significantly
affect a fund's share price. FMR may use a variety of investment techniques
to either increase or decrease a fund's investment exposure to any
currency.
FMR may use various investment techniques to hedge a fund's risks, but
there isi no guarantee that these strategies will work as FMR intends. When
you sell your shares, they may be worth more or less than what you paid for
them.
If you are subject to the federal alternative minimum tax, you should note
that High Income Municipal may invest up to 100% of its assets and each of
Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt may invest up to
20% of its assets in municiapl securities issues to finance private
activities. the interest from these investments is a tax-preference item
for purposes of the tax.
OVERSEAS FUND seeks growth of capital primarily through investments in
foreign securities.
The fund defines foreign securities as securities of issuers whose
principal activities are outside of the United States. The fund currently
intends to invest at least 65% of its total assets in securities of issuers
from at least three different countries outside of North America (the
United States, Canada, Mexico and Central America). There is no limit on
investments in any one region, country, or currency, although the fund
normally invests in at least three different countries. The fund expects to
invest most of its assets in securities of issuers located in developed
countries in these general geographic areas: the Americas (other than the
United States), the Far East and Pacific Basin, and Western Europe.
The fund may invest in many types of issuers, including companies and other
business organizations as well as governments and their agencies. The fund
expects that equity securities (including shares of closed-end investment
companies and depositary receipts) will account for the majority of its
investments. Although the majority of the fund's investments are expected
to be in equity securities, the fund may also purchase debt securities,
including lower-quality, higher yielding securities. FMR will not emphasize
income in choosing investments unless FMR believes the income will
contribute to the securities' growth potential. FMR may also invest a
portion of the fund's assets in high-quality, short-term debt securities,
bank deposits and money market instruments (including repurchase
agreements) denominated in U.S. dollars or foreign currencies.
FMR determines where an issuer is located by looking at such factors as
its country of organization, the primary trading market for its securities,
and the location of its assets, personnel, sales, and earnings. When
allocating the fund's investments among countries and regions, FMR
considers such factors as the potential for economic growth, expected
levels of inflation, governmental policies and the outlook for currency
relationships. Although the fund may invest significantly in the United
States, the fund currently intends to be as fully invested in non-U.S.
issuers as is practicable in light of the fund's cash flow and cash needs.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics
The fund , under normal conditions, will invest at least 65% of its total
assets in common and preferred stock. The fund looks for domestic and
foreign companies with above-average growth characteristics compared to the
average of the companies included in the S&P 500. Growth may be measured by
factors such as earnings or gross sales. Companies with strong growth
potential often have new products, technologies, distribution channels, or
other opportunities. As a general rule, these companies may include
smaller, less well-known companies, and companies whose stocks have higher
than average price/earnings (P/E) ratios. The market prices of these stocks
may be particularly sensitive to economic, market, or company news. FMR may
also pursue growth in larger or revitalized companies or companies that
hold a strong position in the market. These growth characteristics may be
found in mature or declining industries.
GLOBAL RESOURCES FUND seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in
securities of foreign and domestic companies that own or develop natural
resources, or supply goods and services to such companies, or in physical
commodities.
The fund, under normal conditions, will invest at least 65% of its total
assets in securities of foreign and domestic companies that own or develop
natural resources, or supply goods and services to such companies, or in
physical commodities. FMR will seek securities that are priced relative to
the intrinsic value of the relevant natural resource or that are issued by
companies positioned to benefit from particular periods in the economic
cycle. Accordingly, the fund may shift its emphasis from one natural
resource industry to another depending upon prevailing trends or
developments. The fund may also invest in securities of companies in other
industries, and in corporate and governmental debt securities of all types.
The fund expects to invest a majority of its assets in the securities of
companies that have their principal business activities in at least three
different countries (including the United States).
A company will be deemed to have substantial ownership of, or activities in
natural resources if, at the time those company's securities are acquired,
at least 50% of the company's assets are involved, either directly or
through subsidiaries, in exploring, mining, refining, processing,
transporting, fabricating, dealing in, or owning natural resources. Natural
resources include precious metals (e.g., gold, platinum and silver),
ferrous and nonferrous metals (e.g., iron, aluminum and copper), strategic
metals (e.g., uranium and titanium), hydrocarbons (e.g., coal, oil and
natural gases), chemicals, forest products, real estate, food products and
other basic commodities.
Although the fund is authorized to invest up to 50% of its assets in
physical commodities, it currently intends to invest no more than 25% of
its total assets in them, and intends to limit its physical commodity
investments to readily marketable precious metals. Precious metals, at
times, have been subject to substantial price fluctuations over short
periods of time and may be affected by unpredictable international monetary
and political policies such as currency devaluations or revaluations,
economic and social conditions within a country, trade imbalances, or trade
or currency restrictions between countries.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
The fund, under normal conditions, will invest at least 65% of its total
assets in securities of companies that FMR believes have long-term growth
potential. Although the fund invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The fund may invest in foreign securities without
limitation.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation."
Under normal conditions, the fund will invest at least 65% of its total
assets in companies involving a special situation. The term "special
situation" refers to FMR's identification of an unusual, and possibly
non-repetitive, development taking place in a company or a group of
companies in an industry. A special situation may involve one or more of
the following characteristics:
(small solid bullet) A technological advance or discovery, the offering of
a new or unique product or service, or changes in consumer demand or
consumption forecasts.
(small solid bullet) Changes in the competitive outlook or growth potential
of an industry or a company within an industry, including changes in the
scope or nature of foreign competition or the development of an emerging
industry.
(small solid bullet) New or changed management, or material changes in
management policies or corporate structure.
(small solid bullet) Significant economic or political occurrences abroad,
including changes in foreign or domestic import and tax laws or other
regulations.
(small solid bullet) Other events, including natural disasters, favorable
litigation settlements, or a major change in demographic patterns.
"Special situations" often involve breaks with past experience. They can be
relatively aggressive investments.
In seeking capital appreciation, the fund also may invest in securities of
companies not involving a special situation, but which are companies with
valuable fixed assets and whose securities are believed by FMR to be
undervalued in relation to the companies' assets, earnings, or growth
potential. FMR intends to invest primarily in common stocks and securities
that are convertible into common stocks; however, it also may invest in
debt securities of all types and quality if FMR believes that investing in
these securities will result in capital appreciation. The fund may invest
up to 30% of its assets in foreign investments.
EQUITY INCOME seeks a yield from dividend and interest income which exceeds
the composite dividend yield on securities comprising the S&P 500. In
addition, consistent with the primary objective of obtaining dividend and
interest income, the fund will consider the potential for achieving capital
appreciation. ,
Under normal conditions, the fund will invest at least 65% of its total
assets in income-producing equity securities. For purposes of this policy,
equity securities are defined as common and preferred stocks. The balance
of the fund's assets will tend to be invested in debt securities, a high
percentage of which are expected to be convertible into common stocks. The
fund does not intend to invest in securities of issuers without proven
earnings and/or credit histories. Because the fund invests for income, as
well as capital appreciation, investors should not expect capital
appreciation comparable with funds which seek only capital appreciation.
The yield on the fund's assets generally will increase or decrease from
year to year in accordance with market conditions and in relation to the
changes in yields of the stocks included in the S&P 500.
INCOME & GROWTH FUND seeks both income and growth of capital by investing
in a diversified portfolio of equity and fixed-income securities with
income, growth of income and capital appreciation potential.
The fund invests in equity securities, convertible securities, common and
preferred stocks, and fixed-income securities that provide income or
opportunities for capital growth. The fund may buy securities that are not
currently paying income but offer prospects for future income. The fund may
invest in securities of foreign issuers. In selecting investments for the
fund, FMR will consider such factors as the issuer's financial strength,
its outlook for increased dividend or interest payments, and the potential
for capital gains.
EMERGING MARKETS INCOME FUND seeks a high level of current income by
investing primarily in debt securities and other instruments of issuers in
emerging markets. As a secondary objective, the fund seeks capital
appreciation.
The fund, under normal conditions, will invest at least 65% of its total
assets in debt securities and other instruments of issuers in emerging
markets. Countries with emerging markets include countries (i) that have an
emerging stock market, as defined by the International Finance Corporation,
(ii) with low-to middle-income economies, according to the World Bank, or
(iii) that are listed in World Bank publications as "developing."
The fund emphasizes countries with relatively low gross national product
per capita compared to the world's major economies, and with the potential
for rapid economic growth. FMR expects that emerging market opportunities
will be found mainly in Latin America, Asia, Africa, and emerging European
nations. FMR determines where an issuer is located by looking at such
factors as its country of organization, the primary trading market for its
securities, and the location of its assets, personnel, sales, and earnings.
There is no limit on investments in any one region, country, or currency,
although the fund normally invests in at least three different countries.
The fund may also invest a portion of its assets in common and preferred
stocks of emerging markets issuers, debt securities of non-emerging market
foreign issuers, and lower-quality debt securities of U.S. issuers. FMR
does not currently anticipate that these investments will exceed
approximately 20% of the fund's total assets. In addition, for cash
management purposes, the fund will ordinarily invest a portion of its
assets in high-quality, short-term debt securities and money market
instruments, including repurchase agreements and bank deposits denominated
in U.S. or foreign currencies.
HIGH YIELD FUND seeks a combination of a high level of income and the
potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks.
The fund, under normal conditions, will invest at least 65% of its total
assets in income producing debt securities and preferred stocks, including
convertible and zero coupon securities. The fund may also invest in
securities issued or guaranteed by the U.S. Government, any state or any of
their respective subdivisions, agencies or instrumentalities, and
securities of foreign issuers, including securities of foreign governments.
The fund may invest up to 35% of its total assets in equity securities,
including common stocks, warrants and rights.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
The fund invests primarily in fixed-income securities, allocated among
three broad categories: (1) U.S. government securities, including mortgage
securities and securities issued by government agencies; (2) corporate
securities, including lower-quality, high-yield securities as well as
investment-grade corporate bonds; and (3) foreign corporate and
governmental securities, including emerging market instruments and
securities of issuers in more developed markets. Although FMR expects that
the fund will normally have investments in each of the three asset
categories, there is no limit on the amount that the fund may invest in any
one type of fixed-income securities from time to time. Diversification,
when successful, can mean higher returns with decreased volatility. By
allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant investment risks
of each category through diversification. However, each category may
decline at the same time.
FMR regularly reviews the fund's allocation and makes changes gradually
over time to favor investments that it believes provide the most favorable
outlook for achieving the fund's objective.
GOVERNMENT INVESTMENT FUND seeks a high level of current income by
investing primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
The fund, under normal circumstances, will invest at least 65% of its total
assets in government securities. The fund considers "government securities"
to include those which are subject to repurchase agreements. The fund
invests primarily in obligations issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, including U.S.
Treasury bonds, notes and bills, Government National Mortgage Association
mortgage-backed pass-through certificates (Ginnie Maes) and mortgage-backed
securities issued by the Federal National Mortgage Association (Fannie
Maes) or the Federal Home Loan Mortgage Corporation (Freddie Macs). These
securities may or may not be fully backed by the U.S. Government. In
seeking current income, the fund also may consider the potential for
capital gain.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
The fund may invest primarily in fixed-income obligations of all types. The
fund invests in domestic and foreign investment grade securities. When
consistent with its primary objective, the fund may also seek capital
appreciation. Under normal conditions, the fund maintains a dollar-weighted
average maturity of 10 years or less, but individual securities may be of
any maturity. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation.
Under normal conditions, at least 65% of the fund's total assets will be
invested in fixed-income securities of all types, which may include
convertible and zero coupon securities. The fund may invest a portion of
its assets in securities issued by foreign companies and foreign
governments. Under normal conditions, the fund maintains a dollar-weighted
average maturity of three years or less, but individual securities may be
of any maturity. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax.
The fund normally invests so that at least 80% of its net assets is
invested in municipal obligations whose interest is free from federal
income tax. The fund may invest in medium- and lower-quality municipal
obligations. The fund may invest more than 25% of its assets in securities
whose revenue sources are from similar types of projects (e.g., education,
electric utilities, health care, housing, transportation, or water, sewer
and gas utilities) or whose issuers share the same geographic location. The
fund may invest up to 100% of its assets in municipal obligations subject
to the federal alternative minimum tax. The fund may purchase long-term
municipals with maturities of 20 years or more, which generally produce
higher yields than short-term municipals. The fund also may purchase
short-term municipal obligations in order to provide for short-term capital
needs. The average maturity of the fund is currently expected to be greater
than 20 years, but individual securities may be of any maturity.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt
from federal income taxes that can be obtained consistent with the
preservation of capital.
The fund normally will invest so that 80% or more of its net assets will
be invested in securities whose interest is free from federal income
tax. The fund invests in municipal obligations rated investment grade or
higher. The fund may also invest 25% or more of its total assets in
securities whose revenue sources are from similar types of projects (e.g.,
education, electric utilities, health care, housing, transportation or
water, sewer, and gas utilities) or whose issuers share the same geographic
location. The fund may, under normal circumstances, invest up to 20% of
its net assets in obligations subject to the federal alternative minimum
tax. Under normal conditions, at least 80% of the fund's net assets
will be invested in obligations having remaining maturities of 15 years or
less. Under normal conditions, the fund maintains a dollar-weighted average
maturity of 10 years or less. In determining a security's maturity for
purposes of calculating the fund's average maturity, estimates of the
expected time for its principal to be repaid may be used. This can be
substantially shorter than its stated final maturity.
SHORT INTERMEDIATE TAX-EXEMPT FUND seeks as high a level of current income,
exempt from federal income tax, as is consistent with preservation of
capital.
The fund invests primarily in municipal securities. The fund normally will
invest so that 80% or more of its net assets will be invested in securities
whose interest is free from federal income tax. The fund may, under normal
circumstances, invest up to 20% of its net assets in municipal securities
subject to the federal alternative minimum tax. The fund may invest any
portion of its assets in industrial revenue bonds (IRBs) backed by private
issuers, and may invest up to 25% of its total assets in IRBs related to a
single industry. The fund may also invest 25% or more of its total assets
in municipal securities whose revenue sources are from similar types of
projects (e.g., education, electric utilities, health care, housing,
transportation, or water, sewer and gas utilities) or whose issuers share
the same geographic location. Under normal conditions, the fund maintains a
dollar-weighted average maturity of between two and four years, but
individual securities may be of any maturity. In determining a security's
maturity for purposes of calculating the fund's average maturity, estimates
of the expected time for its principal to be repaid may be used. This can
be substantially shorter than its stated final maturity.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to its investment strategy.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, and Income & Growth also reserve
the right to invest without limitation in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
High Yield reserves the right to invest in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
Emerging Markets Income, Strategic Income, Government Investment, Limited
Term Bond, and Short Fixed-Income reserve the right to invest in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each do not expect to invest in federally taxable obligations.
Each, however, reserves the right to invest without limitation in
short-term instruments, to hold a substantial amount of uninvested cash, or
to invest more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about each fund's investments
is contained in the SAI. Policies and limitations are considered at the
time of purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help a fund
achieve its goal. Current holdings and recent investment strategies are
described in a fund's financial reports, which are sent to shareholders
twice a year. For a free SAI or financial report, call your Investment
Professional.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each of Overseas,
Global Resources, Growth Opportunities, Equity Income, Income & Growth,
High Yield, Government Investment, Limited Term Bond, Short Fixed-Income,
High In come Municipal, and Limited Term Tax-Exempt may not purchase
more than 10% of the outstanding voting securities of a single issuer.
With respect to 100% of its assets, each of Equity Portfolio Growth, and
Strategic Opportunities may not purchase more than 10% of the
outstanding voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities, loans, and other direct debt have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds") are,
and tax-exempt lower-quality debt securities may be, considered to be
speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general economic difficulty.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the funds' portfolios. These
figures are dollar-weighted averages of month-end portfolio holdings during
fiscal 1994, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
(AS A % OF ASSETS IN EACH RATING CATEGORY) (AS A % OF ASSETS IN EACH
RATING CATEGORY)
INVESTMENT GRADE LOWER QUALITY
STANDARD & POOR'S CORPORATION AAA, AA, A BBB BB B CCC CC,C D NR
EQUITY FUNDS:
Overseas .43 -- -- -- -- -- -- .61
Equity Portfolio Growth -- -- .01 -- -- -- -- .01
Global Resources -- -- -- -- -- -- -- --
Growth Opportunities 6.38 -- -- -- -- -- -- .17
Strategic Opportunities 15.67 -- .28 .33 -- .04 .76 1.29
Equity Income 2.03 .50 .38 2.17 .03 -- -- .50
Income & Growth 19.17 2.93 4.39 4.28 .97 -- -- 11.79
TAXABLE/FIXED-INCOME
Emerging Markets Income -- -- 9.37 5.32 -- -- -- 54.79
High Yield .79 .26 8.02 32.56 4.79 .61 4.69 29.11
Strategic Income 31.24 .69 2.84 20.62 -- -- -- 10.73
Government Investment 89.71 -- -- -- -- -- -- .56
Limited Term Bond 69.85 .12 -- -- -- -- -- .09
Short Fixed-Income 28.28 21.14 6.40 .69 -- -- -- 16.94
TAX-EXEMPT/MUNICIPAL FUNDS:
High Income Municipal 32.93 22.73 6.31 2.32 -- -- -- 31.76
Limited Term Tax-Exempt 78.53 -- -- -- -- -- -- 10.16
Short Intermediate Tax-Exempt 64.65 -- 9.86 -- -- -- -- 10.96
MOODY'S INVESTOR SERVICE, INC.
Aaa, Aa, A Baa Ba B Caa Ca C --
EQUITY FUNDS:
Overseas .49 -- -- .50 -- -- -- .05
Equity Portfolio Growth -- -- .02 -- -- -- -- --
Global Resources -- -- -- -- -- -- -- --
Growth Opportunities 6.42 -- -- .13 -- -- -- --
Strategic Opportunities 15.67 -- .61 -- .88 .03 .04 1.14
Equity Income 2.13 .61 .19 2.38 -- -- -- .32
Income & Growth 20.40 1.97 3.92 8.48 .55 .25 -- 7.97
TAXABLE/FIXED-INCOME
Emerging Markets Income 1.01 -- 8.44 16.37 -- -- -- 43.66
High Yield -- .18 3.71 38.04 7.49 2.77 .56 28.07
Strategic Income 31.24 -- 1.49 22.86 -- -- -- 10.51
Government Investment 90.27 -- -- -- -- -- -- --
Limited Term Bond 69.25 .72 -- -- -- -- -- .09
Short Fixed-Income 29.78 21.17 9.90 3.27 -- -- -- 9.32
TAX-EXEMPT/MUNICIPAL FUNDS:
High Income Municipal 27.46 28.41 10.76 1.38 -- -- -- 28.05
Limited Term Tax-Exempt 88.37 -- -- -- -- -- -- .33
Short Intermediate Tax-Exempt 69.51 7.11 2.75 -- -- -- -- 6.10
FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED DIRECTLY OR
INDIRECTLY BY MOODY'S OR S&P AMOUNTED TO 41.73%
(EMERGING MARKETS), 0% (EQUITY PORTFOLIO GROWTH), .31% (EQUITY INCOME), 0%
(GROWTH OPPORTUNITIES),.05%
(OVERSEAS), 1.14% (STRATEGIC OPPORTUNITIES), 4.85% (INCOME & GROWTH), 0%
(GLOBAL RESOURCES), 5.51% (STRATEGIC
INCOME), 22.19% (HIGH YIELD)AND 7.85% FOR (SHORT FIXED-INCOME). THESE
PERCENTAGES MAY INCLUDE SECURITIES RATED BY
OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
FMR HAS DETERMINED THAT UNRATED SECURITIES
THAT ARE LOWER QUALITY ACCOUNT FOR 41.51% (EMERGING MARKETS), 0% (EQUITY
PORTFOLIO GROWTH), .31% (EQUITY INCOME), 0%
(GROWTH OPPORTUNITIES), 0% (OVERSEAS), 1.14% (STRATEGIC OPPORTUNITIES),
.3.87% (INCOME & GROWTH), 0% (GLOBAL
RESOURCES), 5.51% (STRATEGIC INCOME), 22.19% (HIGH YIELD)AND 3.88% FOR
(SHORT FIXED-INCOME) OF EACH FUND'S TOTAL
SECURITY INVESTMENTS. REFER TO THE FUND'S SAI FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S AND S&P
AMOUNTED TO 20.86% (HIGH INCOME
MUNICIPAL), 0% (LIMITED TERM TAX-EXEMPT) AND 1.46% (SHORT-INTERMEDIATE
TAX-EXEMPT). THESE PERCENTAGES MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS
WELL AS UNRATED SECURITIES. FMR HAS
DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR
18.09% (HIGH INCOME MUNICIPAL), 0% (LIMITED
TERM TAX-EXEMPT) AND 0% (SHORT-INTERMEDIATE TAX-EXEMPT) OF EACH FUND'S
SECURITY INVESTMENTS. REFER TO THE FUND'S
SAI FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: For all funds, other than Short-Intermediate
Tax-Exempt, purchase of a debt security is consistent with a fund's debt
quality policy if it is rated at or above the stated level by Moody's or
rated in equivalent categories by S&P, or is unrated but judged to be of
equivalent quality by FMR.
Limited Term Bond currently intends to limit its investments in debt
securities to those of Baa-quality and above, and currently intends to
limit its investments in debt securities rated Baa to 5% of its assets.
Short Fixed-Income currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investments in debt securities to B-quality and above.
Global Resources currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investments in debt securities to Caa-quality and above.
Each of Equity Portfolio Growth, Equity Income, Growth Opportunities,
Income & Growth, Overseas, and Strategic Opportunities currently intends to
limit its investments in lower than Baa-quality debt securities to 35% of
its assets.
Purchase of a debt security is consistent with Short-Intermediate
Tax-Exempt's debt quality policy if, with respect to 60% of its assets, it
is judged by FMR to be of equivalent quality to debt securities rated A or
better by Moody's or S&P. The fund currently intends to limit its
investments in debt securities rated below Baa by Moody's or BBB by S&P, or
unrated debt securities judged by FMR to be of equivalent quality, to 5% of
its assets. The fund currently intends to limit its investments in debt
securities to Ba- quality and above.
Limited Term Tax-Exempt currently intends to limit its investments in
debt securities to those of Baa-quality and above and currently intends to
limit its investments in debt securities rated Baa to 25% of its
assets.
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. Government obligations, commercial paper
and other short-term corporate obligations, and certificates of deposit,
bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. Government. Not all U.S. Government securities are backed by the full
faith and credit of the United States. For example, securities issued by
the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other entity. The value of some or all municipal
securities may be affected by uncertainties in the municiapl market related
to legislation or litigation involving the taxation of municiapl securities
or the rights of municiapl securities holders. A fund may own a municipal
security directly or through a participation interest.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve additional risks and considerations. These include risks relating
to political or economic conditions in foreign countries, fluctuations in
foreign currencies, withholding or other taxes, operational risks,
increased regulatory burdens, and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign securities may be unwilling to repay
principal and interest when due, and may require that the conditions for
payment be renegotiated. All of these factors can make foreign investments,
especially those in developing countries, more volatile.
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS (ADRS AND
EDRS) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
ASSET-BACKED SECURITIES may include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or residential
mortgages, and may include complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities. Mortgage
securities may be issued by the U.S. Government or by private entities. For
example, Ginnie Maes are interests in pools of mortgage loans insured or
guaranteed by a U.S. Government agency. Because mortgage securities pay
both interest and principal as their underlying mortgages are paid off,
they are subject to prepayment risk. This is especially true for stripped
securities. Also, the value of a mortgage security may be significantly
affected by changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other factors
difficult to predict, making their value highly volatile.
VARIABLE AND FLOATING RATE SECURITIES may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. Their risks are similar to those of other debt securities,
although they may be more volatile and the value of certain types of
stripped securities may move in the same direction as interest rates.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may
involve greater risk of loss if the counterparty defaults. Some
counterparties in these transactions may be less creditworthy than those in
U.S. markets.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
temporarily transfers possession of a portfolio instrument to another party
in return for cash. This could increase the risk of fluctuation in the
fund's yield or in the market value of its assets.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities and some other securities, including
illiquid securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS. Each of Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt may
not purchase a security if, as a result, more than 10% of its net assets
would be invested in illiquid securities.
Each of Overseas, Emerging Markets Income, High Yield, and Strategic Income
may not purchase a security if, as a result, more than 15% of its net
assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield.
WARRANTS are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant
tends to be more volatile than its underlying securities and ceases to have
value if it is not exercised prior to its expiration date. In addition,
changes in the value of a warrant do not necessarily correspond to changes
in the value of its underlying securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
changes in the market value of a single issuer or industry.
RESTRICTIONS: With respect to 100% of its assets each of Equity Portfolio
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in the securities of a single
issuer.
With respect to 75% of its total assets each of Overseas, Global Resources,
Growth Opportunities, Equity Income, Income & Growth, High Yield,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal, and Limited Term Tax-Exempt may not purchase a security if, as a
result, more than 5% would be invested in the securities of a single
issuer.
Emerging Markets Income, Strategic Income, and Short-Intermediate
Tax-Exempt are considered non-diversified. Generally, to meet federal tax
requirements at the close of each quarter, each fund does not invest more
than 25% of its total assets in any issuer and, with respect to 50% of
total assets, does not invest more than 5% of its total assets in any
issuer
These limitations do not apply to U.S. Government securities.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
LENDING securities to broker-dealers and institutions, including FBSI, an
affiliate of FMR, is a means of earning income. This practice could result
in a loss or a delay in recovering a fund's securities. A fund may also
lend money to other funds advised by FMR and to issuers in connection with
certain direct debt transactions.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of each fund's
total assets; however Limited Term Tax-Exempt, High Income Municipal and
Short-Intermediate Tax-Exempt do not currently intend to make loans.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
OVERSEAS FUND seeks growth of capital primarily through investments in
foreign securities.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics.
GLOBAL RESOURCES FUND seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in
securities of foreign and domestic companies that own or develop natural
resources, or supply goods and services to such companies, or in physical
commodities.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation." Under normal conditions, the fund will invest at least 65% of
its total assets in companies involving a special situation. FMR intends to
invest primarily in common stocks; however, it may also invest in debt
securities of all types and quality if FMR believes that investing in these
securities will result in capital appreciation. The fund may invest up to
30% of its assets in foreign investments.
EQUITY INCOME FUND seeks a yield from dividend and interest income which
exceeds the composite dividend yield on securities comprising the S&P 500.
In addition, consistent with the primary objective of obtaining dividend
and interest income, the fund will consider the potential for achieving
capital appreciation.
INCOME & GROWTH FUND seeks both income and growth of capital by investing
in a diversified portfolio of equity and fixed-income securities with
income, growth of income and capital appreciation potential.
EMERGING MARKETS INCOME FUND seeks a high level of current income by
investing primarily in debt securities and other instruments of issuers in
emerging markets. As a secondary objective, the fund seeks capital
appreciation.
HIGH YIELD FUND seeks a combination of a high level of income and the
potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
GOVERNMENT INVESTMENT FUND seeks a high level of current income by
investing primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed-income obligations.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt from
federal income taxes that can be obtained consistent with the preservation
of capital.
SHORT INTERMEDIATE TAX-EXEMPT FUND seeks as high a level of current income,
exempt from federal income tax, as is consistent with preservation of
capital.
With respect to 75% of its total assets, each of Overseas, Global
Resources, Growth Opportunities, Equity Income, Income & Growth, High
Yield, Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal and Limited Term Tax-Exempt may not purchase a security
if, as a result, more than 5% would be invested in the securities of a
single issuer. With respect to 100% of its assets, each of Equity Portfolio
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in any one issuer.
With respect to 75% of its total assets, each of Overseas, Global
Resources, Growth Opportunities, Equity Income, Income & Growth, High
Yield, Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal, and Limited-Term Tax-Exempt may not purchase more than
10% of the outstanding voting securities of a single issuer. With respect
to 100% of its assets, each of Equity Portfolio Growth and Strategic
Opportunities may not purchase more than 10% of the outstanding voting
securities of a single issuer.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in the
applicable class's share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain of the funds. Each fund also
pays OTHER EXPENSES, which are explained on page __.
FMR may, from time to time, agree to reimburse a fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by each fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease each fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Equity Income
pays FMR a monthly management fee at an annual rate of 0.50% of its average
net assets. The fee for Equity Portfolio Growth, Global Resources, Income &
Growth, Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt is calculated by
adding a group fee rate to an individual fee rate, and multiplying the
result by each fund's average net assets. The fee for Overseas, Growth
Opportunities and Strategic Opportunities is determined by taking a basic
fee and then applying a performance adjustment. The performance adjustment
either increases or decreases the management fee, depending on how well
each fund has performed relative to the Morgan Stanley Capital
International Europe Australia, Far East Index for Overseas or the S&P 500
for each of Growth Opportunities and Strategic Opportunities.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. For Overseas, Equity Portfolio Growth, Global
Resources, Growth Opportunities, Strategic Opportunities, and Income &
Growth (the Equity Funds), this rate cannot rise above 0.52%, it drops as
total assets under management increase. For Emerging Markets Income, High
Yield, Strategic Income, Government Investment, Limited Term Bond, Short
Fixed-Income, High Income Municipal, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt (the Fixed-Income Funds) this rate cannot
rise above 0.37%, and it drops as total assets under management increase.
The basic fee rate (calculated monthly) is calculated by adding a group fee
rate to an individual fund fee rate, and multiplying the result by each
fund's average net assets.
The performance adjustment rate is calculated monthly by comparing the
performance of each of Overseas, Growth Opportunities, and Strategic
Opportunities to that of the respective indices over the most recent
36-month period. The difference is translated into a dollar amount that is
added to or subtracted from the basic fee. The maximum annualized
performance adjustment rate is +/- 0.20%.
Investment performance will be measured separately for each class of shares
offered by Strategic Opportunities, Growth Opportunities, and Overseas and
the least of the results obtained will be used in calculating the
performance adjustment.
* Group Individual Total Fee
Fee Rate Fund Fee Manageme
Rate nt
Overseas 0.32% 0.45% 0.80%
Equity Portfolio Growth 0.32% 0.32%[A] 0.64%[A]
Global Resources 0.32% 0.45% 0.77%
Growth Opportunities 0.32% 0.30% 0.69%
Strategic Opportunities 0.32% 0.30% 0.67%[C]
Equity Income N/A N/A 0.50%
Income & Growth 0.32% 0.20% 0.52%
Emerging Markets Income 0.16% 0.55% 0.70%[C]
High Yield 0.15% 0.45% 0.60%
Strategic Income 0.16% 0.45% 0.60%[C]
Government Investment 0.16% 0.30% 0.46%
Limited Term Bond 0.16% 0.25%[B] 0.41%
Short Fixed-Income 0.16% 0.30% 0.46%
High Income Municipal 0.16% 0.25% 0.41%
Limited Term Tax-Exempt 0.16% 0.25% 0.41%
Short-Intermediate Tax-Exempt 0.16% 0.25% 0.41%[C]
[A] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.33% TO 0.30%. IF THIS REDUCTION WERE NOT IN
EFFECT, DURING FISCAL 1994, THE TOTAL FEE WOULD HAVE BEEN 0.65%.
[B] ON DECEMBER 14, 1994, SHAREHOLDERS OF THE FUND APPROVED AN INCREASE FOR
THE INDIVIDUAL FUND FEE RATE FROM 0.25% TO 0.30% EFFECTIVE FEBRUARY 24,
1995.
[C]ANNUALIZED
[D]THE BASIC FEE RATE FOR FISCAL 1994 WAS 0.77% FOR OVERSEAS, 0.62% FOR
GROWTH OPPORTUNITIES AND 0.62% FOR STRATEGIC OPPORTUNITIES
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR Far
East, FIJ, and FIIA. FIIA in turn has a sub-advisory agreement with FIIAL
U.K. These sub-advisers are compensated for providing FMR with investment
research and advice on issuers based outside the United States. FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the
costs of providing these services. FMR pays FIJ and FIIA a fee equal to 30%
of its management fee rate associated with investments for which the
sub-adviser provided investment advice.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis. FIIA pays FIIAL U.K. a fee
equal to 110% of the cost of providing these services.
For fiscal 1994, FMR, on behalf of each fund with sub-advisory agreements,
paid FMR U.K., FMR Far East, FIJ, and FIIA fees amounting to less than
0.01% of each fund's average net assets. Limited Term Bond did not pay fees
to any of FMR U.K., FMR Far East, FIJ, or FIIA, for fiscal 1994.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A of Overseas, Equity Portfolio Growth,
Global Resources, Growth Opportunities, Strategic Opportunities, Equity
Income, Income & Growth, Emerging Markets Income, High Yield, Strategic
Income, Government Investment, Limited Term Bond, and Short Fixed-Income
(the Taxable Funds). FIIOC performs certain transfer agency, dividend
disbursing and shareholder services for Class B of the Taxable Funds. FSC
calculates the NAV and dividends for each class of the Taxable Funds,
maintains the general accounting records and administers the securities
lending program for each of the Taxable Funds (except for Government
Investment). In fiscal 1994, fees paid by Class A to State Street amount to
0.43% for Overseas, 0.20% for Equity Portfolio Growth, 0.42% for Global
Resources, 0.22% for Growth Opportunities, 0.39% (annualized) for Strategic
Opportunities, 0.38% for Equity Income, 0.20% for Income & Growth, 0.36%
(annualized) for Emerging Markets Income, 0.24% for High Yield, 0.39%
(annualized) for Strategic Income, 0.30% for Limited Term Bond, 0.55% for
Government Investment, 0.22% for Short Fixed-Income, of Class A average net
assets. In fiscal 1994, fees paid by Class B (annualized) to FIIOC amounted
to 0.66% for Strategic Opportunities, 0.51% for Equity Income, 0.86% for
Emerging Markets Income, 0.40% for High Yield, 0.16% for Strategic Income,
0.45% for Government Investment, and 0.50% for Limited Term Bond. In fiscal
1994, fees paid to FSC amounted to 0.06% for Overseas, 0.04% for Equity
Portfolio Growth, 0.06% for Global Resources, 0.02% for Growth
Opportunities, 0.06% (annualized) for Strategic Opportunities, 0.06% for
Equity Income, 0.03% for Income & Growth, 0.21% (annualized) for Emerging
Markets Income, 0.04% for High Yield, 0.43% for Strategic Income, 0.05% for
Government Investment, 0.04% for Limited Term Bond, and 0.03% for Short
Fixed-Income.
UMB has entered into sub-arrangements with State Street pursuant to which
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A shares of High Income Municipal, Limited
Term Tax-Exempt and Short-Intermediate Tax-Exempt (the Tax-Exempt Funds).
UMB has entered into sub-arrangements with FIIOC pursuant to which FIIOC
performs certain transfer agency, dividend disbursing and shareholder
services for Class B shares of the Tax-Exempt Funds. UMB has entered into
sub-arrangements with FSC pursuant to which FSC calculates the NAV and
dividends for each class of the Tax-Exempt/Municipal Funds, and maintains
each of the Tax-Exempt/Municipal Fund's general accounting records. All of
the fees are paid to State Street, FIIOC, and FSC by UMB, which is
reimbursed by the applicable class or fund, as appropriate, for such
payments. In fiscal 1994, fees paid by UMB to State Street on behalf of the
Class A shares amounted to 0.15% for High Income Municipal, 0.18% for
Limited Term Tax-Exempt, and 0.11% (annualized) for Short-Intermediate
Tax-Exempt, of Class A' s average net assets. In fiscal 1994, fees paid by
UMB to FIIOC on behalf of the Class B shares amounted to 0.28%
(annualized)for High Income Municipal, and 0.25% (annualized) for Limited
Term Tax-Exempt of Class B's average net assets. In fiscal 1994 fees paid
by UMB to FSC amounted to 0.04% for High Income Municipal, 0.07% for
Limited Term Tax-Exempt and 0.42% (annualized) for Short-Intermediate
Tax-Exempt, of each fund's average net assets.
State Street has entered into sub-arrangements pursuant to which FIIOC
performs certain transfer agency, dividend disbursing and shareholder
services for Class A shares. State Street pays FIIOC a portion of its fee
for Class A accounts for which FIIOC provides limited services, or its full
fee for Class A accounts that FIIOC maintains on its behalf.
Class A shares of each fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plans, Class A of each fund is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares and providing personal
service to and/or maintenance of Class A shareholder accounts. Class A of
Equity Portfolio Growth and Equity Income may pay FDC a distribution fee at
an annual rate up to 0.75% of its average net assets, or such lesser amount
as the Trustees may determine from time to time. Class A of Emerging
Markets Income, High Yield, Strategic Income, Government Investment,
Limited Term Bond, High Income Municipal, Limited Term Tax-Exempt, Short
Fixed-Income and Short-Intermediate Tax-Exempt may pay FDC a distribution
fee at an annual rate up to 0.40% of its average net assets, or such lesser
amount as the Trustees may determine from time to time.
Class A of each of Overseas, Equity Portfolio Growth, Global Resources,
Growth Opportunities, Strategic Opportunities, Equity Income, and Income &
Growth currently pays FDC monthly at an annual rate of 0.65% of average net
assets; and Class A of each of Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, High Income
Municipal and Limited Term Tax-Exempt currently pays FDC at an annual rate
of 0.25% of average net assets; and Class A of each of Short Fixed-Income
and Short-Intermediate Tax-Exempt currently pays FDC monthly at an annual
rate of 0.15% of average net assets. For purposes of calculating the
distribution fee, average net assets are determined at the close of
business on each day throughout the month. The distribution fee may be
increased only when the Trustees believe that it is in the best interest of
the applicable class's shareholders to do so.
Up to the full amount of the Class A distribution fee may be reallowed to
Investment Professionals based upon the level of marketing and distribution
services provided.
Class B shares of Overseas, Global Resources, Strategic
Opportunities, Equity Income, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, High Income
Municipal and Limited Term Tax-Exempt have also adopted a DISTRIBUTION AND
SERVICE PLAN. Under the Class B Plans, Class B of each fund is authorized
to pay FDC a monthly distribution fee as compensation for its services and
expenses in connection with the distribution of Class B shares of the
applicable fund. Class B of each fund currently pays FDC monthly at an
annual rate of 0.75% of its average net assets determined at the close of
business on each day throughout the month. In addition, pursuant to each
Class B Plan, Investment Professionals are compensated at an annual rate of
0.25% of average net assets of that fund's Class B for providing personal
service to and/or maintenance of Class B shareholder accounts.
The Plans also specifically recognize that FMR may make payments from its
management fee, revenue, past profits or other resources to Investment
Professionals for their services to each class's shareholders.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity. A broker-dealer may use a
portion of the commissions paid by the fund to reduce the fund's custodian
or transfer agent fees.
The portfolio turnover rate for fiscal 1994 was 34% for Overseas, 137% for
Equity Portfolio Growth, 125% for Global Resources, 43% for Growth
Opportunities, 228% (annualized) for Strategic Opportunities, 140% for
Equity Income, 202% for Income & Growth, 354% (annualized) for Emerging
Markets Income, 118% for High Yield, 104% (annualized) for Strategic
Income, 68% for Limited Term Bond, 313% for Government Investment, 108% for
Short Fixed-Income, 38% for High Income Municipal, 53% for Limited Term
Tax-Exempt, and 111% (annualized) for Short-Intermediate Tax-Exempt. These
rates vary from year to year. High turnover rates increase transaction
costs and may increase taxable capital gains. FMR considers these effects
when evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
TYPES OF ACCOUNTS
Read your Investment Professional's program materials in conjunction with
this prospectus for additional service features or fees that may apply.
Certain features of the funds, such as minimum initial or subsequent
investment amounts, may be modified in these programs, and administrative
charges may be imposed for the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, tax-free funds are not available
for purchase in retirement accounts. If your employer offers a fund through
a retirement program, contact your employer for more information. Otherwise
call your Investment Professional directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
TAX FREE FUND ARE NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
(solid bullet) MONEY PURCHASE/PROFIT SHARING PLANS (KEOGH PLANS) are
tax-deferred pension accounts designated for employees of unincorporated
businesses or for persons who are self-employed.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your Investment
Professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A shares
of each fund: the offering price and the NAV. The offering price for Class
A shares includes a front-end sales charge, which you pay when you buy
Class A shares, unless you qualify for a reduction or waiver as described
on page ___. When you buy Class A shares at the offering price, the
transfer agent deducts the applicable sales charge and invests the rest at
NAV. Each fund's Class B NAV, is also calculated every business day. Class
B shares of each fund are sold without a front-end sales charge and may be
subject to a CDSC upon redemption. For information on how the CDSC is
calculated, see "Transaction Details," page __.
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted by the transfer agent.
The offering price and NAV are normally calculated at 4:00 p.m. Eastern
time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the appropriate transfer agent before 4:00 p.m. Eastern time.
The transfer agent must receive payment within five business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
Share certificates may be available for Class A shares only upon request.
Share certificates are not available for Class B shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this prospectus, call your Investment
Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund, or
(small solid bullet) Contact your Investment Professional.
If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
Investment Professional for more information and a retirement account
application.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity Advisor retirement accounts $500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $250
For Fidelity Advisor retirement accounts $100
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity Advisor retirement accounts NONE
PURCHASE AMOUNTS OF MORE THAN $250,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE (small solid bullet) Contact your Investment
Professional (small solid bullet) Contact your Investment
Professional
YOUR INVESTMENT PROFESSIONAL or, if you are investing through a or, if you are investing through a
Broker-Dealer or Insurance Broker-Dealer or Insurance
Representative call 1-800-522-7297. Representative call 1-800-522-7297. If
If you are investing through a Bank you are investing through a Bank
Representative call 1-800-843-3001. Representative call 1-800-843-3001.
(small solid bullet) Exchange from the
same class of (small solid bullet) Exchange from the same
class of
another Fidelity Advisor fund account another Fidelity Advisor fund account
with the same registration, including with the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the
account (small solid bullet) Make your check payable to the
application. Make your check payable complete name of the fund of your
to the complete name of the fund of choice and note the applicable class.
your choice and note the applicable Indicate your fund account number on
class. Mail to the address indicated your check and mail to the address
on the application. printed on your account statement.
(small solid bullet) Exchange by mail: call your Investment
Professional for instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your account
application and (small solid bullet) Bring your check to your Investment
check to your Investment Professional.
Professional.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) Not available (small solid bullet) If you are investing through a
Broker-Dealer or Insurance
Representative, wire to:
State Street Bank & Trust Co.
Routing # 011000028
ATTN: Custody & Shareholder
Services Division
CREDIT: Fund Name
DDA# 99029084
FBO: (Account name)
(Account number)
If you are investing through a Bank
Representative, wire to:
Banker's Trust Co.
Routing # 021001033
Custody & Shareholder Services
Division
Fidelity Advisor DART System
A/C #00159759
FBO: (Account name)
(Account number)
Specify the complete name of the fund
of your choice and note the applicable
class, and include your account number
and your name.
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent, less any applicable CDSC. NAV is normally calculated at
4:00 p.m. Eastern time.
To sell shares in a non-retirement account, you may use any of the methods
described on these pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to other Fidelity funds, which can
be requested by phone or in writing. For a retirement distribution form,
contact your Investment Professional, or, if you purchased your shares
through a Broker-Dealer or Insurance Representative, call 1-800-522-7297.
If you purchased your shares through a Bank Representative, call
1-800-843-3001.
To sell certificate shares, call 1-800-544-7777 for instructions. The fund
no longer issues certificate shares.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES,
leave at least $1,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity Advisor account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
signed certificates (if applicable), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
(small solid bullet) If you purchase your shares through a Broker-Dealer or
Insurance Representative:
Fidelity Advisor Funds
P.O. Box 8302
Boston, MA 02266-8302
(small solid bullet) If you purchased your shares through a Bank
Representative:
Fidelity Investments Institutional Operations Co.
82 Devonshire Street ZR5
Boston, MA 02109
Unless otherwise instructed, the transfer agent will send a check to the
record address.
CHECKWRITING
If you have a checkbook for your account in Short Fixed-Income or
Short-Intermediate Tax-Exempt, you may write an unlimited number of checks.
The minimum amount for a check is $500. Do not, however, try to close out
your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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<CAPTION>
<S> <C> <C>
PHONE All account types except retirement Maximum check request: $100,000.
YOUR INVESTMENT PROFESSIONAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(phone_graphic) All account types You may exchange to the same class of
other Fidelity Advisor funds if both
accounts are registered with the same
name(s), address, and taxpayer ID
number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant, The letter of instruction (with signature
Sole Proprietorship, guaranteed) must be signed by all
UGMA, UTMA persons required to sign for transactions,
exactly as their names appear on the
Retirement account account and sent to your Investment
Professional or the transfer agent.
The account owner should complete a
retirement distribution form. Contact your
Investment Professional or, if you
purchased your shares through a
Broker-Dealer or Insurance
Representative, call 1-800-522-7297. If
you purchased your shares through a
Bank Representative, call
1-800-843-3001.
Trust The trustee must sign the letter indicating
capacity as trustee. If the trustee's name
is not in the account registration, provide a
copy of the trust document certified within
the last 60 days.
Business or Organization At least one person authorized by
corporate resolution to act on the
account must sign the letter.
Executor, Administrator, For instructions contact your Investment
Conservator/Guardian Professional or, if you purchased your
shares through a Broker-Dealer or
Insurance Representative, call
1-800-522-7297. If you purchased your
shares through a Bank Representative,
call 1-800-843-3001.
Wire (wire_graphic) All account types except
retirement You must sign up for the wire feature
before using it. To verify that it is in
place, contact your Investment
Professional or, if you purchased your
shares through a Broker-Dealer or
Insurance Representative, call
1-800-522-7297. If you purchased your
shares through a Bank Representative,
call 1-800-843-3001. Minimum wire:
$500.
Your wire redemption request must be
received by the transfer agent before
4:00 p.m. Eastern time for money to be
wired on the next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Check (check_graphic) For all non-retirement Short Minimum check: $500.
Fixed-Income and Short-Intermediate All account owners must sign a signature
Tax-Exempt accounts only. card to receive a checkbook.
</TABLE>
Telephone redemptions cannot be processed for Fidelity Advisor fund
prototype retirement accounts where State Street Bank and Trust Company is
the custodian.
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction that
affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your Investment
Professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds by telephone or in writing. The Class
A shares you exchange will carry credit for any front-end sales charge you
previously paid in connection with their purchase.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions" page __.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Only Class A shares are eligible for this
program. Because of Class A's front-end sales charge, you may not want to
set up a systematic withdrawal plan during a period when you are buying
Class A shares on a regular basis.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for retirement, a home, educational expenses, and other
long-term financial goals. Certain restrictions apply for retirement
accounts. Call your Investment Professional for more information.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
$1,000 $100[A] quarterly, application.
or semi-annually (small solid bullet) For existing accounts, call your Investment Professional for an
application.
(small solid bullet) To change the amount or frequency of your investment, contact
your Investment Professional directly or, if you purchased your
shares through a Broker-Dealer or Insurance Representative, call
1-800-522-7297. If you purchased your shares through a Bank
Representative, call 1-800-843-3001. Call at least 10 business
days prior to your next scheduled investment date. (20 business
days if you purchased your shares through a bank)
</TABLE>
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your Investment Professional after both
semi-annually, or accounts are opened.
annually (small solid bullet) To change the amount or frequency of your investment, contact
your Investment Professional directly or, if you purchased your
shares through a Broker-Dealer or Insurance Representative, call
1-800-522-7297. If you purchased your shares through a Bank
Representative, call 1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be
processed must have a minimum balance of $10,000. The account
into which the exchange is being processed must have a minimum
of $1,000.
(small solid bullet) Call at least 2 business days prior to your next
scheduled exchange date.
</TABLE>
[A] BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital gains
to shareholders each year. Each fund pays capital gains, if any, in
December and may pay additional capital gains after the close of its fiscal
year. Normally, dividends for Equity Income and Income & Growth are
distributed in March, June, September and December; dividends for
Overseas, Equity Portfolio Growth, Global Resources, Growth
Opportunities and Strategic Opportunities are distributed in December;
dividends for Equity Portfolio Growth and Equity Income may also be
distributed in January; dividends for Emerging Markets Income,
Strategic Income, High Yield, Limited Term Bond, Government Investment,
Short Fixed-Income, High Income Municipal, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt are declared daily and paid monthly.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS PROGRAM(registered trademark). Your dividend and
capital gain distributions will be automatically invested in the same class
of shares of another identically registered Fidelity Advisor fund.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option. You may change your
distribution option at any time by notifying the transfer agent in writing.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 1/2 years old, you can receive distributions in cash.
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge. If you direct Class A
distributions to a fund with a 4.75% front-end sales charge, you will not
pay a sales charge on those purchases.
When each of Overseas, Equity Portfolio Growth, Global Resources, Growth
Oppotunities, Strategic Opportunities, Equity Income and Income & Growth
deducts a distribution from its NAV, the reinvestment price is the
applicable fund's NAV at the close of business that day.
Dividends from Emerging Markets Income, High Yield, Strategic Income,
Government Investment, Limited Term Bond, Short Fixed-Income, High income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt will
be reinvested at the applicable funds NAV on the last day of the month.
Capital gain distributions from these funds will be reinvested at the NAV
as of the date the applicable fund deducts the distributions from its NAV.
Distribution checks will be mailed within seven days for a December
ex-dividend date.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the funds' tax implications. If your
account is not a tax-deferred retirement account, be aware of these tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that High Income Municipal, Limited
Term Tax-Exempt, and Short-Intermediate Tax-Exempt earn is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed. Distributions from Overseas,
Equity Portfolio Growth, Global Resources, Growth Opportunites, Strategic
Opportunities, Equity Income, Income & Growth, Emerging Markets Income,
High Yield, Strategic Income, Government Investment, Limited Term Bond,
and Short Fixed-Income, however, are subject to federal income tax and may
also be subject to state or local taxes. If you live outside the United
States, your distributions from these funds could also be taxed by the
country in which you reside.
For federal tax purposes, income and short-term capital gain distributions
for each of Overseas, Equity Portfolio Growth, Global Resources, Growth
Opportunites, Strategic Opportunities, Equity Income, Income & Growth,
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, and Short Fixed-Income are taxed as
dividends; long-term capital gain distributions are taxed as long-term
capital gains.
Mutual fund dividends from U.S. Government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not qualify for the benefit. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on the
tax laws in your state.
However, for shareholders of High Income Municipal, Limited Term
Tax-Exempt, Short-Intermediate Tax-Exempt, gain on the sale of tax-free
bonds results in taxable distributions. Short-term capital gains and a
portion of the gain on bonds purchased at a discount are taxed as
dividends; long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them. However, distributions declared in December and paid in
January are taxable as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. High Income Municipal may invest up to 100% of
its assets and each of Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt may invest up to 20% of its assets in these securities.
Individuals who are subject to the tax must report this interest on their
tax returns.
A portion of High Income Municipal, Limited Term Tax-Exempt,
Short-Intermediate Tax-Exempt's dividends may be free from state or local
taxes. Income from investments in your state are often tax-free to you.
Each year, the transfer agent will send you a breakdown of income from each
state to help you calculate your taxes.
During fiscal 1994, 100% of the income dividends from High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt's
were free from federal income tax. And during fiscal 1994, 5.63% of High
Income Municipal's and 11.07% of Short-Intermediate Tax-Exempt's income
dividends were subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of a fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution or dividend distribution, as applicable, from its NAV,
you will pay the full price for the shares and then receive a portion of
the price back in the form of a taxable distribution.
CURRENCY CONSIDERATIONS. For funds that can invest in foreign securities,
if a fund's dividends exceed its taxable income in any year, which is
sometimes the result of currency-related losses, all or a portion of the
fund's dividends may be treated as a return of capital to shareholders for
tax purposes. To minimize the risk of a return of capital, each of these
funds may adjust its dividends to take currency fluctuations into account,
which may cause the dividends to vary. Any return of capital will reduce
the cost basis of your shares, which will result in a higher reported
capital gain or a lower reported capital loss when you sell your shares.
The statement you receive in January will specify if any distributions
included a return of capital.
Undistributed net gains from currency transactions, if any, will generally
be distributed as a separate dividend in December.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a fund and
its investments and these taxes generally will reduce a fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV and offering price are calculated as of the close
of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting that
class's pro rata share of the value of the applicable fund's liabilities,
subtracting the liabilities allocated to that class, and dividing by the
number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
readily available or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable class's NAV,
plus a sales charge for Class A shares. Class A has a maximum sales charge
of 4.75% (1.50% for Short Fixed-Income and Short-Intermediate Tax-Exempt)
of the offering price. The REDEMPTION PRICE (price to sell one share) is
the applicable class's NAV, minus any applicable CDSC for Class B shares.
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A
(EXCEPT SHORT FIXED INCOME AND SHORT-INTERMEDIATE TAX-EXEMPT)
Sales Charge as % of
Investment
Offering Net Profession
Amount al
Price Investe Concession
d as % of
Offering
Price
Less than $50,000 4.75 4.99 4.00%
% %
$50,000 to less than $100,000 4.50 4.71 4.00%
% %
$100,000 to less than $250,000 3.50 3.63 3.00%
% %
$250,000 to less than $500,000 2.50 2.56 2.00%
% %
$500,000 to less than $1,000,000 2.00 2.04 1.75%
% %
$1,000,000 or more None None See
Below[A]
SHORT-FIXED-INCOME FUND AND
SHORT-INTERMEDIATE TAX-EXEMPT FUND:
Less than $1,000,000 1.50 1.52 1.20%
% %
$1,000,000 or more None None See
Below[A]
[A] INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF 0.25% FOR
PURCHASES OF $1 MILLION OR MORE IF THE ASSETS ON WHICH THE 0.25% IS PAID
REMAIN WITHIN THE FIDELITY ADVISOR FUNDS FOR ONE YEAR, EXCEPT FOR PURCHASES
THROUGH A BANK OR BANK-AFFILIATED BROKER-DEALER THAT QUALIFY FOR A SALES
CHARGE WAIVER DESCRIBED ON PAGE _. ALL ASSETS ON WHICH THE 0.25% FEE IS
PAID MUST REMAIN IN CLASS A SHARES OF THE FIDELITY ADVISOR FUNDS, INITIAL
CLASS SHARES OF DAILY MONEY FUND: U.S. TREASURY PORTFOLIO, OR SHARES OF
DAILY MONEY FUND: MONEY MARKET PORTFOLIO OR DAILY TAX-EXEMPT MONEY FUND FOR
A PERIOD OF ONE UNINTERRUPTED YEAR, OR THE INVESTMENT PROFESSIONAL WILL BE
REQUIRED TO REFUND THIS FEE TO FDC.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 3 years 3%
3 years to less than 4 years 2%
4 years to less than 5 years 1%
5 years to less than 6 years [A] 0%
[A] AFTER A MAXIMUM HOLDING PERIOD OF 6 YEARS, CLASS B SHARES WILL CONVERT
AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND. SEE
"CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
Investment Professionals with which FDC has agreements receive as
compensation from FDC a concession equal to 3.00% of your purchase of Class
B shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of six years from the
initial date of purchase, Class B shares convert automatically to Class A
shares of the same Fidelity Advisor fund. Conversion to Class A shares will
be made at NAV. At the time of conversion, a portion of the Class B shares
purchased through the reinvestment of dividends or capital gains (Dividend
Shares) will also convert to Class A shares. The portion of Dividend Shares
that will convert is determined by the ratio of your converting Class B
non-Dividend Shares to your total Class B non-Dividend Shares. (A portion
of Class B shares that had been acquired previously by exchange also may
convert, representing the appreciated value of, and/or reinvested dividends
or capital gains earned on, Class B shares prior to their exchange.)
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your Investment
Professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of a fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or of any
of the other Fidelity Advisor funds, at the NAV next determined after
receipt of your investment order, provided that such reinvestment is made
within 30 days of redemption. Under these circumstances, the dollar amount
of the CDSC you paid on Class B shares will be reimbursed to you by
reinvesting that amount in Class B shares. You must reinstate your shares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to a fund and certain restrictions
may apply. For purposes of the CDSC schedule, the holding period of your
Class B shares will continue as if Class B shares had not been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV or offering price, as applicable, calculated after your order is
received and accepted by the transfer agent. Note the following:
(small solid bullet) The funds do not accept cash.
(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) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or the
transfer agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Automated Purchase Orders : You begin to earn
dividends as of the business day your order is received and accepted.
AUTOMATED PURCHASE ORDERS. Class A and Class B shares of the funds can be
purchased or sold through Investment Professionals utilizing an automated
order placement and settlement system that guarantees payment for orders on
a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your order is
received and accepted. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares of Emerging Markets Income, Strategic In come,
High Yield, Limited Term Bond, Government Investment, Short Fixed-Income,
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt will earn dividends through the date of redemption; however,
shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500 (including any
amount paid as a sales charge). The fee, which is payable to the transfer
agent, is designed to offset in part the relatively higher costs of
servicing smaller accounts.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be
given 30 days' notice to reestablish the minimum balance. If you do not
increase your balance, the transfer agent reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at the
NAV, minus any applicable CDSC, on the day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to Investment Professional who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of Investment Professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to Investment Professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Class A or Class B
shares of a fund for the same class of shares of other Fidelity Advisor
funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you have previously paid in connection with the shares you are exchanging.
For example, if you had already paid a sales charge of 2% on your shares
and you exchange them into a fund with a 3% sales charge, you would pay an
additional 1% sales charge. If you have held Class A shares of Short
Fixed-Income or Short-Intermediate Tax-Exempt for at least six months, you
may exchange at NAV into the same class of any other Advisor fund.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A shares
according to the Sales Charge Schedule shown on page __ if your purchase
qualifies for one of the following reduction plans. Please refer to the
funds' SAIs for more details about each plan or call your Investment
Professional. If you purchased your shares through a Broker-Dealer or
Insurance Representative, call 1-800-522-7297. If you purchased your shares
through a Bank Representative, call 1-800-843-3001.
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor funds, and to purchases of Initial Class
shares and Class B shares of Daily Money Fund: U.S. Treasury Portfolio and
shares of Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt
Money Fund acquired by exchange from any Fidelity Advisor fund. (Minimum
investment is $50,000, except that the minimum investment in each of Short
Fixed-Income or Short-Intermediate Tax-Exempt is $1 million).
To qualify for a quantity discount, investing in [a/the] fund's Class A
shares for several accounts at the same time will be considered a single
transaction (Combined Purchase), as long as shares are purchased through
one Investment Professional and the total is at least $50,000 (or at least
$1 million for each of Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A shares by adding to your new purchase of Class A shares the value
of all of the Fidelity Advisor fund Class A and Class B shares held by you,
your spouse, and your children under age 21. You can also add the value of
Initial Class shares and Class B shares of Daily Money Fund: U.S. Treasury
Portfolio and shares of Daily Money Fund: Money Market Portfolio and Daily
Tax-Exempt Money Fund acquired by exchange from any Fidelity Advisor fund.
A LETTER OF INTENT lets you receive the same reduced front-end sales charge
on purchases of Class A shares made during a 13-month period as if the
total amount invested during the period had been invested in a single lump
sum. (See Quantity Discounts above.) You must file your non-binding Letter
within 90 days of the start of your purchases. Your initial investment must
be at least 5% of the amount you plan to invest. Out of the initial
investment, 5% of the dollar amount specified in the Letter will be
registered in your name and held in escrow. You will earn income dividends
and capital gain distributions on escrowed Class A shares. Neither income
dividends nor capital gain distributions reinvested in additional Class A
or Class B shares will apply toward completion of the Letter. The escrow
will be released when your purchase of the total amount has been completed.
You are not obligated to complete the Letter, and in such a case,
sufficient escrowed Class A shares will be redeemed to pay any applicable
front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A SHARES:
1. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of Investment
Professionals having agreements with FDC;
2. Purchased by a current or former trustee or officer of a Fidelity fund
or a current or retired officer, director or regular employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of trust for the sole benefit of the minor child of a Fidelity
trustee or employee;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
5. Purchased by a trust institution or bank trust department which has
executed a Participation Agreement with Fidelity Investments Institutional
Services Company (FIIS) specifying certain asset minimums and
qualifications, marketing restrictions, and program requirements;
6. Purchasedby a Wrap Program provider which has executed a Participation
Agreement with FIIS specifying certian asset minimums and qualifications
and marketing program and trading restrictions;
7. Purchased as part of an employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor funds;
8. Purchased for a Fidelity or Fidelity Advisor IRA account with the
proceeds of a distribution (i) from an employee benefit plan that qualified
for waiver (1) or had a minimum of $3 million in plan assets invested in
Fidelity funds; or (ii) from an insurance company separate account
qualifying under (9) below, or used to fund annuity contracts purchased by
employee benefit plans having in the aggregate at least $3 million in plan
assets invested in Fidelity funds;
9. Purchased for an insurance company separate account used to fund annuity
contracts for employee benefit plans which, in the aggregate, have more
than 200 eligible employees or a minimum of $1 million in plan assets
invested in Fidelity Advisor funds;
10. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency; or
11. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC; and
12. Purchased by a registered investment advisor which is not part of an
organization principally engaged in the brokerage business and which has
executed a Participation Agreement with FIIS specifying certain asset
minimums and qualifications, marketing program and trading restrictions.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. Employee benefit plan investors must meet additional requirements
specified in the funds' SAI.
THE CDSC ON CLASS B SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that Class B shares are
redeemed within one year following the death or the initial determination
of disability, or
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts.
Your Investment Professional should call Fidelity for more information.
APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issued so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
No dealer, sales respresentative or any other person has been authorized
to give any information or make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or resresentations must not be relied upon as having been
authorized by a fund or FDC. This Prospectus and related SAI do not
constitute an offer by a fund or by FDC to sell or to buy shares of a fund
to any person to whom it is unlawful to make such offer.
<PAGE>
Fidelity Advisor Class A and Class B
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A
<S> <C>
Item Number Statement of Additional Information Section
----------- -------------------------------------------
10, 11 .................... Cover Page; Table of Contents
........
12 .................... *
........
13 a - c .................... Investment Policies and Limitations
........
d .................... Portfolio Transactions
........
14 a - c .................... Trustees and Officers
........
15 a .................... *
........
b .................... Description of the Trusts
........
c .................... Trustees and Officers
........
16 a i .................... FMR
........
ii .................... Trustees and Officers
........
iii .................... Management Contracts; Contracts with FMR
........ Affiliates
b,c,d .................... Management Contracts; Contracts with FMR
........ Affiliates
e .................... *
........
f .................... Distribution and Service Plans
........
g .................... *
........
h .................... Description of the Trust
........
i .................... Contracts with FMR Affiliates
........
17 a .................... Portfolio Transactions
........
b .................... Portfolio Transactions
........
c .................... Portfolio Transactions
........
d, e .................... *
........
<PAGE>
18 a .................... Description of the Trust
........
b .................... *
........
19 a .................... Additional Purchase and Redemption Information
........
b .................... Additional Purchase and Redemption Information;
........ Valuation of Portfolio Securities
c .................... *
........
20 Distributions and Taxes
21 a, b .................... Distribution and Service Plans; Contracts with FMR
........ Affiliates
c .................... *
........
22 .................... Performance
........
23 .................... Financial Statements
........
* Not Applicable
** To Be Filed By Amendment
</TABLE>
- 2 -
<PAGE>
FIDELITY ADVISOR FUNDS
CLASS A and CLASS B
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1995
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus (dated
June 30, 1995) for Class A and Class B shares. Please retain this document
for future reference. Each fund's financial statements and financial
highlights, included in their respective Annual Reports, for the most
recent fiscal period, are incorporated herein by reference. To obtain an
additional copy of this SAI, any Prospectus or any Annual Report, please
call Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts, 02109 or your Investment Professional.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Considerations Affecting Canada
Special Considerations Affecting Latin America
Special Considerations Affecting Japan, the Pacific Basin, and
Southeast Asia
Special Considerations Affecting Europe
Special Considerations Affecting Africa
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange, and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Contracts with FMR Affiliates
Distribution and Service Plans
Description of the Trusts
Financial Statements
Appendix
<PAGE>
<TABLE>
<CAPTION>
Fidelity Advisor Series I-VIII Service Providers
<S> <C>
Growth Funds
Fidelity Advisor Overseas Fund Investment Adviser
Fidelity Advisor Equity Portfolio Growth Fidelity Management & Research Company (FMR)
Fidelity Advisor Global Resources Fund Investment Sub-Advisers
Fidelity Advisor Growth Opportunities Fund Fidelity Management & Research (U.K.) Inc. (FMR
U.K.)
Fidelity Advisor Strategic Opportunities Fidelity Management & Research (Far East) Inc. (FMR
Fund Far East)
Growth and Income Funds Fidelity International Investment Advisors (FIIA)
Fidelity Advisor Equity Income Fund Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.)
Fidelity Advisor Income & Growth Fund Fidelity Investments Japan Limited (FIJ)
Taxable Income Funds Distributor
Fidelity Advisor Emerging Markets Income Fidelity Distributors Corporation (FDC)
Fund
Fidelity Advisor High Yield Fund Transfer Agent
Fidelity Advisor Strategic Income Fund State Street Bank and Trust Company (State Street)
(Class A - taxable funds)
Fidelity Advisor Government Investment Fund Fidelity Investments Institutional Operations
Company (FIIOC) (Class B - taxable funds)
Fidelity Advisor Limited Term Bond Fund United Missouri Bank, N.A. (UMB) (Class A and B -
tax-exempt funds)
Fidelity Advisor Short Fixed-Income Fund
Tax-Exempt/Municipal Funds
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt
Fund
Fidelity Advisor Short-Intermediate
Tax-Exempt Fund
</TABLE>
FACOM-ptb-695
- 2 -
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth
in the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with a fund's investment
policies and limitations.
A fund's fundamental investment policies and limitations cannot
be changed without approval of a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the 1940
Act)) of the fund. However, except for the fundamental investment
limitations listed below and the policies restated in the "Fundamental
Policies" paragraph on page __, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
OVERSEAS FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than obligations issued or guaranteed
by the government of the United States, its agencies or instrumentalities)
if, as a result thereof: (i) more than 5% of the fund's total assets would
be invested in the securities of such issuer or (ii) the fund would hold
more than 10% of the outstanding voting securities of such issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (including
the amount borrowed), less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the fund's total assets by
reason of a decline in net assets will be reduced within three days
(exclusive of Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite any issue of securities, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States,
its agencies or instrumentalities) if, as a result thereof, more than 25%
of the fund's total assets (taken at current value) would be invested in
- 3 -
<PAGE>
the securities of issuers having their principal business activities in
the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the price at which they are valued.
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in interests in real estate limited partnerships that are not
- 4 -
<PAGE>
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 15% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements).
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 10% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal domestic
or foreign exchanges. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
EQUITY PORTFOLIO GROWTH
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) purchase the securities of any issuer (other than
obligations issued or guaranteed by the Government of the United States,
its agencies or instrumentalities) if, as a result (a) more than 5% of the
- 5 -
<PAGE>
fund's total assets (taken at current value) would be invested in the
securities of such issuer, or (b) the fund would hold more than 10% of the
voting securities of such issuer;
(2) make short sales of securities (unless it owns or by
virtue of its ownership of other securities has the right to obtain,
securities equivalent in kind and amount to the securities sold),
provided, however, that the fund may purchase or sell futures contracts;
(3) purchase any securities on margin, except for such
short-term credits as are necessary for the clearance of transactions,
provided, however, that the fund may make initial and variation margin
payments in connection with purchases or sales of futures contracts or of
options on futures contracts;
(4) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of the fund's total assets
(including the amount borrowed) less liabilities (not including
borrowings). Any borrowings that come to exceed 33 1/3% of the value of
the fund's total assets by reason of a decline in net assets will be
reduced within 3 days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(5) underwrite any issue of securities (to the extent that
the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(6) purchase the securities of any issuer (other than
obligations issued or guaranteed by the Government of the United States,
its agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the
same industry;
(7) purchase or sell real estate (but this shall not prevent
the fund from investing in marketable securities issued by companies such
as real estate investment trusts which deal in real estate or interests
therein and participation interests in pools of real estate mortgage
loans);
(8) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities);
(9) lend any security or make any other loan if, as a result,
more than 33 1/3% of the fund's total assets would be lent to other
parties, except (i) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities;
(10) purchase securities of other investment companies (except
in the open market where no commission other than the ordinary broker's
commission is paid, or as a part of a merger or consolidation, and in no
- 6 -
<PAGE>
event may investments in such securities exceed 10% of the total assets of
the fund);
(11) purchase the securities of any issuer if, as a result,
more than 5% of the fund's total assets (taken at current value) would be
invested in the securities of companies which, including predecessors,
have a record of less than three years of continuous operation; or
(12) invest in oil, gas, or other mineral exploration or
development programs.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (4)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iii) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(iv) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable, or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iii) would exceed 10% of the fund's net assets.
(v) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements).
- 7 -
<PAGE>
(vi) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(vii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(viii) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
GLOBAL RESOURCES FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than obligations issued or guaranteed
by the government of the United States, or any of its agencies or
instrumentalities) if, as a result thereof, (a) more than 5% of the fund's
total assets would be invested in the securities of such issuer, or (b)
the fund would hold more than 10% of the outstanding voting securities of
such issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the
extent that the fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
- 8 -
<PAGE>
(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.
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) 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 fund for which FMR or an affiliate serves
as investment adviser or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings
for purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(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 cannot
- 9 -
<PAGE>
be sold or disposed of in the ordinary course of business at approximately
the prices at which they are valued.
(v) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to invest in physical
commodities other than precious metals (i.e., gold, palladium, platinum
and silver) and it intends to limit such investments to not more than 25%
of the fund's total assets. The fund may receive no more than 10% of its
yearly income from gains resulting from selling metals or any other
physical commodity.
(vii) 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.)
(viii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange or as a result of a reorganization,
consolidation, or merger.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 10% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal domestic
- 10 -
<PAGE>
or foreign exchanges. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(xii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures contracts and options, see
the section entitled "Limitations on Futures and Options Transactions" on
page . For the fund's limitations on short sales, see the section
entitled " Short Sales" on page .
GROWTH OPPORTUNITIES FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933, in the disposition of restricted
securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
- 11 -
<PAGE>
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
- 12 -
<PAGE>
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the
fund's total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they cannot
be sold or disposed of in the ordinary course of business at approximately
the prices at which they are valued.
(v) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments, and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limit does not apply to purchases of debt securities or
to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower cost of the market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, may
- 13 -
<PAGE>
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page . For the fund's limitations on short sales, see the section
entitled "Short Sales" on page .
STRATEGIC OPPORTUNITIES FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States,
its agencies, or instrumentalities) if, as a result thereof, more than 5%
of the fund's total assets (taken at current value) would be invested in
the securities of such issuer;
(2) purchase the securities of any issuer, if such purchase,
at the time thereof, would cause more than 10% of the outstanding voting
securities of such issuer to be held in the fund's portfolio;
(3) issue senior securities (except to the extent that
issuance of one or more classes of shares of the fund in accordance with
an order issued by the Securities and Exchange Commission may be deemed
to constitute issuance of a senior security);
(4) make short sales of securities, (unless it owns, or by
virtue of its ownership of other securities has the right to obtain, at no
additional cost, securities equivalent in kind and amount to the
securities sold); provided, however, that the fund may enter into forward
foreign currency exchange transactions; and further provided that the fund
may purchase or sell futures contracts;
(5) purchase any securities or other property on margin,
(except for such short-term credits as are necessary for the clearance of
transactions); provided, however, that the fund may make initial and
variation margin payments in connection with purchases or sales of futures
contracts or options on futures contracts;
- 14 -
<PAGE>
(6) borrow money except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of the fund's total assets
(including the amount borrowed) less liabilities (not including
borrowings). Any borrowings that come to exceed 33 1/3% of the fund's
total assets by reason of a decline in net assets, will be reduced within
three days (exclusive of Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation. The fund will not purchase
securities for investment while borrowings equaling 5% or more of its
total assets are outstanding;
(7) underwrite any issue of securities (except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of "restricted securities");
(8) purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States,
its agencies, or instrumentalities) if, as a result thereof, more than 25%
of the fund's total assets would be invested in the securities of one or
more issuers having their principal business activities in the same
industry;
(9) purchase or sell real estate (but this shall not prevent
the fund from investing in marketable securities issued by companies such
as real estate investment trusts which deal in real estate or interests
therein and participation interests in pools of real estate mortgage
loans);
(10) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities);
(11) lend any security or make any other loan if as a result,
more than 33 1/3% of the fund's total assets would be lent to other
parties except (i) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities;
(12) purchase securities of other investment companies (except
in the open market where no commission other than the ordinary broker's
commission is paid, or as part of a merger or consolidation, and in no
event may investments in such securities exceed 10% of the value of total
assets of the fund). The fund may not purchase or retain securities issued
by other open-end investment companies;
(13) invest more than 5% of the fund's total assets (taken at
market value) in the securities of companies which, including
predecessors, have a record of less than three years' continuous
operation; or
(14) invest in oil, gas, or other mineral exploration or
development programs.
- 15 -
<PAGE>
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund may borrow money only (a) from a bank or
from a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements are
treated as borrowings for purposes of fundamental investment limitation
(6)). The fund will not borrow from other funds advised by FMR or its
affiliates if total outstanding borrowings immediately after such
borrowing would exceed 15% of the fund's total assets.
(ii) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(iii) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (ii) would exceed 10% of the fund's net assets.
(iv) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(v) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(vi) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(vii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page . For the fund's limitations on short sales, see the section
entitled "Short Sales" on page .
- 16 -
<PAGE>
EQUITY INCOME FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
- 17 -
<PAGE>
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except (a) by lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser, or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation or merger.
- 18 -
<PAGE>
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(xi) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
INCOME & GROWTH FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) 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
- 19 -
<PAGE>
of the Securities Act of 1933, in the disposition of restricted
securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
- 20 -
<PAGE>
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except 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.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
- 21 -
<PAGE>
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of its net assets.
Included in that amount, but not to exceed 2% of the fund's net assets,
may be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas,
other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
EMERGING MARKETS INCOME FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
- 22 -
<PAGE>
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) To meet federal tax requirements for
qualification as a " regulated investment company," the fund limits its
investments so that at the close of each quarter of its taxable year: (a)
with regard to at least 50% of total assets, no more than 5% of total
assets are invested in the securities of a single issuer, and (b) no more
than 25% of total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "government securities" as
defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(iii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (2)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
- 23 -
<PAGE>
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to invest in interests
in real estate investment trusts that are not readily marketable, or to
invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(vii) The fund does not currently intend to lend assets other
than securities to other parties, except (a) by lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser, or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation or merger.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 10% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal domestic
or foreign exchanges. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(xii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
- 24 -
<PAGE>
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
HIGH YIELD FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the value of the fund's total assets would
be invested in the securities of that issuer, or (b) it would hold more
than 10% of the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered 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
- 25 -
<PAGE>
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval:
(i) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 15% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
- 26 -
<PAGE>
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans , loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(viii) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(x) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page.
STRATEGIC INCOME FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
- 27 -
<PAGE>
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933, in the disposition of restricted
securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval:
(i) To meet federal tax requirements for
qualification as a " regulated investment company," the fund limits its
investments so that at the close of each quarter of its taxable year: (a)
with regard to at least 50% of total assets, no more than 5% of total
assets are invested in the securities of a single issuer, and (b) no more
than 25% of total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "government securities" as
defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
- 28 -
<PAGE>
(iii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (2)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans and loan participations or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
loan commitments of the sellers. (This limitation does not apply to
purchases of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
- 29 -
<PAGE>
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas,
or other mineral explorations or development programs or leases.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
GOVERNMENT INVESTMENT FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result,(a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940.
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of issuers having
their principal business activities in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other investments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies in the real estate business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
- 30 -
<PAGE>
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed 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.
- 31 -
<PAGE>
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System if, as a result, the sum of such interests
and other investments considered illiquid under limitation (iv) would
exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser, or (b)
acquiring loans, loan participations or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange or as a result of a reorganization,
consolidation or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than 3 years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
- 32 -
<PAGE>
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(xii) The fund does not currently intend to enter into any
futures contract or option on a futures contract if, as a result, the sum
of initial margin deposits on futures contracts and related options and
premiums paid for options on futures contracts the fund has purchased,
after taking into account unrealized profits and losses on such contracts
would exceed 5% of the fund's total assets.
(xiii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
LIMITED TERM BOND FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment), in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings.) Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
- 33 -
<PAGE>
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of the fund's total assets would be lent to other
parties (but this limitation does not apply to purchases of debt
securities or to repurchase agreements).
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund 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 fund for which FMR or an affiliate serves
as investment advisor or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings
for purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other
than securities to other parties, except by: (a) lending money (up to 7.5%
- 34 -
<PAGE>
of the fund's net assets) to a registered investment company or fund for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments,
and, in connection therewith, assuming any associated unfunded commitments
of the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vi) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(vii) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(viii) The fund does not currently intend to invest in interests
in real estate investment trusts that are not readily marketable or to
invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(ix) The fund currently does not intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to (a) purchase
securities of other investment companies except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(xi) The fund does nor currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
SHORT FIXED-INCOME FUND
- 35 -
<PAGE>
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
- 36 -
<PAGE>
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 limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other
than securities to other parties, except by (i) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (ii)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange or as a result of a reorganization,
consolidation, or merger.
(vii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
- 37 -
<PAGE>
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(viii) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(x) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page.
HIGH INCOME MUNICIPAL FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others (except to the
extent that the fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted
securities);
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(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government, or a political subdivision of any of the foregoing) if, as a
result, more than 25% of the fund's total assets would be invested in
securities of companies whose principal business activities are in the
same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
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borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger
(vi) The fund does not currently intend to invest in interests
of real estate investment trusts that are not readily marketable, or to
invest in interests of real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(vii) The fund does not currently intend to engage in
repurchase agreements or make loans (but this limitation does not apply to
purchases of debt securities).
(viii) The fund does not currently intend to invest more than
25% of its total assets in industrial revenue bonds related to a single
industry.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(xii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
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For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page.
LIMITED TERM TAX-EXEMPT FUND
The following are the fund's fundamental investment limitations
and policies set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of its total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933, in the disposition of restricted
securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government, or a political subdivision of any of the foregoing) if, as a
result, more than 25% of the fund's total assets would be invested in the
securities of companies whose principal business activities are in the
same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
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(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
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<PAGE>
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to engage in
repurchase agreements or make loans but this limitation does not apply to
purchases of debt securities.
(vi) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger. Any securities issued by other investment
companies would also have to meet the fund's credit and maturity
standards. In some cases, other investment companies may incur expenses
that are comparable to expenses paid by the fund, which would be taken
into account in considering investments in such securities.
(vii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(viii) The fund does not currently intend to invest in oil, gas,
other mineral exploration or development programs or leases.
(ix) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and Trustees of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(x) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Company or an affiliate
or successor with substantially the same fundamental investment objective,
policies, and limitations as the fund.
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<PAGE>
For the fund's limitations on futures contracts and options, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
SHORT-INTERMEDIATE TAX-EXEMPT FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government, or a political subdivision of any of the foregoing) if, as a
result, more than 25% of the fund's total assets would be invested in
securities of companies whose principal business activities are in the
same industry;
(5) purchase or sell real estate, unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business;
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties (but
this limitation does not apply to purchases of debt securities or to
repurchase agreements);
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
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<PAGE>
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) To meet federal tax requirements for
qualification as a " regulated investment company," the fund limits its
investments so that at the close of each quarter of its taxable year: (a)
with regard to at least 50% of total assets, no more than 5% of total
assets are invested in the securities of a single issuer, and (b) no more
than 25% of total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "government securities" as
defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(iii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (2)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to engage in
repurchase agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
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<PAGE>
(viii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years continuous operation.
(x) The fund may not purchase or sell physical commodities
unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the fund from purchasing or
selling options and futures contracts or from investing in securities or
other instruments backed by physical commodities.)
(xi) The fund does not currently intend to invest in interests
of real estate investment trusts that are not readily marketable, or to
invest in interests of real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(xii) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(xiii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Company or an affiliate
or successor with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
For purposes of certain fundamental investment limitations, FMR
identifies the issuer of a security depending on its terms and conditions.
In identifying the issuer, FMR will consider the entity or entities
responsible for payment of interest and repayment of principal and the
source of such payments; the way in which assets and revenues of an
issuing political subdivision are separated from those of other political
entities; and whether a governmental body is guaranteeing the security.
Each fund's investments must be consistent with its investment
objective and policies. Accordingly, not all of the security types and
investment techniques discussed below are eligible investments for each of
the funds.
Affiliated Bank Transactions. A fund may engage in transactions
with financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the Investment Company Act of 1940
(1940 Act). These transactions may include repurchase agreements with
custodian banks; short-term obligations of, and repurchase agreements
with, the 50 largest U.S. banks (measured by deposits); municipal
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<PAGE>
securities; U.S. government securities with affiliated financial
institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. In accordance with
exemptive orders issued by the Securities and Exchange Commission (SEC),
the Board of Trustees (the Trustees) has established and periodically
reviews procedures applicable to transactions involving affiliated
financial institutions.
Funds' Rights as Shareholders. The funds do not intend to direct
or administer the day-to-day operations of any company. A fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of a fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business
activities; seeking changes in a company's directors or management;
seeking changes in 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 the fund and the risk of actual liability if a fund is
involved in litigation. No guarantee can be made, however, that litigation
against the fund will not be undertaken or liabilities incurred.
Lower-Quality Debt Securities. While the market for high-yield
corporate debt securities has been in existence for many years and has
weathered previous economic downturns, the 1980s brought a dramatic
increase in the use of such securities to fund highly leveraged corporate
acquisitions and restructurings. Past experience may not provide an
accurate indication of the future performance of the high-yield bond
market, especially during periods of economic recession. In fact, from
1989 to 1991, the percentage of lower-quality debt securities that
defaulted rose significantly above prior levels, although the default rate
decreased from 1992 and 1993.
The market for lower-quality debt securities may be thinner and
less active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of Trustees,
including the use of outside pricing services. Judgment plays a greater
role in valuing high-yield corporate debt securities than is the case for
securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor
perceptions may affect the ability of outside pricing services to value
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<PAGE>
lower-quality debt securities and a fund's ability to sell these
securities.
Since the risk of default is higher for lower-quality debt
securities, FMR's research and credit analysis are an especially important
part of managing securities of this type held by a fund. In considering
investments for a fund, FMR will attempt to identify those issuers of
high-yielding securities whose financial condition is adequate to meet
future obligations, has improved, or is expected to improve in the future.
FMR's analysis focuses on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.
Each fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise to exercise its rights as a
security holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
Lower-Quality Municipal Securities. High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt may invest a
portion of their assets in lower-quality municipal securities as
described in the Prospectus.
While the market for municipals is considered to be substantial,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by a fund to value its portfolio
securities, and a fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
Each fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise exercise its rights as a
security holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
Loans and Other Direct Debt Instruments. Direct debt instruments
are interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivables), or
to other parties. Direct debt instruments are subject to each fund's
policies regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
principal and interest. Direct debt instruments may not be rated by any
nationally recognized rating service. If a fund does not receive scheduled
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<PAGE>
interest or principal payments on such indebtedness, the fund's share
price and yield could be adversely affected. Loans that are fully secured
offer a fund more protections than an unsecured loan in the event of
non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor
involves substantially greater risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of developing countries also involves a risk that the
governmental entities responsible for the repayment of the debt may be
unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks to a fund. For example, if a loan is foreclosed, the fund could
become part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral. In
addition, it is conceivable that under emerging legal theories of lender
liability, the fund could be held liable as a co-lender. Direct debt
instruments may also involve a risk of insolvency of the lending bank or
other intermediary. Direct debt instruments that are not in the form of
securities may offer less legal protection to a fund in the event of fraud
or misrepresentation. In the absence of definitive regulatory guidance,
each fund relies on FMR's research in an attempt to avoid situations where
fraud or misrepresentation could adversely affect the fund.
A loan is often administered by a bank or other financial
institution that acts as agent for all holders. The agent administers the
terms of the loan, as specified in the loan agreement. Unless, under the
terms of the loan or other indebtedness, each fund has direct recourse
against the borrower, it may have to rely on the agent to apply
appropriate credit remedies against a borrower. If assets held by the
agent for the benefit of a fund were determined to be subject to the
claims of the agent's general creditors, the fund might incur certain
costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by a fund may include letters of
credit, revolving credit facilities, or other standby financing
commitments obligating the fund to pay additional cash on demand. These
commitments may have the effect of requiring the fund to increase its
investment in a borrower at a time when it would not otherwise have done
so, even if the borrower's condition makes it unlikely that the amount
will ever be repaid. A fund will set aside appropriate liquid assets in a
segregated custodial account to cover its potential obligations under
standby financing commitments.
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<PAGE>
Each fund limits the amount of total assets that it will invest
in any one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations, a fund
generally will treat the borrower as the "issuer" of indebtedness held by
the fund. In the case of loan participations where a bank or other lending
institution serves as financial intermediary between the fund and the
borrower, if the participation does not shift to the fund the direct
debtor-creditor relationship with the borrower, SEC interpretations
require the fund, in appropriate circumstances, to treat both the lending
bank or other lending institution and the borrower as " issuers" for these
purposes. Treating a financial intermediary as an issuer of indebtedness
may restrict a fund's ability to invest in indebtedness related to a
single financial intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
Repurchase Agreements. In a repurchase agreement, a fund
purchases a security and simultaneously commits to sell that security back
to the original seller at an agreed-upon price. The resale price reflects
the purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. While
it does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well as delays
and costs to a fund in connection with bankruptcy proceedings), it is each
fund's (except Equity Portfolio Growth's) current policy to engage in
repurchase agreement transactions with parties whose creditworthiness has
been reviewed and found satisfactory by FMR. Equity Portfolio Growth will
engage in repurchase agreement transactions only with banks of the
Federal Reserve System and primary dealers in U.S. Government securities.
Foreign Repurchase Agreements. Foreign repurchase agreements may
include agreements to purchase and sell foreign securities in exchange for
fixed U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of the
security purchased by the fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of a
default by the counterparty, the fund may suffer a loss if the value of
the security purchased is less than the agreed-upon repurchase price, or
if the fund is unable to successfully assert a claim to the collateral
under foreign laws. As a result, foreign repurchase agreements may involve
higher credit risks than repurchase agreements in U.S. markets, as well as
risks associated with currency fluctuations. In addition, as with other
emerging market investments, repurchase agreements with counterparties
located in emerging markets or relating to emerging market securities may
involve issuers or counterparties with lower credit ratings than typical
U.S. repurchase agreements.
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Reverse Repurchase Agreements. In a reverse repurchase agreement,
a fund sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
A fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
Delayed-Delivery Transactions. A fund may buy and sell
securities on a delayed-delivery or when-issued basis. These transactions
involve a commitment by a fund to purchase or sell specific securities at
a predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security (and more
than seven days in the future). Typically, no interest accrues to the
purchaser until the security is delivered. A fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because a fund is not required to pay for securities
until the delivery date, these risks are in addition to the risks
associated with a fund's other investments. If a fund remains
substantially fully invested at a time when delayed-delivery purchases
are outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, a fund will
set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When a fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities, a
fund could miss a favorable price or yield opportunity, or could suffer a
loss.
A fund may renegotiate delayed-delivery transactions after they
are entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
Illiquid Investments are investments that cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued. Under the supervision of the Trustees, FMR
determines the liquidity of a fund's investments and, through reports from
FMR, the Board monitors investments in illiquid instruments. In
determining the liquidity of a fund's investments, FMR may consider
various factors including (1) the frequency of trades and quotations, (2)
the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security
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(including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the
fund's rights and obligations relating to the investment).
Investments currently considered by a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government-stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR may
determine some restricted securities, municipal lease obligations,
government-stripped fixed-rate mortgage-backed securities, loans and other
direct debt instruments, emerging market securities, and swap agreements
to be illiquid. However, with respect to over-the-counter options a fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option
before expiration.
In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If, through a change in values, net assets or
other circumstances, a fund were in a position where more than 10% or 15%
of its net assets (see each fund's non-fundamental investment limitations)
was invested in illiquid securities, it would seek to take appropriate
steps to protect liquidity.
Restricted Securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under
the Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration
of the security.
Securities Lending. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the
securities loaned and, at the same time, to earn additional income. Since
there may be delays in the recovery of loaned securities, or even a loss
of rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good standing.
Furthermore, they will only be made if, in FMR's judgment, the
consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that
a fund may engage in loan transactions only under the following
conditions: (1) a fund must receive 100% collateral in the form of cash or
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cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower;
(2) the borrower must increase the collateral whenever the market value of
the securities loaned (determined on a daily basis) rises above the value
of the collateral; (3) after giving notice, a fund must be able to
terminate the loan at any time; (4) a fund must receive reasonable
interest on the loan or a flat fee from the borrower, as well as amounts
equivalent to any dividends, interest, or other distributions on the
securities loaned and to any increase in market value; (5) a fund may pay
only reasonable custodian fees in connection with the loan; and (6) the
Board of Trustees must be able to vote proxies on the securities loaned,
either by terminating the loan or by entering into an alternative
arrangement with the borrower.
Cash received through loan transactions may be invested in any
security in which a fund is authorized to invest. Investing this cash
subjects that investment, as well as the security loaned, to market forces
(i.e., capital appreciation or depreciation).
Swap Agreements. Swap agreements can be individually negotiated
and structured to include exposure to a variety of investments or market
factors. Depending on their structure, swap agreements may increase or
decrease a fund's exposure to long- or short-term interest rates (in the
United States or abroad), foreign currency values, mortgage securities,
corporate borrowing rates, or other factors such as security prices or
inflation rates. Swap agreements can take many different forms and are
known by a variety of names. A fund is not limited to any particular form
of swap agreement if FMR determines it is consistent with a fund's
investment objective and policies.
In a typical cap or floor agreement, one party agrees to make
payments only under specified circumstances, usually in return for payment
of a fee by the other party. For example, the buyer of an interest rate
cap obtains the rights to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure
from one type of investment to another. For example, if a fund agreed to
exchange payments in dollars for payments in foreign currency, the swap
agreement would tend to decrease a fund's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements
is the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, a fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely
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to decline, potentially resulting in losses. A fund expects to be able to
reduce its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the
same party or a similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
If a fund enters into a swap agreement on a net basis, it will segregate
assets with a daily value at least equal to the excess, if any, of the
fund's accrued obligations under the swap agreement over the accrued
amount the fund is entitled to receive under the agreement. If a fund
enters into a swap agreement on other than a net basis, it will segregate
assets with a value equal to the full amount of a fund's accrued
obligations under the agreement.
Indexed Securities. A fund may purchase securities whose prices
are indexed to the prices of other securities, securities indices,
currencies, precious metals or other commodities, or other financial
indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic.
Gold-indexed securities, for example, typically provide for a maturity
value that depends on the price of gold, resulting in a security whose
price tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt securities
whose maturity values or interest rates are determined by reference to the
values of one or more specified foreign currencies, and may offer higher
yields than U.S. dollar-denominated securities of equivalent issuers.
Currency-indexed securities may be positively or negatively indexed; that
is, their maturity value may increase when the specified currency value
increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline when
foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent
on the performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes in
the U.S. and abroad. At the same time, indexed securities are subject to
the credit risks associated with the issuer of the security, and their
values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain U.S. government agencies. Indexed securities may
be more volatile than the underlying instruments.
Foreign Investments. Investing in securities issued by companies
or other issuers whose principal activities are outside the United States
may involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
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fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not
subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards
of practice comparable to those applicable to U.S. issuers. Further,
economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States.
Investing abroad also involves different political and economic
risks. Foreign investments may be affected by actions of foreign
governments adverse to the interests of U.S. investors, including the
possibility of expropriation or nationalization of assets, confiscatory
taxation, restrictions on U.S. investment or on the ability to repatriate
assets or convert currency into U.S. dollars, or other government
intervention. There may be a greater possibility of default by foreign
governments or foreign government-sponsored enterprises. Investments in
foreign countries also involve a risk of local political, economic, or
social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that FMR will be able to anticipate
these potential events or counter their effects. The considerations noted
above generally are intensified for investments in developing countries.
Developing countries may have relatively unstable governments, economies
based on only a few industries, and securities markets that trade a small
number of securities.
Foreign markets may offer less protection to investors than U.S.
markets. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter
markets located outside of the United States. Foreign stock markets, while
growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid
and more volatile than securities of comparable U.S. issuers. Foreign
security trading practices, including those involving securities
settlement where fund assets may be released prior to receipt of payment,
may expose a fund to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer, and may involve substantial
delays. In addition, the costs of foreign investing, including withholding
taxes, brokerage commissions and custodial costs, are generally higher
than for U.S. investing. In general, there is less overall governmental
supervision and regulation of securities exchanges, brokers, and listed
companies than in the United States. It may also be difficult to enforce
legal rights in foreign countries.
Each fund may invest in foreign securities that impose
restrictions on transfer within the United States or to U.S. persons.
Although securities subject to such transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the
same class that are not subject to such restrictions.
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A fund may invest in American Depository Receipts and European
Depository Receipts (ADRs and EDRs), which are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a bank or
similar financial institution. Designed for use in the U.S. and European
securities markets, respectively, ADRs and EDRs are alternatives to the
purchase of the underlying securities in their national markets and
currencies.
Sovereign Debt Obligations. A fund may purchase sovereign debt
instruments issued or guaranteed by foreign governments or their agencies,
including debt of Latin American nations or other developing countries.
Sovereign debt may be in the form of conventional securities or other
types of debt instruments such as loans or loan participations, sovereign
debt of developing countries may involve a high degree of risk, and may be
in default or present the risk of default. Governmental entities
responsible for repayment of the debt may be unable or unwilling to repay
principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and interest may depend on political as well as economic
factors.
Foreign Currency Transactions. A fund may conduct foreign
currency transactions on a spot (i.e., cash) basis or by entering into
forward contracts to purchase or sell foreign currencies at a future date
and price. A fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers generally do not charge a fee for
conversion, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to a fund at one rate, while
offering a lesser rate of exchange should a fund desire to resell that
currency to the dealer. Forward contracts are generally traded in an
interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. The parties to a forward
contract may agree to offset or terminate the contract before its
maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
A fund may use currency forward contracts for any purpose
consistent with its investment objective. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by a fund. A fund may also use swap
agreements, indexed securities, and options and futures contracts relating
to foreign currencies for the same purposes.
When a fund agrees to buy or sell a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into a forward contract for the purchase or sale,
for a fixed amount of U.S. dollars, of the amount of foreign currency
involved in the underlying security transaction, a fund will be able to
protect itself against an adverse change in foreign currency values
between the date the security is purchased or sold and the date on which
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payment is made or received. This technique is sometimes referred to as a
"settlement hedge" or "transaction hedge." A fund may also enter into
forward contracts to purchase or sell a foreign currency in anticipation
of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by
FMR.
A fund may also use forward contracts to hedge against a decline
in the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. A fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling - for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. For example, if a fund held
investments denominated in Deutschemarks, a fund could enter into forward
contracts to sell Deutschemarks and purchase Swiss Francs. This type of
strategy, sometimes known as a " cross-hedge," will tend to reduce or
eliminate exposure to the currency that is sold, and increase exposure to
the currency that is purchased much as if a fund had sold a security
denominated in one currency and purchased an equivalent security
denominated in another. Cross-hedges protect against losses resulting
from a decline in the hedged currency, but will cause a fund to assume the
risk of fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to
set aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, the fund
will segregate assets to cover currency forward contracts, if any, whose
purpose is essentially speculative. A fund will not segregate assets to
cover forward contracts entered into for hedging purposes, including
settlement hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on
FMR's skill in analyzing and predicting currency values. Currency
management strategies may substantially change a fund's investment
exposure to changes in currency exchange rates, and could result in losses
to a fund if currencies do not perform as FMR anticipates. For example, if
a currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would be unable to
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participate in the currency's appreciation. If FMR hedges currency
exposure through proxy hedges, a fund could realize currency losses from
the hedge and the security position at the same time if the two currencies
do not move in tandem. Similarly, if FMR increases a fund's exposure to a
foreign currency, and that currency's value declines, a fund will realize
a loss. There is no assurance that FMR's use of currency management
strategies will be advantageous to the fund or that it will hedge at an
appropriate time.
Refunding Contracts. A fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts require the issuer to sell
and a fund to buy refunded municipal obligations at a stated price and
yield on a settlement date that may be several months or several years in
the future. A fund generally will not be obligated to pay the full
purchase price if it fails to perform under a refunding contract. Instead,
refunding contracts generally provide for payment of liquidated damages to
the issuer (currently 15-20% of the purchase price). A fund may secure
its obligations under a refunding contract by depositing collateral or a
letter of credit equal to the liquidated damages provisions of the
refunding contract. When required by SEC guidelines, a fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
Inverse Floaters are instruments whose interest rates bear an
inverse relationship to the interest rate on another security or the value
of an index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate
paid on the short-term instrument. Depending on market availability, the
two portions may be recombined to form a fixed-rate municipal bond. The
market for inverse floaters is relatively new.
Variable or Floating Rate Obligations bear variable or floating
interest rates and carry rights that permit holders to demand payment of
the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate instruments have interest
rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic
adjustment in the interest rate. These formulas are designed to result in
a market value for the instrument that approximates its par value. In
many instances, bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
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thereof. A fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The Internal Revenue Service (IRS) has not ruled whether the
interest on Participating VRDOs is tax-exempt and, accordingly, a fund
intends to purchase these instruments based on opinions of bond counsel. A
fund may invest in fixed-rate bonds that are subject to third party puts
and in participation interests in such bonds held by a bank in trust or
otherwise.
Tender Option Bonds are created by coupling an intermediate - or
long-term, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for a fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
Zero Coupon Bonds do not make regular interest payments. Instead,
they are sold at a deep discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its dividends, a fund takes into account as income a portion
of the difference between a zero coupon bond's purchase price and its face
value.
Standby Commitments are puts that entitle holders to same-day
settlement at an exercise price equal to the amortized cost of the
underlying security plus accrued interest, if any, at the time of
exercise. A fund may acquire standby commitments to enhance the liquidity
of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a
third party, although it could sell the underlying municipal security to a
third party at any time. A fund may purchase standby commitments separate
from or in conjunction with the purchase of securities subject to such
commitments. In the latter case, a fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit
or other guarantees to support their ability to buy securities on demand.
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FMR may rely upon its evaluation of a bank's credit in determining whether
to purchase an instrument supported by a letter of credit. In evaluating
a foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be
subject to unfavorable political or economic developments, currency
controls, or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
Standby commitments are subject to certain risks, including the
ability of issuers of standby commitments to pay for securities at the
time the commitments are exercised; the fact that standby commitments are
not marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
Federally Taxable Obligations. High Income Municipal, Limited
Term Tax-Exempt, and Short-Intermediate Tax-Exempt each does not intend to
invest in securities whose interest is federally taxable; however, from
time to time, a tax-exempt fund may invest a portion of its assets on a
temporary basis in fixed-income obligations whose interest is subject to
federal income tax. For example, a fund may invest in obligations whose
interest is federally taxable pending the investment or reinvestment in
municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should High Income Municipal, Limited Term Tax-Exempt, or
Short-Intermediate Tax-Exempt invest in federally taxable obligations, it
would purchase securities that in FMR's judgment are of high quality.
These would include obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities; obligations of domestic
banks; and repurchase agreements. Each fund's standards for high-
quality, taxable obligations are essentially the same as those described
by Moody's Investor Services (Moody's) in rating corporate obligations
within its two highest ratings of Prime-1 and Prime-2, and those
described by Standard & Poor's Corporation (S&P) in rating corporate
obligations within its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax
exemption for interest on municipal obligations are introduced before
Congress from time to time. Proposals also may be introduced before state
legislatures that would affect the state tax treatment of the funds'
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the tax-exempt funds' holdings
would be affected and the Trustees would reevaluate the tax-exempt fund's
investment objectives and policies.
High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt each anticipates being as fully invested as
practicable in municipal securities; however, there may be occasions when,
as a result of maturities of portfolio securities, sales of fund shares,
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or in order to meet redemption requests, a fund may hold cash that is not
earning income. In addition, there may be occasions when, in order to
raise cash to meet redemptions, a fund may be required to sell securities
at a loss.
Municipal Lease Obligations. A fund may invest a portion of its
assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, a fund will not hold such obligations directly as a
lessor of the property, but will purchase a participation interest in a
municipal obligation from a bank or other third party. A participation
interest gives the fund a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
obligation.
Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. State constitutions
and statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the leased
asset to pass to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting
their constitutional and statutory requirements for the issuance of debt.
Many leases and contracts include " non-appropriation clauses" providing
that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purposes
by the appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance limitations.
Interfund Borrowing Program. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to,
and borrow money from, other funds advised by FMR or its affiliates. High
Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each will participate in the interfund borrowing program only
as a borrower. 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. Each fund (except High Income Municipal, Limited Term
Tax-Exempt, and Short-Intermediate Tax-Exempt) will lend through the
program only when the returns are higher than those available from other
short-term instruments (such as repurchase agreements). A fund will
borrow through the program only when the costs are equal to or lower than
the cost of bank loans. 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.
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Real Estate-Related Instruments include real estate investment
trusts, commercial and residential mortgage-backed securities, and real
estate financings. Real estate-related instruments are sensitive to
factors such as changes in real estate values and property taxes, interest
rates, cash flow of underlying real estate assets, overbuilding, and the
management skill and creditworthiness of the issuer. Real estate-related
instruments may also be affected by tax and regulatory requirements, such
as those relating to the environment.
Mortgage-Backed Securities. A fund may purchase
mortgage-backed securities issued by government and non-government
entities such as banks, mortgage lenders, or other financial institutions.
A mortgage-backed security may be an obligation of the issuer backed by
a mortgage or pool of mortgages or a direct interest in an underlying pool
of mortgages. Some mortgage-backed securities, such as collateralized
mortgage obligations (CMOs), make payments of both principal and interest
at a variety of intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties. Other
types of mortgage-backed securities will likely be developed in the
future, and a fund may invest in them if FMR determines they are
consistent with the fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts
in the market's perception of issuers. In addition, regulatory or tax
changes may adversely affect the mortgage securities market as a whole.
Non-government mortgage-backed securities may offer higher yields than
those issued by government entities, but also may be subject to greater
price changes than government issues. Mortgage-backed securities are
subject to prepayment risk. Prepayment, which occurs when unscheduled or
early payments are made on the underlying mortgages, may shorten the
effective maturities of these securities and may lower their total
returns.
Stripped Mortgage-Backed Securities are created when a U.S.
government agency or a financial institution separates the interest and
principal components of a mortgage-backed security and sells them as
individual securities. The holder of the " principal-only" security (PO)
receives the principal payments made by the underlying mortgage-backed
security, while the holder of the " interest-only" security (IO) receives
interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be
particularly affected by changes in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce prices of
IOs and increase prices of POs. Rising interest rates can have the
opposite effect.
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Short Sales. A fund may enter into short sales with respect to
stocks underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security a fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. A fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
If a fund enters into a short sale , it will be required to set
aside securities equivalent in kind and amount to the securities sold
short (or securities convertible or exchangeable into such securities) and
will be required to hold such securities while the short sale is
outstanding. A fund will incur transaction costs, including interest
expense, in connection with opening, maintaining, and closing short sales
.
Warrants are securities that give a fund the right to purchase
equity securities from the issuer at a specific price (the strike price)
for a limited period of time. The strike price of warrants typically is
much lower than the current market price of the underlying securities, yet
they are subject to similar price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities and may offer
greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in
the assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to expiration
date. These factors can make warrants more speculative than other types
of investments.
Physical Commodities. As a practical matter, investments in
physical commodities can present concerns such as delivery, storage and
maintenance, possible illiquidity and the unavailability of accurate
market valuations. FMR, in addressing these concerns, currently intends to
purchase only readily marketable precious metals and to deliver and store
them with a qualified U.S. bank. Investments in bullion earn no investment
income and may involve higher custody and transaction costs than
investments in securities. Global Resources may receive no more than 10%
of its yearly income from gains resulting from selling metals or any other
physical commodity. Therefore, the fund may be required either to hold its
metals or to sell them at a loss, or to sell its portfolio securities at a
gain,when it would not otherwise do so for investment reasons.
Limitations on Futures and Options Transactions. Each fund has
filed a notice of eligibility for exclusion from the definition of the
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term " commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. Each fund intends to comply with Rule 4.5
under the Commodity Exchange Act, which limits the extent to which the
fund can commit assets to initial margin deposits and option premiums.
In addition to the above limitations, a fund will not: (a) sell
futures contracts, purchase put options, or write call options if, as a
result, more than 25% of 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, a fund's total obligations
upon settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; or (c) purchase call options
if, as a result, the current value of option premiums for call options
purchased by a fund would exceed 5% of 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 a fund's investments in futures
contracts and options, and a fund's policies regarding futures contracts
and options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
Futures Contracts. When a fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When a fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when a fund enters into the
contract. Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on
indices of securities prices, such as the Standard & Poor's Composite
Index of 500 Stocks (S&P 500) or the Bond Buyer Municipal Bond Index.
Futures can be held until their delivery dates, or can be closed out
before then if a liquid secondary market is available.
The 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
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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.
Purchasing Put and Call Options. By purchasing a put option, a
fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right,
the fund pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures contracts.
A fund may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is
allowed to expire, the fund will lose the entire premium it paid. If the
fund exercises the option, it completes the sale of the underlying
instrument at the strike price. A fund may also terminate a put option
position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing
the option, a put buyer can expect to suffer a loss (limited to the amount
of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of
put options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
Writing Put and Call Options. When a fund writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract, a fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
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market is not liquid for a put option a fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the
premium received for writing the option should mitigate the effects of the
decline.
Writing a call option obligates a fund to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options are
similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the effects
of a price decline. At the same time, because a call writer must be
prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
Combined Positions. A fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, a fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a
futures contract. Another possible combined position would involve writing
a call option at one strike price and buying a call option at a lower
price, in order to reduce the risk of the written call option in the event
of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may
be more difficult to open and close out.
Correlation of Price Changes. Because there are a limited number
of types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's current
or anticipated investments exactly. A fund may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will
not track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by such
factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until
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expiration of the contract, which may not affect security prices the same
way. Imperfect correlation may also result from differing levels of demand
in the options and futures markets and the securities markets, from
structural differences in how options and futures and securities are
traded, or from imposition of daily price fluctuation limits or trading
halts. A fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not
be successful in all cases. If price changes in a fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that
are not offset by gains in other investments.
Liquidity of Options and Futures Contracts. There is no assurance
a liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading
volume and liquidity if their strike prices are not close to the
underlying instrument's current price. In addition, exchanges may
establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when
the price fluctuation limit is reached or a trading halt is imposed, it
may be impossible for a fund to enter into new positions or close out
existing positions. If the secondary market for a contract is not liquid
because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require a fund
to continue to hold a position until delivery or expiration regardless of
changes in its value. As a result, a fund's access to other assets held to
cover its options or futures positions could also be impaired.
OTC Options. Unlike exchange-traded options, which are
standardized with respect to the underlying instrument, expiration date,
contract size, and strike price, the terms of over-the-counter options
(OTC) (options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this type
of arrangement allows a fund greater flexibility to tailor an option to
its needs, OTC options generally involve greater credit risk than
exchange-traded options, which are guaranteed by the clearing organization
of the exchanges where they are traded.
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.
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The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above.
A fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of a fund's investments exactly over time.
Asset Coverage for Futures and Options Positions. A fund will
comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account
cannot be sold while the futures or option strategy is outstanding, unless
they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of a fund's assets
could impede portfolio management or the fund's ability to meet redemption
requests or other current obligations.
Electric Utilities Industry. The electric utilities industry has
been experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open
transmission access to any electricity supplier, although it is not
presently known to what extent competition will evolve. Other risks
include: (a) the availability and cost of fuel, (b) the availability and
cost of capital, (c) the effects of conservation on energy demand, (d) the
effects of rapidly changing environmental, safety, and licensing
requirements, and other federal, state, and local regulations, (e) timely
and sufficient rate increases, and (f) opposition to nuclear power.
Health Care Industry. The health care industry is subject to
regulatory action by a number of private and governmental agencies,
including federal, state, and local governmental agencies. A major source
of revenues for the health care industry is payments from the Medicare and
Medicaid programs. As a result, the industry is sensitive to legislative
changes and reductions in governmental spending for such programs.
Numerous other factors may affect the industry, such as general and local
economic conditions; demand for services; expenses (including malpractice
insurance premiums); and competition among health care providers. In the
future, the following elements may adversely affect health care facility
operations: adoption of legislation proposing a national health insurance
program; other state or local health care reform measures; medical and
technological advances which dramatically alter the need for health
services or the way in which such services are delivered; changes in
medical coverage which alter the traditional fee-for-service revenue
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stream; and efforts by employers, insurers, and governmental agencies to
reduce the costs of health insurance and health care services.
Housing. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They are
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current
laws and regulations.
Education. In general, there are two types of education-related
bonds; those issued to finance projects for public and private colleges
and universities, and those representing pooled interests in student
loans. Bonds issued to supply educational institutions with funds are
subject to the risk of unanticipated revenue decline, primarily the result
of decreasing student enrollment. Among the factors that may lead to
declining or insufficient revenues are restrictions on students' ability
to pay tuition, availability of state and federal funding, and general
economic conditions. Student loan revenue bonds are generally offered by
state (or substate) authorities or commissions and are backed by pools of
student loans. Underlying student loans may be guaranteed by state
guarantee agencies and may be subject to reimbursement by the United
States Department of Education through its guaranteed student loan
program. Others may be private, uninsured loans made to parents or
students which are supported by reserves or other forms of credit
enhancement. Recoveries of principal due to loan defaults may be applied
to redemption of bonds or may be used to re-lend, depending on program
latitude and demand for loans. Cash flows supporting student loan revenue
bonds are impacted by numerous factors, including the rate of student loan
defaults, seasoning of the loan portfolio, and student repayment deferral
during periods of forbearance. Other risks associated with student loan
revenue bonds include potential changes in federal legislation regarding
student loan revenue bonds, state guarantee agency reimbursement and
continued federal interest and other program subsidies currently in
effect.
Water and Sewer. Water and sewer revenue bonds are often
considered to have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults. Further,
costly environmental litigation and federal environmental mandates are
challenges faced by issuers of water and sewer bonds.
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Transportation. Transportation debt may be issued to finance the
construction of airports, toll roads, or highways. Airport bonds are
dependent on the general stability of the airline industry and on the
stability of a specific carrier that uses the airport as a hub. Air
traffic generally tracks broader economic trends and is also affected by
the price and availability of fuel. Toll road bonds are also affected by
the cost and availability of fuel as well as toll levels, the presence of
competing roads, and the general economic health of the area. Fuel costs
and availability also affect other transportation-related securities, as
does the presence of alternate forms of transportation, such as public
transportation.
The following paragraph restates fundamental policies previously
disclosed in the above descriptions of security types and investment
practices.
Equity Portfolio Growth: It is the policy of the fund to limit
repurchase transactions to those member banks of the Federal Reserve
System and primary dealers in U.S. government securities whose
creditworthiness has been reviewed and found satisfactory by FMR.
SPECIAL CONSIDERATIONS AFFECTING CANADA
Canada occupies the northern part of North America and is the
second largest country in the world (3.97 million square miles in area)
extending from the Atlantic Ocean to the Pacific Ocean. The companies in
which the funds may invest include those involved in the energy industry,
industrial materials (chemicals, base metals, timber and paper) and
agricultural materials (grain cereals). The economy of Canada is strongly
influenced by the activities of companies and industries involved in the
production and processing of natural resources. Canada is a major producer
of hydroelectricity, oil and gas. The business activities of companies in
the energy field may include the production, generation, transmission,
marketing, control or measurement of energy or energy fuels. The
securities of companies in the energy industry are subject to changes in
value and dividend yield which depend, to a large extent, on the price and
supply of energy fuels. Rapid price and supply fluctuations may be caused
by events relating to international politics, energy conservation and the
success of exploration products. Canada is one the world's leading
industrial countries and is rich in natural resources such as zinc,
uranium, nickel, gold, silver, aluminum, iron and copper. Forest covers
over 44% of land area, making Canada a leading world producer of
newsprint. Canada is also a major exporter of agricultural products.
Canada, the United States and Mexico began to implement the
North American Free Trade Agreement (NAFTA) in 1994, reducing trade
barriers affecting important sectors of each country's economy. This
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agreement is expected to lead to increased trade among the three
countries.
Many factors affect and could have an adverse impact on the
financial condition of Canada, including social, environmental and
economic conditions, factors which are not within the control of Canada.
Although the Canadian political system is generally more stable than that
of many other foreign countries, continued tension with respect to greater
independence for, or possible separation of, Quebec causes political
uncertainty. Moreover, while the Canadian dollar is generally less
volatile relative to the U.S. dollar than other foreign currencies, the
value of the Canadian dollar has decreased significantly in recent years.
Continued efforts to reduce the structural Canadian budget deficit will be
required. FMR is unable to predict what effect, if any, such factors would
have on instruments held in the fund's portfolio.
Securities of Canadian companies are not considered by FMR to
have the same level of risk as those of other non-U.S. companies.
Canadian and U.S. companies are generally subject to similar auditing and
accounting procedures, and similar government supervision and regulation.
Canadian markets are more liquid than many other foreign markets and share
similar characteristics with U.S. markets. A fund may elect to
participate in new equity issues or initial public offerings of Canadian
companies.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA
Latin America is a region rich in natural resources such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock, and
agriculture. The region has a large population (roughly 300 million)
representing a large number of markets. Economic growth was strong in the
1960s and 1970s, but slowed dramatically in the 1980s as a result of poor
economic policies, higher international interest rates and the denial of
access to new foreign capital. Capital flight has proven a persistent
problem and external debt has been forcibly rescheduled. High inflation
and low economic growth have begun to give way to stable, manageable
inflation rates and higher economic growth, although political turmoil
(including assassinations) continues in some countries . Changes in
political leadership and the implementation of market oriented economic
policies, such as privatization, trade reform, and fiscal and monetary
reform are among the recent steps taken to renew economic growth. External
debt is being restructured and flight capital (domestic capital that has
left the home country) has begun to return.
Various trade agreements have also been formed within the
region, including the Andean Pact, Mercosur, and NAFTA. NAFTA, which was
implemented on January 1, 1994, is the largest of these agreements.
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Latin American equity markets can be extremely volatile and in
the past have shown little correlation with the United States market.
Currencies have typically been weak, given high inflation rates, but have
stabilized more recently. Most currencies are not free floating, but wide
fluctuations in value over relatively short periods of time can still
occur due to changes in the market.
Mexico's economy is a mixture of state-owned industrial plants
(notably oil), private manufacturing and services, and both large-scale
and traditional agriculture. Mexico's economy has been transformed
significantly over the last six to seven years. Large budget deficits and
a high level of state ownership in many productive and service areas have
given way to balanced budgets and privatization. In the last few years,
the government has sold the telephone company, the major steel companies,
the banks, and many others. The major state ownership remaining is in the
oil sector and the electricity sector. Economic policy transformation has
led to much reduced inflation and more stable economic growth in the last
few years. The recently implemented NAFTA will further cement the economic
ties between Mexico, Canada, and the United States.
Continued political unrest, particularly in southern Mexico, and
uncertainty as to the effectiveness of reforms have recently had an
adverse impact on economic development. In December 1994, Mexico reversed
a long-held currency policy by devaluing the Mexican peso and allowing it
to float freely. The value of the peso against the U.S. dollar and other
currencies declined sharply. As a result, Mexican stocks plunged while
interest rates soared, and other Latin America securities markets were
also adversely affected. Extension and continuance of financial aid to
Mexico from the U.S., including loan guarantees, is uncertain at this
time.
Brazil is the sixth largest country in the world in population,
with about 155 million people, and represents a huge domestic market.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy
direction. Brazil's rate of consumer-price inflation continues to
accelerate while gross domestic product (GDP) remains depressed. A major
long-run strength is Brazil's natural resources. Iron ore, bauxite, tin,
gold, and forestry products make up some to Brazil's basic natural
resource base, which includes some of the largest mineral reserves in the
world. The private sector has remained efficient, mainly through export
promotion. The government has recently embarked on an ambitious reform
program that seeks to modernize and reinvigorate the economy by
stabilizing prices, deregulating the economy, and opening the economy to
increased foreign competition. Privatization of certain industries is
proceeding slowly.
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Chile, like Brazil, is endowed with considerable mineral
resources, particularly copper, which accounts for 40% of total exports.
Export production (especially in the forestry and mining sectors)
continues to be the main long-term engine of economic growth and
modernization. Economic reform has been ongoing in Chile for over 15
years, but political democracy has only recently returned to Chile.
Privatization of the public sector beginning in the early 1980s has
bolstered the equity market. A well-organized pension system has created
a long-term domestic investor base.
Argentina is strong in wheat production and other foodstuffs and
in livestock ranching. A well-educated and skilled population boasts one
of the highest literacy rates in the region. The country has been ravaged
by decades of extremely high inflation and political instability. Like
Mexico, however, Argentina has had a dramatic transformation in its
economy in the last several years. Extremely high inflation rates and
stagnant economic growth have been replaced by low inflation and strong
economic growth. Massive privatization has occurred and continues, which
should reduce the amount of external debt outstanding.
Venezuela has substantial oil reserves. External debt is being
renegotiated, and the government is implementing economic reform in order
to reduce the size of the public sector, although these reform attempts
have recently met with political opposition. Internal gasoline prices,
which are one-third those of international prices, are being increased in
order to reduce subsidies. Price controls did not prevent annual inflation
from reaching at least 75% in 1994, compared to 45.9% in 1993. The
official target of 25-30% inflation for 1995 is improbable, with a
continuation of higher levels more likely. The failure of major banks
adversely affected the Venezuelan economy in 1994 and could continue to
have a negative impact. Plans for privatization and exchange and interest
rate liberalization are examples of recently introduced reforms. It is
not clear when the economic situation in Venezuela will improve and the
country remains extremely dependent on oil.
SPECIAL CONSIDERATIONS AFFECTING JAPAN, THE PACIFIC BASIN, AND SOUTHEAST
ASIA
Many Asian countries may be subject to a greater degree of
social, political and economic instability than is the case in the United
States and Western European countries. Such instability may result from
(i) authoritarian governments or military involvement in political and
economic decision-making; (ii) popular unrest associated with demands for
improved political, economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries; and (v)
ethnic, religious and racial disaffection.
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The economies of most of the Asian countries are heavily
dependent upon international trade and are accordingly affected by
protective trade barriers and the economic conditions of their trading
partners, principally, the United States, Japan, China and the European
Community. The enactment by the United States or other principal trading
partners of protectionist trade legislation, reduction of foreign
investment in the local economies and general declines in the
international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.
Thailand has one of the fastest growing stock markets in the
world. The manufacturing sector is becoming increasingly sophisticated and
is benefiting from export-oriented investing. The manufacturing and
service sectors continue to account for the bulk of Thailand's economic
growth. The agricultural sector continues to become less important. The
government has followed fairly sound fiscal and monetary policies, aided
by increased tax receipts from a fast moving economy. The government also
continues to move ahead with new projects - especially telecommunications,
roads and port facilities - needed to refurbish the country's overtaxed
infrastructure. Nonetheless, political unrest has caused many
international businesses to question Thailand's political stability.
Hong Kong's economic growth which was vigorous in the 1980s has
not been positively affected by its impending return to Chinese dominion
in 1997. Although China has committed by treaty to preserve the economic
and social freedoms enjoyed in Hong Kong for 50 years after regaining
control of Hong Kong, the continuation of the current form of the economic
system in Hong Kong after the reversion will depend on the actions of the
government of China. Business confidence in Hong Kong, therefore, can be
significantly affected by developments, which in turn can affect markets
and business performance. In preparation for 1997, Hong Kong has continued
to develop trade with China, while also maintaining its long-standing
export relationship with the United States. Spending on infrastructure
improvements is a significant priority of the colonial government while
the private sector continues to diversify abroad based on its position as
an established international trade center in the Far East.
In terms of GDP, industrial standards and level of education,
South Korea is second only to Japan in Asia. It enjoys the benefits of a
diversified economy with well developed sectors in electronics,
automobiles, textiles and shoe manufacture, steel and shipbuilding among
others. The driving force behind the economy's dynamic growth has been the
planned development of an export-oriented economy in a vigorously
entrepreneurial society. Inflation rates, however, began to challenge
South Korea's strong economic performance in the early 1990s. Moreover,
the international situation between South Korea and North Korea continues
to be uncertain.
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Indonesia is a mixed economy with many socialist institutions and
central planning but with a recent emphasis on deregulation and private
enterprise. Like Thailand, Indonesia has extensive natural wealth, yet
with a large and rapidly increasingly population, it remains a poor
country. Indonesia's dependence on commodity exports makes it vulnerable
to a fall in world commodity prices. Malaysia has one of the fastest
growing economies in the Asian-Pacific region. Malaysia has become the
world's third-largest producer of semiconductor devices (after the United
States and Japan) and the world's largest exporter of semiconductor
devices. More remarkable is the country's ability to achieve rapid
economic growth with relative price stability as the government followed
prudent fiscal and monetary policies. Malaysia's high export dependence
level leaves it vulnerable to recession in the countries with which it
trades or to a fall in world commodity prices.
Singapore has an open entrepreneurial economy with strong service
and manufacturing sectors and excellent international trading links
derived from its history. During the 1970s and the early 1980s, the
economy expanded rapidly, achieving an average annual growth rate of 9%.
Per capita GDP is among the highest in Asia. Singapore holds a position as
a major oil refining and services center.
Japan currently has the second largest GDP in the world. The
Japanese economy has grown substantially over the last three decades. Its
growth rate averaged over 5% in the 1970s and 1980s. However, in the
1990s, the growth rate in Japan has slowed. Despite small rallies and
market gains, Japan has been plagued with economic sluggishness. Economic
conditions have weakened considerably in Japan since October 1992. The
boom in Japan's equity and property markets during the expansion of the
late 1980's supported high rates of investment and consumer spending on
durable goods, but both of these components of demand have now retreated
sharply following the decline in asset prices. Profits have fallen
sharply, the previously tight labor market conditions have eased
considerably, and consumer confidence has waned. The banking sector has
experienced a sharp rise in non-performing loans, and strains in the
financial system may continue. Continued political uncertainty has
resulted from numerous changes in government, shifting government
coalitions and the political and economic problems associated with a large
trade imbalance.
Although Japan's economic growth has declined significantly since
1990, many Japanese companies seem capable of rebounding due to increased
investments, smaller borrowings, increased product development and
continued government support. Growth recovered slightly in 1994. Japan's
economic growth in the early 1980's was due in part to government
borrowings. Japan is heavily dependent upon international trade and,
accordingly, has been and may continue to be adversely affected by trade
barriers, and other protectionist or retaliatory measures of, as well as
economic conditions in, the United States and other countries with which
it trades. Industry, the most important sector of the economy, is heavily
dependent on imported raw materials and fuels. Japan's major industries
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are in the engineering, electrical, textile, chemical, automobile,
fishing, and telecommunication fields. Japan imports iron ore, copper, and
many forest products. Only 19% of its land is suitable for cultivation.
Japan's agricultural economy is subsidized and protected. It is about 50%
self-sufficient in food production. Even though Japan produces a minute
rice surplus, it is dependent upon large imports of wheat, sorghum, and
soybeans from other countries. Japan's high volume of exports such as
automobiles, machine tools, and semiconductors have caused trade tensions
with other countries, particularly the United States. Attempts to approve
trading agreements between the countries may reduce the friction caused by
the current trade imbalance. In recent months, the Japanese markets have
also been adversely affected by the earthquake in Kobe, Japan, and the
bankruptcy of Barings Bank, Ltd., although the long-term effects of these
events are difficult to predict.
Australia has a prosperous Western-style capitalist economy,
with a per capita GDP comparable to levels in industrialized West European
countries. It is rich in natural resources and is the world's largest
exporter of beef and wool, second-largest exporter of mutton, and among
the top wheat exporters. Australia is also a major exporter of minerals,
metals and fossil fuels. Due to the nature of its exports, a downturn in
world commodity prices could have a significant negative impact on its
economy.
SPECIAL CONSIDERATIONS AFFECTING EUROPE
New developments surrounding the creation of a unified common
market in Europe have helped to reduce physical and economic barriers
promoting the free flow of goods and services throughout Western Europe.
These new developments could make this new unified market one of the
largest in the world.
The economic situation also remains difficult for Eastern
European countries in transition from central planning, following what has
already been a sizable decline in output. The contraction now appears to
be bottoming out in parts of central Europe, where some countries are
projected to register positive growth in 1995. But key aspects of the
reform and stabilization efforts have not yet been fully implemented, and
there remain risks of policy slippages. In the Russian Federation and
most other countries of the former Soviet Union, economic conditions are
of particular concern because of economic instability due to political
unrest and armed conflicts in many regions.
Notwithstanding the continued economic difficulties in many
countries, recent positive developments offer hope for a cooperative
growth strategy in the near term, which could also permit a strengthening
of global economic performance over the medium term. Many developing
countries are reaping the fruits of sustained reform and stabilization
efforts. Efforts to enhance assistance to countries affected by the
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transition to market-based trading systems occurring in central Europe and
the former Soviet Union, and to low-income countries to support
strengthened stabilization and restructuring efforts, are moving forward.
In Europe, exchange market tensions have eased, and interest rates have
been falling and should continue to do so as evidence accumulates of the
waning of inflationary pressures.
The European Community (EC) consists of Belgium, Denmark, France,
Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,
and the United Kingdom (the member states). In 1986, the member states of
the EC signed the "Single European Act," an agreement committing these
countries to the establishment of a market among themselves, unimpeded by
internal barriers or hindrances to the free movement of goods, persons,
services, or capital. To meet this goal, a series of directives have been
issued to the member states. Compliance with these directives is designed
to eliminate three principal categories of barriers: 1) physical
frontiers, such as customs posts and border controls; 2) technical
barriers (which include restrictions operating within national
territories) such as regulations and norms for goods and services (product
standards); discrimination against foreign bids (bids by other EC members)
on public purchases; or restrictions on foreign requests to establish
subsidiaries; and 3) fiscal frontiers, notably the need to levy
value-added taxes, tariffs, or excises on goods or services imported from
other EC states.
The ultimate goal of this project is to achieve a large unified
domestic European market in which available resources would be more
efficiently allocated through the elimination of the above-mentioned
barriers and the added costs associated with those barriers. Elimination
of these barriers would simplify product distribution networks, allow
economies of scale to be more readily achieved, and free the flow of
capital and other resources. The Maastricht Treaty on economic and
monetary union (EMU) attempts to provide its members with a stable
monetary framework consistent with the EC's broad economic goals. But
until the EMU takes effect, which is intended to occur between 1997 and
1999, the community will face the need to reinforce monetary cooperation
in order to reduce the risk of a recurrence of tensions between domestic
and external policy objectives.
The total European market, as represented by both EC and non-EC
countries, consists of over 328 million consumers, making it larger
currently than either the United States or Japanese markets. European
businesses compete nationally and internationally in a wide range of
industries including: telecommunications and information services, roads
and transportation, building materials, food and beverages, broadcast and
media, financial services, electronics, and textiles. Actual and
anticipated actions on the part of member states to conform to the unified
Europe directives has prompted interest and activity not only by European
firms, but also by foreign entities anxious to establish a presence in
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Europe that will result from these changes. Indications of the effect of
this response to a unified Europe can be seen in the areas of mergers and
acquisitions, corporate expansion and development, GDP growth, and
national stock market activity.
The early experience of the former centrally planned economies
has already demonstrated the crucially important link between structural
reforms, macroeconomic stabilization, and successful economic
transformation. Among the central European countries, the Czech Republic,
Hungary, and Poland have made the greatest progress in structural reform;
inflationary pressures there have abated following price liberalization,
and output has begun to recover. These achievements will be difficult to
sustain, however, in the absence of strong efforts to contain the large
fiscal deficits that have accompanied the considerable losses of output
and tax revenue since the start of the reform process.
In the Baltic countries there are encouraging signs that reforms
are taking hold and are being supported by strong stabilization efforts.
In most other countries of the former Soviet Union, in contrast,
inadequate stabilization efforts now threaten to lead to hyper-inflation,
which could derail the reform process. Inflation, which had abated
following the immediate impact of price liberalization in early 1992,
surged to extremely high levels. The main reason for this development has
been excessive credit expansion to the government and to state
enterprises. The transformation process is being seriously hampered by
the widespread subsidization of inefficient enterprises and the resulting
misallocation of resources. The lack of effective economic and monetary
cooperation among the countries of the former Soviet Union exacerbates
other problems by severely constraining trade flows and impeding inflation
control. Partly as a result of these difficulties, some countries have
decided that the introduction of separate currencies offers the best scope
for avoiding hyper-inflation and for improving economic conditions. This
development can facilitate the implementation of stronger stabilization
programs.
Economic conditions appear to have improved for some of the
transition economies of central Europe. Following three successive years
of output declines, there are preliminary indications of a turnaround in
the former Czech and Slovak Federal Republic, Hungary and Poland; growth
in private sector activity and strong exports, especially to Western
Europe, now appear to have contained the fall in output. Most central
European countries in transition, however, are expected to achieve
positive real growth in 1995 as market reforms deepen. The strength of
the projected output gains will depend crucially on the ability of the
reforming countries to contain fiscal deficits and inflation and on their
continued access to, and success in, export markets. Economic conditions
in the former Soviet Union have continued to deteriorate. Real GDP in
Russia is estimated to have fallen 19 percent in 1992, after a 9 percent
decline in 1991. In many other countries of the region, output losses
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have been even larger. These declines reflect the adjustment difficulties
during the early stages of the transition, high rates of inflation, the
compression of imports, disruption in trade among the countries of the
former Soviet Union, and uncertainties about the reform process itself.
Large-scale subsidies are delaying industrial restructuring and are
exacerbating the fiscal situation. A reversal of these adverse factors is
not anticipated in the near term, and output is expected to decline
further in most of these countries. A number of their governments,
including those of Hungary, and Poland, are currently implementing or
considering reforms directed at political and economic liberalization,
including efforts to foster multi-party political systems, decentralize
economic planning, and move toward free market economies. At present, no
Eastern European country has a developed stock market, but Poland, Hungary
and the Czech Republic have small securities markets in operation. Ethnic
and civil conflict currently rage throughout the former Yugoslavia. The
outcome is uncertain.
Both the EC and Japan, among others, have made overtures to
establish trading arrangements and assist in the economic development of
the Eastern European nations. There is also an urgent need for positive
steps to resist protectionist pressures, especially by bringing the
multilateral trade negotiations under the Uruguay Round of the General
Agreement on Trade and Tariffs (GATT) to a successful conclusion.
Determined action to alleviate short-term difficulties and to achieve key
medium-term objectives would unquestionably strengthen consumer and
business confidence. Interest rates generally have declined somewhat with
the easing of tensions in the Exchange Rate Mechanism (ERM), but for most
countries tight monetary conditions remain an obstacle to stronger growth
and a threat to exchange market stability. However, in the long-term,
reunification could prove to be an engine for domestic and international
growth .
The conditions that have given rise to these developments are
changeable, and there is no assurance that reforms will continue or that
their goals will be achieved.
Portugal is a genuinely emerging market which has experienced
rapid growth since the mid-1980s, except for a brief period of stagnation
over 1990-91. Portugal's government remains committed to privatization of
the financial system away from one dependent upon the banking system to a
more balanced structure appropriate for the requirements of a modern
economy.
Economic reforms launched in the 1980s continue to benefit Turkey
in the 1990s. Turkey's economy has grown since the 1980s. Agriculture
remains the most important economic sector, employing over half of the
labor force, and accounting for significant portions of GDP and exports.
Inflation and interest rates remain high, and a large budget deficit will
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continue to cause difficulties in Turkey's substantial transformation from
a centrally controlled to a free market economy.
Like many other Western economies, Greece suffered severely from
the global oil price hikes of the 1970s, with annual GDP growth plunging
from 8% to 2% in the 1980s, and inflation, unemployment, and budget
deficits rising sharply. The fall of the socialist government in 1989 and
the inability of the conservative opposition to obtain a clear majority
led to business uncertainty and the prospect for continued flat economic
performance. Once Greece has sorted out its political situation, it will
have to face the challenges posed by the steadily increasing integration
of the EU, including the progressive lowering of trade and investment
barriers. Tourism continues as a major industry, providing a vital offset
to a sizable commodity trade deficit.
Real GDP Annual Rate of Growth
1993
Denmark 1.2
France -1.0
Germany -1.1
Italy -0.7
Netherlands -1.0
Spain -0.6
Switzerland 2.0
United Kingdom
Source: World Economic Outlook October 1994
(Figures are quoted based on each country's domestic currency.)
NATIONAL INDICES (WITHOUT DIVIDENDS) OCTOBER 1994
GROWTH IN U.S. DOLLARS
EUROPE
6 Months 12 Months 5 Years
Greece -10.22 5.56 2.71
Portugal .65 7.68 -5.53
Turkey 48.77 -45.261 -7.386
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SPECIAL CONSIDERATIONS AFFECTING AFRICA
Africa is a continent of roughly 50 countries with a total
population of approximately 840 million people. Literacy rates (the
percentage of people who are over 15 years of age and who can read and
write) are relatively low, ranging from 20% to 60%. The primary industries
include crude oil, natural gas, manganese ore, phosphate, bauxite, copper,
iron, diamonds, cotton, coffee, cocoa, timber, tobacco, sugar, tourism,
and cattle. Many African countries are fraught with political instability.
However, there has been a trend over the past several years toward
democratization. Many countries are moving from a military style, Marxist,
or single party government to a multi-party system. Still, there remain
many countries that do not have a stable political process. Many countries
have been enmeshed in civil ethnic or border wars. Ethnic, religious,
cultural and linguistic differences divide the African peoples.
Economically, the Northern Rim countries (including Morocco, Egypt, and
Algeria) and Nigeria, Zimbabwe and South Africa are the wealthier
countries on the continent due to their strong ties with the European
nations. The market capitalization of these countries has been growing
recently as more international companies invest in Africa and as local
companies start to list on the exchanges. However, religious strife has
been a significant source of instability in the Northern Rim countries.
Although racial discord in South Africa may be reduced by constitutional
and political changes that are in progress, as well as increased foreign
investments, the long-term future of South Africa remains uncertain.
On the other end of the economic spectrum are countries, such as
Burkina-Faso, Madagascar, and Malawi, that are considered to be among the
poorest or least developed in the world. These countries are generally
landlocked or have poor natural resources. The economies of many African
countries are heavily dependent on international oil prices. Of all the
African industries, oil has been the most lucrative, accounting for 40% to
60% of many countries' GDP. However, the general decline in oil prices
has had an adverse impact on many economies.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are
placed on behalf of each fund by FMR pursuant to authority contained in
the management contract. If FMR grants investment management authority to
the sub-advisers (see the section entitled "Management Contracts"), the
sub-advisers are authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to: the
size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency,
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settlement capability, and financial condition of the broker-dealer firm;
the broker-dealer's execution services rendered on a continuing basis;
the reasonableness of any commissions; and, for equity funds, arrangements
for payment of fund expenses. Generally, commissions for foreign
investments traded on foreign exchanges will be higher than for U.S.
investments and may not be subject to negotiation.
The funds may execute portfolio transactions with broker-dealers
who provide research and execution services to the funds or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; the
availability of securities or the purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and
settlement). Generally, FMR selects such broker-dealers (to the extent
possible consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by FMR's investment
staff (for equity funds), based upon the quality of research and execution
services provided.
The receipt of research from broker-dealers that execute
transactions on behalf of the funds may be useful to FMR in rendering
investment management services to the funds or its other clients, and
conversely, such research provided by broker-dealers who have executed
transaction orders on behalf of other FMR clients may be useful to FMR in
carrying out its obligations to the funds. The receipt of such research
has not reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if FMR
tried to develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are
in excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing
broker-dealers, viewed in terms of a particular transaction or FMR's
overall responsibilities to the funds and its other clients. In reaching
this determination, FMR will not attempt to place a specific dollar value
on the brokerage and research services provided, or to determine what
portion of the compensation should be related to those services.
FMR is authorized to use research services provided by, and to
place portfolio transactions with, brokerage firms that have provided
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<PAGE>
assistance in the distribution of shares of the funds or shares of other
Fidelity funds to the extent permitted by law. FMR may use research
services provided by and place agency transactions with FBSI and Fidelity
Brokerage Services, Ltd. (FBSL), subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. Prior to
September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members, and various trusts for the benefit of
the Johnson family own, directly or indirectly, more than 25% of the
voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who
have entered into arrangements with FMR under which the broker-dealer
allocates a portion of the commissions paid by Overseas, Equity Portfolio
Growth, Global Resources, Growth Opportunities, Strategic Opportunities,
Equity Income, and Income & Growth toward payment of that fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits
members of national securities exchanges from executing exchange
transactions for accounts which they or their affiliates manage, unless
certain requirements are satisfied. Pursuant to such requirements, the
Board of Trustees has authorized FBSI to execute portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The funds' Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of each fund and review the commissions paid by
each fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended 1993 and 1994, respectively, each
fund's portfolio turnover rates are shown in the chart below. Because a
high turnover rate increases transaction costs and may increase taxable
gains, FMR carefully weighs the anticipated benefits of short-term
investing against these consequences. An increased turnover rate is due to
a greater volume of shareholder purchase orders, short-term interest rate
volatility and other special market conditions.
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<PAGE>
Fund Fiscal Period 1993 1994
Ended
Overseas October 31 42% 34%
Equity Portfolio Growth November 30 160% 137%
Global Resources October 31 208% 125%
Growth Opportunities October 31 69% 43%
Strategic Opportunities September 30+ 183% 159%
Equity Income November 30 120% 140%
Income & Growth October 31 200% 202%
Emerging Markets Income December 31 n/a* 354%**
High Yield October 31 79% 118%
Strategic Income December 31 n/a* 104%**
Government Investment October 31 333% 313%
Limited Term Bond November 30 59% 68%
Short Fixed-Income October 31 58% 108%
High Income Municipal October 31 27% 38%
Limited Term
Tax-Exempt November 30 46% 53%
Short-Intermediate
Tax-Exempt November 30 n/a* 111%**
* Emerging Markets Income, Strategic Income, and
Short-Intermediate Tax-Exempt commenced operations on March 10, 1994,
October 10, 1994, and March 16, 1994, respectively.
** Annualized. Portfolio turnover rates shown are from commencement
of operations to the end of the fiscal period, as indicated.
+ On November 9, 1994, the Board of Trustees voted to change the
fiscal year end for Strategic Opportunities from September 30 to December
31.
The brokerage commissions paid by each fund, the percentage of
this amount paid to firms providing research, and the fees paid to FBSI
and FBSL for the past three fiscal years are listed in the following
table. The second table shows the percentage of brokerage commissions paid
to, and the amount of transactions effected through, FBSI and FBSL for
fiscal 1994. Each fund pays both commissions and spreads in connection
with the placement of portfolio transactions; FBSI and FBSL are paid on a
commission basis. The difference between the percentage of brokerage
commissions paid and the percentage of the dollar amount of transactions
effected through FBSI is a result of the low commission rates charged by
FBSI. The other funds paid no brokerage commissions for the fiscal years
1992 through 1994.
<TABLE>
<CAPTION>
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<PAGE>
<C> <C>
<C> % Paid to Firms <C> To
<S> Total Providing Research* To FBSI FBSL
----- --------- ------- ----
Overseas
11/30/94 $1,601,660 84.8% $ 685 0
11/30/93 500,186 87.0 800 0
11/30/92 119,400 89.0 30 1,179
Equity Portfolio Growth
11/30/94 2,086,370 58.7 729,903 0
11/30/93 915,767 55.0 362,158 0
11/30/92 424,364 55.0 148,571 0
Global Resources
10/31/94 630,752 63.7 195,272 0
10/31/93 147,017 66.3 41,286 0
10/31/92 58,180 73.0 13,864 0
Growth Opportunities
10/31/94 3,589,080 54.9 1,368.574 0
10/31/93 2,583,165 59.2 899,767 0
10/31/92 1,147,967 65.1 334,189 925
Strategic Opportunities
10/1/94 - 12/31/94 403,617 58.7 70,462 0
10/1/93 - 9/30/94 1,166,854 76.9 151,233 0
12/31/93 1,068,788 82.0 103,206 0
12/31/92 1,087,115 78.3 126,298 0
Equity Income
11/30/94 827,499 59.1 290,182 0
11/30/93 557,493 68.6 126,832 0
11/30/92 342,397 60.1 107,503 441
Income & Growth
10/31/94 7,338,038 76.1 1,104,577 0
10/31/93 2,998,137 64.9 796,821 0
10/31/92 767,720 63 143,974 0
</TABLE>
* The provision of research services was not necessarily a factor in the
placement of all this business with such firms.
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<PAGE>
<TABLE>
<CAPTION>
% of
% of % of Transactions % of
Commissions Commissions Effected through Transactions
Paid to FBSI Paid to FBSL To FBSI Effected through FBSL
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Overseas * .04 0 17.46 0
Equity Portfolio 35.0 0 49.2 0
Growth **
Global Resources* 31.0 0 52.7 0
Growth 38.1 0 50.1 0
Opportunities *
Strategic 17.5 0 29.9 0
Opportunities ***
Equity Income ** 35.1 0 45.6 0
Income & Growth * 15.1 0 20.7 0
</TABLE>
From time to time, the Trustees will review whether the
recapture for the benefit of the funds of some portion of the brokerage
commissions or similar fees paid by the funds on portfolio transactions is
legally permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present
no other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine in the exercise of their
business judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially
the same as those of other funds managed by FMR, investment decisions for
each fund are made independently from those of other funds managed by FMR
or accounts managed by FMR affiliates. It sometimes happens that the same
security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several funds and
accounts are managed by the same investment adviser, particularly when the
same security is suitable for the investment objective of more than one
fund or account.
When two or more funds or accounts 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 and account. In some cases this system could have
a detrimental effect on the price or value of the security as far as each
fund is concerned. In other cases, however, the ability of the funds to
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participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to each fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
Valuation
Portfolio securities are valued by various methods depending on
the primary market or exchange on which they trade. Most equity
securities for which the primary market is the United States are valued at
last sale price or, if no sale has occurred, at the closing bid price.
Most equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale price
in the principal market in which they are traded. If the last sale price
(on the local exchange) is unavailable, the last evaluated quote or last
bid price normally is used. Fixed-income securities and other assets for
which market quotations are readily available may be valued at market
values determined by such securities' most recent bid prices (sales prices
if the principal market is an exchange) in the principal market in which
they normally are traded, as furnished by recognized dealers in such
securities or assets. Short-term securities are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. Short-term securities are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. Fixed-income and convertible securities may
also 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 Trustees, on the basis of an on-going
evaluation of these services, may use various pricing services or
discontinue the use of any pricing service.
Foreign securities are valued based on prices furnished by
independent brokers or quotation services which express the value of
securities in their local currency. Fidelity Service Company (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. If an
extraordinary event that is expected to materially affect the value of a
portfolio security occurs after the close of an exchange on which that
security is traded, then that security will be valued as determined in
good faith by a committee appointed by the Board of Trustees.
Futures contracts and options are valued on the basis of market
quotations, if available.
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<PAGE>
Securities and other assets for which there is no readily
available market are valued in good faith by a committee appointed by the
Board of Trustees. The procedures set forth above need not be used to
determine the value of the securities owned by a fund if, in the opinion
of a committee appointed by the Board of Trustees, some other method
(e.g., closing over-the-counter bid prices in the case of debt instruments
traded on an exchange) would more accurately reflect the fair market value
of such securities .
PERFORMANCE
Each class of shares may quote performance in various ways. All
performance information supplied by the funds in advertising is historical
and is not intended to indicate future returns. Share price, yield, and
total return fluctuate in response to market conditions and other factors,
and the value of shares when redeemed may be more or less than their
original cost.
Yield Calculations. Yields for a class are computed by dividing
the class's pro rata share of the applicable interest and dividend income,
if any, for a given 30-day or one-month period, net of expenses, by the
average number of shares of that class entitled to receive distributions
during the period, dividing this figure by the class's net asset value
(NAV) or offering price, as appropriate, at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. Dividends from equity investments are treated as if they
were accrued on a daily basis, solely for the purposes of yield
calculations. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. For a fund's investments denominated in foreign currencies, income
and expenses are calculated first in their respective currencies, and are
then converted to U.S. dollars, either when they are actually converted or
at the end of the 30-day or one month period, whichever is earlier.
Capital gains and losses generally are excluded from the calculation as
are gains and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a class's yield
differs from income as determined for other accounting purposes. Because
of the different accounting methods used, and because of the compounding
of income assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
In calculating a class's yield, a fund may from time to time use
a portfolio security's coupon rate instead of its yield to maturity in
- 88 -
<PAGE>
order to reflect the risk premium on that security. This practice will
have the effect of reducing a class's yield.
Yield information may be useful in reviewing a class's
performance and in providing a basis for comparison with other investment
alternatives. However, each class's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the quality
and maturity of the portfolio securities of respective investment
companies they have chosen to consider.
Investors should recognize that in periods of declining interest
rates, a class's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the class's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its shares
will likely be invested in instruments producing lower yields than the
balance of the fund's holdings, thereby reducing the class's current
yield. In periods of rising interest rates, the opposite can be expected
to occur.
Tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment to equal a class's tax-free yield.
Tax-equivalent yields are calculated by dividing a class's yield by the
result of one minus a stated federal or combined federal and state tax
rate. If any portion of a class's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following table shows the effect of a shareholder's tax
status on effective yield under federal income tax laws for 1995. It shows
the approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 2.00% to 8.00%. Of course, no
assurance can be given that a class will achieve any specific tax-exempt
yield. While the tax-exempt funds invest principally in obligations whose
interest is exempt from federal income tax, other income received by the
funds may be taxable.
- 89 -
<PAGE>
<TABLE>
<CAPTION>
1995 Tax Rates and Tax-Equivalent Yields
Federal
Income If individual tax-exempt yield is:
Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
Taxable Income*
Single Return Joint Return Bracket** Then Taxable equivalent yield is:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$23,351 - $56,500 $36,001 - $94,250 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$56,551 - $117,950 $94,251 - $143,600 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$117,951 - $256,500 $143,601 - $256,500 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$256,501 - $256,501 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An increase
in a shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A tax-exempt fund may invest a portion of its assets in
obligations that are subject to federal income tax. When the fund invests
in these obligations, its tax-equivalent yields will be lower. In the
table above, tax-equivalent yields are calculated assuming investments
are 100% federally tax-free.
Total Return Calculations. Total returns quoted in advertising
reflect all aspects of a class's return, including the effect of
reinvesting dividends and capital gain distributions, and any change in a
class's NAV over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over
the period. For example, a cumulative total return of 100% over ten years
would produce an average annual return of 7.18%, which is the steady
annual rate of return that would equal 100% growth on a compounded basis
in ten years. Average annual returns covering periods of less than one
year are calculated by determining the class's total return for the
period, extending that return for a full year (assuming that return
remains constant over the year), and quoting the result as an annual
- 90 -
<PAGE>
return. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that performance is not
constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance.
In addition to average annual total returns, unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period may be quoted. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to
total return. Total returns may be quoted on a before-tax or after-tax
basis and may be quoted with or without taking the maximum sales charge
into account. Excluding a sales charge from a total return calculation
produces a higher total return figure. Total returns, yield, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration.
Net Asset Value. Charts and graphs using NAVs, adjusted NAVs,
and benchmark indices may be used to exhibit performance. An adjusted NAV
includes any distributions paid and reflects all elements of its return.
Unless otherwise indicated, adjusted NAVs are not adjusted for sales
charges, if any.
Moving Averages. A growth or growth and income fund may
illustrate performance using moving averages. A long-term moving average
is the average of each week's adjusted closing NAV for a specified period.
A short-term moving average is the average of each day's adjusted
closing NAV for a specified period. Moving Average Activity Indicators
combine adjusted closing NAVs from the last business day of each week with
moving averages for a specified period to produce indicators showing when
an NAV has crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown
below: *
- 91 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund As of 13-Week 39-Week
Overseas - Class A 10/28/94 $14.01 $13.88
Equity Portfolio Growth - Class A 11/25/94 28.83 28.55
Equity Portfolio Growth - Institutional 11/25/94 29.17 28.84
Global Resources - Class A 10/28/94 17.65 17.17
Growth Opportunities - Class A 10/28/94 26.30 25.87
Strategic Opportunities - Initial 12/30/94 18.92 19.18
Strategic Opportunities - Class A 12/30/94 18.79 19.08
Strategic Opportunities - Class B 12/30/94 18.65 18.96
Equity Income - Class A 11/25/94 16.24 15.65
Equity Income - Class B 11/25/94 16.23 15.64
Equity Income - Institutional 11/25/94 16.33 15.70
Income & Growth - Class A 10/28/94 14.77 14.84
</TABLE>
*Moving averages are shown for those classes that had commenced operations
prior to June 30, 1995 (the date of this Statement of Additional
Information).
Historical Bond Fund Results. The following tables show yields,
tax-equivalent yields (for tax-exempt funds), and total returns for 1994
fiscal periods ended as indicated . The tax-equivalent yield is based on a
31% federal income tax rate. Note that each fund may invest in securities
whose income is subject to the federal alternative minimum tax.
<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
Fiscal Period
Ended:
10/31 = *
11/30 = ** Tax-Equivalent One Five Ten Years/ One Five Ten Years/
12/31 = *** Yield Yield Year Years Life of Fund+ Year Years Life of Fund+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging 8.71% N/A n/a n/a n/a n/a n/a 2.47%
Markets
Income-Class
A***1
Emerging Markets 8.19% N/A n/a n/a n/a n/a n/a 1.96%
Income-Class
B***3
High Yield- 7.33% N/A -2.23% 15.75% 12.99% 2.64% 118.17% 173.14%
Class A*1
- 92 -
<PAGE>
High Yield-Class 7.04% N/A -1 .60% 16.66% 13.63% 2.14% 117.09% 171.80%
B*3
Strategic 7.67% N/A n/a n/a n/a n/a n/a 0.17%
Income-
Class A*** 1
Strategic 6.81% N/A n/a n/a n/a n/a n/a 0.06%
Income-
Class B*** 3
Government 6.46% N/A -9.77% 5.73% 5.77% -5.27% 38.71% 62.83%
Investment-Class
A*1
Government 6.02% N/A -9.20% 6.53% 6.37% -5.66% 38.13% 62.15%
Investment-Class
B*3
Limited 5.98% N/A -7.07% 6.59% 8.90% -2.44% 44.42% 146.17%
Term Bond-Class
A**1
Limited 5.47% N/A -6.59% 7.38% 9.37% -2.91% 43.72% 144.98%
Term Bond-Class
B**3
Limited 6.53% N/A -2.10% 7.86% 9.55% -2.10% 46.01% 148 .89%
Term
Bond-Institution
al Class**
Short-Fixed 6.10% N/A -1.72% 6.82% 7.32% -0.22% 41.17% 68.00%
Income-Class
A*2
High Income 5.99% 8.68% -10.49% 7.15% 8.56% -6.03% 48.27% 88.65%
Municipal-Class
A*1
High Income 5.30% 7.68% -10.00% 7.95% 9.23% -6.47% 47.57% 87.76%
Municipal-Class
B*3
Limited Term 4.97% 7.20% -10.25% 4.05% 5.93% -5.78% 28.03% 78.39%
Tax-
Exempt-Class
A**1
Limited Term 4.35% 6.30% -9.74% 4.84% 6.44% -6.15% 27.53% 77.69%
Tax-
Exempt-Class
B**3
Limited Term 5.47% 7.93% -5.43% 5.21% 6.57% -5.43% 28.90% 79 .59%
Tax-
Exempt-Instituti
onal Class**
Short 4.83% 7.00% n/a n/a -1.74% n/a n/a 0.27%
Intermediate
Tax-Exempt-Class
A**2
- 93 -
<PAGE>
</TABLE>
+ Life of fund figures are from commencement of operations (March 10,
1994 for Emerging Markets Income; January 5, 1987 for High Yield; October
31, 1994 for Strategic Income; January 7, 1987 for Government Investment;
September 16, 1987 for Short Fixed-Income and High Income Municipal;
September 19, 1985 for Limited Term Tax-Exempt; and March 16, 1994 for
Short-Intermediate Tax-Exempt) through the 1994 fiscal year end.
1 Average annual total return figures include the effect of the class's
maximum 4.75% front-end sales charge in effect for the periods shown.
2 Average annual total return figures include the effect of the class's
1.50% front-end sales charge.
3 Average annual total return figures include the effect of the class's
maximum 4.0% contingent deferred sales charge.
Note: If FMR had not reimbursed certain fund expenses during
certain of these periods, the yields and total returns for those periods
for Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt would have
been lower. If the following funds had not been in reimbursement, their
yields and tax-equivalent yields (if applicable) would have been as
follows: Emerging Markets Income - Class A and Class B (8.06% and 7.84%);
Strategic Income - Class A and Class B (5.69% and 5.18%); Limited Term
Bond - Class A and Class B (5.91% and 4.71%); Government Investment -
Class A and Class B (5.73% and 5.10%); Limited Term Tax-Exempt - Class A,
Class B, and Institutional Class (4.83%/7.00%, 3.64%/5.28%, and
5.36%/7.77%); and Short-Intermediate Tax Exempt - Class A (4.04%/5.86%).
Historical Equity Fund Results. The following table shows the
total returns for 1994 fiscal periods ended as indicated .
<TABLE>
<CAPTION>
Fiscal Period
Ended:
10/31 - *
11/30 - **
12/31 - *** Average Annual Total Returns Cumulative Total Returns
- 94 -
<PAGE>
<C> <C> <C> <C> <C> <C>
One Five Ten Years/ One Five Ten Years/
Year Years Life of Fund+ Year Years Life of Fund+
<S> ---- ----- -------------- ---- ----- --------------
Overseas 3.74% n/a 7.50% 8.91% n/a 45.67%
Class-A*1
EPG-Class A** -3.24% 16.55% 19.14% 1.58% 125.75% 504.83%
EPG-Institu- 2.46% 18 .10% 19.93% 2.46% 129.70% 515.42%
tional Class
Global -0.97% 13.48% 14.86% 3.97% 97.54% 171.05%
Resources-
Class A**1
Growth 3.55% 15.15% 19.94% 8.71% 112.51% 272.05%
Opportunities-
Class A**1
Strategic -11.58% 6.55% 13.88% -7.17% 44.18% 285.19%
Opportunities-
Class A***1
Strategic -10.79% 7.44% 14.43% -7.22% 44.11% 285.00%
Opportunities-
Class B***2
Strategic -10.80% 7.20% 14.38% -6.35% 48.64% 302.39%
Opportunities-
Initial
Class ***
Equity 3.67% 9.10% 12.68% 8.84% 62.28% 246.39%
Income-Class
A**1
Equity 4.77% 10.02% 13.22% 8.77% 62.17% 246.17%
Income-Class
B**2
Equity 9.82% 10.56% 13.43% 9.82% 65.21% 252.65%
Income-Insti-
tutional
Class**
Income & -7.31% 9.99% 11.34% -2.69% 68.98% 143.26%
Growth-Class
A*1
</TABLE>
+ Life of fund figures are from commencement of operations (April
23, 1990 for Overseas; December 29, 1987 for Global Resources; November
18, 1987 for Growth Opportunities; and January 6, 1987 for Income &
Growth) through the 1994 fiscal year end.
1 Average annual total return figures include the effect of the class's
maximum 4.75% front-end sales charge in effect for the periods shown.
- 95 -
<PAGE>
2 Average annual total return figures include the effect of the class's
maximum 4.0% contingent deferred sales charge.
Note: If FMR had not reimbursed certain fund expenses during
certain of these periods, the total returns for those periods for
Overseas, Global Resources, Equity Income, and Growth Opportunities would
have been lower.
Domestic Fund Returns. The following tables show the income and
capital elements of the cumulative total return for each class of each
fund. The table compares each class's return to the record of the S&P
500, the Dow Jones Industrial Average (DJIA), and the cost of living
(measured by the Consumer Price Index (CPI) over the same period. The CPI
information is as of the month-end closest to the initial investment date
for each fund. The S&P 500 and DJIA comparisons are provided to show how
each class's total return compared to the record of a broad average of
common stock prices and a narrower set of stocks of major industrial
companies, respectively, over the same period. Of course, since bond funds
invest in fixed-income securities, common stocks represent a different
type of investment from those funds. Common stocks generally offer
greater growth potential than bonds, but generally experience greater
price volatility, which means greater potential for loss. In addition,
common stocks generally provide lower income than a fixed-income
investment such as the bond funds. Each fund has the ability to invest in
securities not included in either index, and its investment portfolio may
or may not be similar in composition to the indices. Figures for the S&P
500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the classes' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
The following charts show the growth of a hypothetical $10,000
investment in each class, assuming all distributions were reinvested. This
was a period of fluctuating interest rates, bond prices, and stock prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the class today. Tax consequences of different investments
have not been factored into the figures.
Institutional/Initial Class Charts. Institutional and Initial
Class shares are sold to eligible investors without a sales charge or a
12b-1 fee.
Class A Charts. Class A shares are sold to eligible investors
with a maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On September 10, 1992, a .65% (for equity
funds) or a .25% (for fixed-income funds, except Short Fixed-Income and
Short-Intermediate Tax-Exempt, which have a .15% 12b-1 fee) 12b-1 fee
for all Class A shares was imposed. The Class A 12b-1 fee is not
- 96 -
<PAGE>
reflected in figures prior to that date. The initial offering of Class A
shares for Equity Portfolio Growth, Equity Income, Limited Term
Tax-Exempt, and Limited Term Bond was September 10, 1992. Prior to that
date, the figures for these funds reflect Institutional Class (Initial
Class for Strategic Opportunities) data, i.e., no sales charge or 12b-1
fee.
Class B Charts. Class B shares are sold to eligible investors
with a 1.00% 12b-1 fee and may be subject to the contingent deferred
sales charge upon redemption (maximum 4.00%). The 1.00% 12b-1 fee is
reflected in figures for the period beginning on June 30, 1994, the
initial offering date of Class B shares. Prior to that date, the figures
for Class B shares reflect Class A and Institutional Class (Initial Class
for Strategic Opportunities) data, as applicable, for the particular fund,
as described above.
<TABLE>
<CAPTION>
EQUITY PORTFOLIO GROWTH - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
1985 $13,155 $0 $0 $13,155 $12,899 $12,966 $10,351
1986 15,634 28 459 16,121 16,469 17,477 10,484
1987 11,767 31 1,564 13,362 15,699 17,258 10,959
1988 14,258 52 3,029 17,339 19,361 20,628 11,425
1989 20,545 611 4,364 25,520 25,333 27,398 11,956
1990 18,445 674 7,102 26,221 24,451 26,939 12,707
1991 28,800 1,052 11,089 40,941 29,428 31,509 13,086
1992 31,232 1,199 17,090 49,521 34,872 37,054 13,485
1993 34,992 1,512 20,207 56,711 38,394 42,501 13,846
1994 33,830 1,462 22,318 57,610 38,795 44,332 14,236
* From month-end closest to initial investment date.
</TABLE>
EQUITY PORTFOLIO GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
- 97 -
<PAGE>
1985 $13,811 $0 $0 $13,811 $12,899 $12,966 $10,351
1986 16,413 29 482 16,924 16,469 17,477 10,484
1987 12,354 32 1,641 14,027 15,699 17,258 10,959
1988 14,969 55 3,180 18,204 19,361 20,628 11,425
1989 21,569 642 4,582 26,793 25,333 27,398 11,956
1990 19,365 707 7,456 27,528 24,451 26,939 12,707
1991 30,237 1,104 11,642 42,983 29,428 31,509 13,086
1992 32,839 1,261 17,970 52,070 34,872 37,054 13,485
1993 37,036 1,645 21,386 60,067 38,394 42,501 13,846
1994 35,990 1,822 23,731 61,543 38,795 44,332 14,236
* From month-end closest to initial investment date.
</TABLE>
- 98 -
<PAGE>
<TABLE>
<CAPTION>
GLOBAL RESOURCES - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
1988* $10,925 $0 $0 $10,925 $11,702 $11,395 $10,416
1989 12,002 0 1,068 13,070 14,791 14,557 10,884
1990 11,716 81 2,106 13,903 13,683 13,970 11,568
1991 13,440 93 3,081 16,614 18,268 18,172 11,906
1992 13,221 91 4,293 17,605 20,090 19,672 12,288
1993 16,754 116 7,961 24,831 23,093 23,104 12,626
1994 16,726 116 8,975 25,817 23,986 25,207 12,955
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
GROWTH OPPORTUNITIES - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
1988* $13,592 $0 $0 $13,592 $11,872 $11,566 $10,416
1989 15,745 35 896 16,676 15,006 14,775 10,884
1990 12,373 71 1,721 14,165 13,882 14,179 11,568
1991 19,602 371 2,727 22,700 18,534 18,444 11,906
1992 20,136 499 4,810 25,445 20,383 19,966 12,288
1993 24,184 790 7,623 32,597 23,430 23,449 12,626
1994 25,356 925 9,157 35,438 24,336 25,585 12,955
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
- 99 -
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC OPPORTUNITIES - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Dec. 31 Investment Distributions Distributions Value 500 DJIA Living*
1985 $11,799 $233 $1,079 $13,101 $13,175 $13,356 $10,380
1986 14,178 355 2,227 16,760 15,636 16,967 10,494
1987 11,388 535 3,776 15,699 16,459 17,889 10,959
1988 13,435 1,302 4,454 19,191 19,193 20,737 11,443
1989 17,327 2,375 5,745 25,447 25,274 27,323 11,975
1990 15,429 3,078 5,116 23,623 24,486 27,176 12,707
1991 16,172 4,106 8,796 29,074 31,951 33,791 13,096
1992 16,662 5,147 11,008 32,817 34,393 36,257 13,476
1993 18,193 6,361 14,969 39,523 37,859 42,418 13,846
1994 16,356 6,383 13,951 36,690 38,358 44,527 14,217
</TABLE>
* From month-end closest to initial investment date.
<TABLE>
<CAPTION>
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C>
Period Ended $10,000 Dividend Capital Gain Total S&P Cost of
Dec. 31 Investment Distributions Distributions Value 500 DJIA Living*
1985 $12,388 $ 234 $1,133 $13,755 $13,175 $13,356 $10,380
1986 14,885 372 2,338 17,595 15,636 16,967 10,494
1987 11,956 561 3,964 16,481 16,459 17,889 10,959
1988 14,105 1,367 4,677 20,149 19,193 20,737 11,443
1989 18,191 2,493 6,031 26,715 25,274 27,323 11,975
1990 16,198 3,231 5,371 24,800 24,486 27,176 12,707
1991 16,979 4,311 9,235 30,525 31,951 33,791 13,096
1992 17,493 5,403 11,557 34,453 34,393 36,257 13,476
1993 19,100 6,678 15,716 41,494 37,859 42,418 13,846
1994 17,052 6,899 14,549 38,500 38,358 44,527 14,217
</TABLE>
* From month-end closest to initial investment date.
- 100 -
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC OPPORTUNITIES - INITIAL CLASS INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Dec. 31 Investment Distributions Distributions Value 500 DJIA Living**
1985 $11,799 $223 $1,079 $13,101 $13,175 $13,356 $10,380
1986 14,178 355 2,227 16,760 15,636 16,967 10,494
1987 11,467 547 3,788 15,802 16,459 17,889 10,959
1988 13,548 1,366 4,476 19,390 19,193 20,737 11,443
1989 17,388 2,652 5,744 25,784 25,274 27,323 11,975
1990 15,499 3,465 5,120 24,084 24,486 27,176 12,707
1991 16,260 4,673 8,858 29,791 31,951 33,791 13,096
1992 16,741 5,959 11,104 33,804 34,393 36,257 13,476
1993 18,324 7,425 15,179 40,928 37,859 42,418 13,846
1994 16,496 7,660 14,172 38,328 38,358 44,527 14,217
</TABLE>
** From month-end closest to initial investment date.
<TABLE>
<CAPTION
EQUITY INCOME - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living**
1985 $11,116 $777 $0 $11,893 $12,899 $12,966 $10,351
1986 12,595 1,711 380 14,686 16,469 17,477 10,484
1987 10,167 2,077 1,373 13,617 15,699 17,258 10,959
1988 10,325 3,242 3,725 17,292 19,361 20,628 11,425
1989 11,413 4,801 4,118 20,332 25,333 27,398 11,956
1990 8,855 4,848 3,598 17,301 24,451 26,939 12,707
1991 10,306 6,782 4,188 21,276 29,428 31,509 13,086
1992 11,962 8,862 4,860 25,684 34,872 37,054 13,485
1993 13,822 10,876 5,616 30,314 38,394 42,501 13,846
1994 14,846 12,116 6,032 32,994 38,795 44,332 14,236
</TABLE>
- 101 -
<PAGE>
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
EQUITY INCOME - CLASS B INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
1985 $11,670 $816 $0 $12,486 $12,899 $12,966 $10,351
1986 13,223 1,797 398 15,418 16,469 17,477 10,484
1987 10,674 2,180 1,441 14,295 15,699 17,258 10,959
1988 10,840 3,403 3,911 18,154 19,361 20,628 11,425
1989 11,982 5,040 4,323 21,345 25,333 27,398 11,956
1990 9,297 5,090 3,777 18,164 24,451 26,939 12,707
1991 10,820 7,120 4,396 22,336 29,428 31,509 13,086
1992 12,559 9,304 5,103 26,966 34,872 37,054 13,485
1993 14,512 11,418 5,896 31,826 38,394 42,501 13,846
1994 15,566 12,725 6,325 34,616 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
- 102 -
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<C> <C>
<S> Value of Value of <C>
Period Initial Reinvested Reinvested <C> <C> <C>
Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
1985 $11,670 $816 $0 $12,486 $12,899 $12,966 $10,351
1986 13,223 1,797 398 15,418 16,469 17,477 10,484
1987 10,674 2,180 1,441 14,295 15,699 17,258 10,959
1988 10,840 3,403 3,911 18,154 19,361 20,628 11,425
1989 11,982 5,040 4,323 21,345 25,333 27,398 11,956
1990 9,297 5,090 3,777 18,164 24,451 26,939 12,707
1991 10,820 7,120 4,396 22,336 29,428 31,509 13,086
1992 12,578 9,318 5,111 27,007 34,872 37,504 13,485
1993 14,580 11,608 5,924 32,112 38,394 42,501 13,846
1994 15,693 13,195 6,376 35,264 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
<TABLE>
<CAPTION>
INCOME & GROWTH - CLASS A INDICES
<C> <C>
<S> Value of Value of <C>
Period Initial Reinvested Reinvested <C> <C> <C>
Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
1987 $8,992 $161 $0 $9,153 $10,232 $10,358 $10,434
1988 10,544 774 0 11,318 11,747 11,572 10,878
1989 12,163 1,549 0 13,712 14,849 14,782 11,367
1990 9,916 2,328 488 12,732 13,736 14,187 12,081
1991 13,459 3,924 663 18,046 18,339 18,454 12,434
1992 13,726 4,641 1,532 19,899 20,169 19,977 12,833
1993 15,154 6,002 2,653 23,809 23,183 23,462 13,186
1994 13,973 6,056 3,141 23,170 24,080 25,598 13,529
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
- 103 -
<PAGE>
<CAPTION>
HIGH YIELD - CLASS A INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Oct. 31 Investment Distributions Distributions Value Index+ Living**
1987* $8,658 $790 $0 $9,448 $9,917 $10,434
1988 9,392 2,148 0 11,540 11,054 10,878
1989 8,544 3,381 0 11,925 12,369 11,367
1990 7,763 4,589 0 12,352 13,150 12,081
1991 9,639 7,613 0 17,252 15,229 12,434
1992 10,544 10,496 0 21,040 16,727 12,833
1993 11,440 13,420 488 25,348 18,712 13,186
1994 10,687 14,350 980 26,017 18,025 13,529
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
HIGH YIELD - CLASS B INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Oct. 31 Investment Distributions Distributions Value Index+ Living**
1987* $9,090 $829 $0 $9,919 $9,917 $10,434
1988 9,860 2,256 0 12,116 11,054 10,878
1989 8,970 3,550 0 12,520 12,369 11,367
1990 8,150 4,818 0 12,968 13,150 12,081
1991 10,120 7,992 0 18,112 15,229 12,434
1992 11,070 11,020 0 22,090 16,727 12,833
1993 12,010 14,089 512 26,611 18,712 13,186
1994 11,210 14,942 1,028 27,180 18,025 13,529
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
- 104 -
<PAGE>
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
STRATEGIC INCOME - CLASS A INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index+ Living**
1994* $9,449 $93 $0 $9,542 $10,047 $10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
STRATEGIC INCOME - CLASS B INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index+ Living**
1994* $9,910 $84 $0 $9,994 $10,047 $10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 105 -
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT INVESTMENT - CLASS A INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index+ Living**
1987* $8,763 $587 $0 $9,350 $10,133 $10,434
1988 8,820 1,403 0 10,223 10,932 10,878
1989 8,868 2,313 0 11,181 12,520 11,367
1990 8,715 3,190 0 11,905 13,642 12,081
1991 9,134 4,277 0 13,411 15,825 12,434
1992 9,268 5,281 0 14,549 16,996 12,833
1993 9,658 6,395 318 16,371 18,653 13,186
1994 8,534 6,472 503 15,509 18,109 13,529
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
GOVERNMENT INVESTMENT - CLASS B INDICES
<C>
<C> Value of <C>
Value of Rein- Rein-
<S> Initial vested vested <C>
Period $10,000 Dividend Capital Gain <C> Aggre-gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,200 $616 $0 $9,816 $9,917 $10,434
1988 9,260 1,473 0 10,733 11,054 10,878
1989 9,310 2,429 0 11,739 12,369 11,367
1990 9,150 3,349 0 12,499 13,150 12,081
1991 9,590 4,490 0 14,080 15,229 12,434
1992 9,730 5,545 0 15,275 16,727 12,833
1993 10,140 6,714 334 17,189 18,712 13,186
1994 8,950 6,737 528 16,215 18,025 13,529
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 106 -
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM BOND - CLASS A INDICES
<C>
<C> Value of <C>
Value of Rein- Rein- <C>
<S> Initial vested vested Aggre-
Period $10,000 Dividend Capital Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living*
1985 $10,089 $1,093 $0 $11,182 $13,436 $10351
1986 10,749 2,315 22 13,086 15,900 10,484
1987 9,802 3,257 260 13,319 16,180 10,959
1988 9,735 4,499 258 14,492 17,674 11,425
1989 9,955 6,016 264 16,235 20,211 11,956
1990 9,697 7,330 257 17,284 21,741 12,707
1991 10,089 9,235 268 19,592 24,875 13,086
1992 10,175 10,919 270 21,364 27,079 13,485
1993 10,653 13,098 283 24,034 30,029 13,846
1994 9,812 13,376 260 23,448 29,110 14,236
</TABLE>
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM BOND - CLASS B INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C>
Period $10,000 Dividend Capital Gain <C> Aggregate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living*
1985 $10,592 $1,147 $0 $11,739 $13,436 $10,351
1986 11,285 2,431 24 13,740 15,900 10,484
1987 10,291 3,419 273 13,983 16,180 10,959
1988 10,221 4,723 271 15,215 17,674 11,425
1989 10,452 6,316 277 17,045 20,211 11,956
1990 10,181 7,696 270 18,147 21,741 12,707
1991 10,592 9,695 281 20,568 24,875 13,086
1992 10,683 11,463 283 22,429 27,079 13,485
1993 11,185 13,751 297 25,233 30,029 13,846
- 107 -
<PAGE>
1994 10,291 13,934 273 24,498 29,110 14,236
</TABLE>
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM BOND - INSTITUTIONAL CLASS INDICES
<C> <C> <C>
Value of Value of Rein- <C>
<S> Initial Reinvested vested Aggre-
Period $10,000 Dividend Capital Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living*
1985 $10,592 $1,147 $0 $11,739 $13,436 $10,351
1986 11,285 2,431 24 13,710 15,900 10,484
1987 10,291 3,419 273 13,983 16,180 10,959
1988 10,221 4,723 271 15,215 17,674 11,425
1989 10,452 6,316 277 17,045 20,211 11,956
1990 10,181 7,696 270 18,147 21,741 12,707
1991 10,592 9,695 281 20,568 24,875 13,086
1992 10,683 11,498 283 22,464 27,079 13,485
1993 11,205 13,920 297 25,422 30,029 13,846
1994 10,311 14,304 273 24,888 29,110 14,236
</TABLE>
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
SHORT FIXED-INCOME - CLASS A INDICES
<C> <C> <C>
Value of Value of Reinvested <C>
<S> Initial Reinvested Capital Aggre-
Period $10,000 Dividend Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,909 $100 $0 $10,009 $10,356 $10,026
1988 9,791 974 0 10,765 11,543 10,452
1989 9,801 1,921 0 11,722 12,917 10,922
- 108 -
<PAGE>
1990 9,476 2,902 0 12,378 13,732 11,609
1991 9,722 4,165 0 13,887 15,903 11,948
1992 9,801 5,397 0 15,198 17,467 12,330
1993 9,939 6,645 0 16,584 19,540 12,670
1994 9,338 7,211 0 16,549 18,823 13,000
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
HIGH INCOME MUNICIPAL - CLASS A INDICES
<C>
<C> Value of
Value of Rein- <C>
<S> Initial vested Reinvested <C>
Period $10,000 Dividend Capital Gain <C> Aggregate <C.
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,382 $87 $0 $9,469 $10,356 $10,026
1988 9,963 852 0 10,815 11,543 10,452
1989 10,306 1,759 54 12,119 12,917 10,922
1990 10,354 2,722 168 13,244 13,732 11,609
1991 10,868 3,903 330 15,101 15,903 11,948
1992 11,097 5,044 351 16,492 17,467 12,330
1993 12,116 6,577 429 19,122 19,540 12,670
1994 10,687 6,808 473 17,968 18,823 13,000
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 109 -
<PAGE>
<TABLE>
<CAPTION>
HIGH INCOME MUNICIPAL - CLASS B INDICES
<C>
<C> Value of <C.
Value of Rein- Rein-
<S> Initial vested vested <C.
Period $10,000 Dividend Capital Gain <C. Aggregate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,850 $92 $0 $9,942 $10,356 $10,026
1988 10,460 895 0 11,355 11,543 10,452
1989 10,820 1,847 57 12,724 12,917 10,922
1990 10,870 2,858 176 13,904 13,732 11,609
1991 11,410 4,097 347 15,854 15,903 11,948
1992 11,650 5,296 368 17,314 17,467 12,330
1993 12,720 6,905 450 20,075 19,540 12,670
1994 11,210 7,069 496 18,775 18,823 13,000
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 110 -
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT - CLASS A INDICES
<C> <C>
<S> <C> Value of Rein-
Value of Rein- vested <C>
Period Initial vested Capital Aggre-
Ended $10,000 Dividend Gain <C> gate <C>
Nov. Invest- Distri- Distri- Total Bond Cost of
30 ment butions butions Value Index+ Living**
1985* $9,792 $126 $0 $9,918 $10,455 $10,065
1986 10,468 826 51 11,345 12,372 10,194
1987 9,887 1,451 117 11,455 12,590 10,656
1988 10,020 2,207 118 12,345 13,752 11,108
1989 10,106 3,046 119 13,271 15,726 11,625
1990 10,135 3,951 120 14,206 16,917 12,355
1991 10,287 4,955 122 15,364 19,356 12,724
1992 10,554 6,062 125 16,741 21,071 13,112
1993 9,963 6,581 1,489 18,033 23,366 13,463
1994 8,954 6,669 1,369 16,992 22,651 13,841
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT - CLASS B INDICES
<C> <C>
<C> Value of Rein-
Value of Rein- vested <C>
<S> Initial vested Capital Aggre-
Period $10,000 Dividend Gain <C> gate <C>
Ended Invest- Distri Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living**
1985* $10,280 $132 $0 $10,412 $10,455 $10,065
1986 10,990 867 53 11,910 12,372 10,194
1987 10,380 1,524 123 12,027 12,590 10,656
1988 10,520 2,317 124 12,961 13,752 11,108
1989 10,610 3,198 125 13,933 15,726 11,625
1990 10,640 4,148 126 14,914 16,917 12,355
1991 10,800 5,202 128 16,130 19,356 12,724
1992 11,080 6,365 131 17,576 21,071 13,112
1993 10,460 6,909 1,564 18,933 23,366 13,463
- 111 -
<PAGE>
1994 9,400 6,931 1,437 17,768 22,651 13,841
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT-INSTITUTIONAL CLASS INDICES
<C>
<C> Value of <C>
Value of Rein- Rein- <C>
<S> Initial vested vested Aggre-
Period $10,000 Dividend Capital Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living**
1985* $10,280 $132 $0 $10,412 $10,455 $10,065
1986 10,990 867 53 11,910 12,372 10,194
1987 10,380 1,524 123 12,027 12,590 10,656
1988 10,520 2,317 124 12,961 13,752 11,108
1989 10,610 3,198 125 13,933 15,726 11,625
1990 10,640 4,148 126 14,914 16,917 12,355
1991 10,800 5,202 128 16,130 19,356 12,724
1992 11,080 6,371 131 17,582 21,071 13,112
1993 10,460 6,967 1,564 18,991 23,366 13,463
1994 9,410 7,110 1,440 17,960 22,651 13,841
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE TAX-EXEMPT - CLASS A INDICES
Value of Value of Aggregat
Period Initial Reinvested Reinvested e
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Nov. 30 InvestmentDistributions Distributions Value Index+ Living**
<S> <C> <C> <C> <C> <C> <C>
1994 $9,623 $254 $0 $9,877 $9,926 $10,183
</TABLE>
- 112 -
<PAGE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
The yield for the S&P 500 for the year ended December 31, 1994 was
2.93%, calculated by dividing the dollar value of dividends paid by the
S&P 500 stocks during the period by the average value of the S&P 500 on
December 31, 1994. The S&P 500 yield is calculated differently from each
class's yield. For example, a class's yield calculation treats dividends
as accrued in anticipation of payment, rather than recording them when
paid.
International Fund Returns. The following tables show the income and
capital elements of the total return for each class of the Overseas and
Emerging Markets Income from the date each fund commenced operations
through the 1994 fiscal period, ended as indicated. The classes may
compare their total returns to the record of the following Morgan Stanley
Capital International indices: the World Index; EAFE Index; the Europe
Index; the Pacific Index, the Combined Far East ex-Japan Free Index; and
the Latin America Free Index. The EAFE Index combines the Europe and
Pacific indices. The addition of Canada, the United States, and South
African Gold Mines to the EAFE index compiles the World Index which
includes over 1400 companies. The Europe Index and Pacific Index are
subsets of the Morgan Stanley Capital International World Index, which is
also published by Morgan Stanley Capital International, S.A. The Europe
and Pacific Indices are weighted by the market value of each country's
stock exchange(s). The companies included in the indices change only in
the event of mergers, takeovers, failures and the like, and minor
adjustments may be made when Morgan Stanley Capital International, S.A.
reviews the companies covered as to suitability every three or four years.
<TABLE>
<CAPTION>
Fund Comparative Index Description of Index
<S> <C> <C>
Overseas Morgan Stanley Capital International An unmanaged index of 900 foreign common stocks
Europe, Australia, Far East Index
(EAFE)
Emerging Markets J.P. Morgan Emerging An unmanaged index of fixed income securities from
Income Market Bond Index developing nations
</TABLE>
Each table below compares the returns for each class of Overseas and
Emerging Markets Income to the record of the S&P 500, the DJIA, a foreign
stock market index as described above, and the cost of living (measured by
the Consumer Price Index, or CPI) over the same period. The CPI
information is as of the month-end closest to the initial investment date
for each fund. The S&P 500 and DJIA comparisons are provided to show how
- 113 -
<PAGE>
each class's total return compared to the record of a broad range of U.S.
common stocks and a narrower set of stocks of major U.S. industrial
companies, respectively, over the same period. The funds have the ability
to invest in securities not included in the indices, and their investment
portfolios may or may not be similar in composition to the indices. The
EAFE Index, Emerging Market Bond Index, S&P 500, and DJIA are based on
the prices of unmanaged groups of stocks and, unlike each class's returns,
their returns do not include the effect of paying brokerage commissions
and other costs of investing.
The following charts show the growth of a hypothetical $10,000
investment in each class, assuming all distributions were reinvested. This
was a period of fluctuating interest rates, bond prices, and stock prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the class today. Tax consequences of different investments
have not been factored into the figures.
Institutional Class Charts. Institutional and Initial Class shares are
sold to eligible investors without a sales charge or a 12b-1 fee
(Institutional Class for the International Funds will commence operations
as of June 30, 1995.)
Class A Charts. Class A shares are sold to eligible investors with a
maximum 4.75% front-end sales charge, which is reflected in the figures
set forth in the charts below. On September 10, 1992, a .65% (for equity
funds) or a .25% (for fixed-income funds, except Short Fixed-Income and
Short-Intermediate Tax-Exempt, which have a .15% 12b-1 fee) 12b-1 fee for
all Class A shares was imposed. The Class A 12b-1 fee is not reflected in
figures prior to that date.
Class B Charts. Class B shares are sold to eligible investors with a
1.00% 12b-1 fee and may be subject to the contingent deferred sales
charge (maximum 4.00%) applicable upon redemption. The 1.00% 12b-1 fee is
reflected in figures for the period beginning on June 30, 1994, the
initial offering date of Class B shares. Prior to that date, the figures
for Class B shares reflect Class A data for the particular fund, as
described above. (Class B shares for Overseas will commence operations as
of June 30, 1995.)
<TABLE>
<CAPTION>
OVERSEAS-CLASS A INDICES
Value of Value of
Period Initial Reinvested Reinvested
Ended $10,000 Dividend Capital Gain Total EAFE S&P Cost of
Oct. 31 Investment Distributions Distributions Value Index 500 DJIA Living**
- 114 -
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990* $9,096 $0 $0 $9,096 $9,968 $9,246 $9,246 $10,357
1991 9,315 77 0 9,392 10,661 12,344 12,027 10,659
1992 8,639 200 0 8,839 9,252 13,575 13,020 11,001
1993 12,316 424 0 12,740 12,717 15,604 15,291 11,303
1994 13,392 483 0 13,875 14,002 16,208 16,684 11,598
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME-CLASS A INDICES
Value of Value of J.P. Morgan
Period Initial Reinvested Reinvested Emerging
Ended $10,000 Dividend Capital Gain Total Market Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index Living**
<S> <C> <C> <C> <C> <C> <C>
1994* $9,068 $457 $235 $9,760 $9,989 $10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME-CLASS B INDICES
Value of Value of J.P. Morgan
Initial Reinvested Reinvested Emerging
Period $10,000 Dividend Capital Gain Total Market Bond S&P Cost of
Ended Dec. 31 Investment Distributions Distributions Value Index 500 DJIA Living**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994* $9,520 $430 $246 $10,196 $9,989 $20,674 $10,178 $10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
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<PAGE>
The following table reflects the cost of the initial $10,000
investment in each of the classes, plus the aggregate cost of reinvested
dividends and capital gain distributions, if any, for the period covered.
If distributions had not been reinvested, the amount of distributions
earned from the applicable class over time would have been smaller and the
cash payments from these classes for the periods noted would have come to
the amounts shown in column (A) for capital gain distributions, and the
amounts shown in column (B) for income dividends. Tax consequences of
different investments (with the exception of foreign tax withholdings)
have not been factored into the figures below.
<TABLE>
<CAPTION>
(A) (B)
Capital Gain Income
Fund Cost Distributions Dividends
<S> <C> <C> <C>
Overseas-A $24,857 $10,557 $581
Equity Portfolio Growth-A 25,863 11,083 772
Equity Portfolio Growth-Institutional 16,456 5,229 76
Global Resources-A 16,797 5,296 514
Growth Opportunities-A 28,518 8,432 3,848
Strategic Opportunities-A 29,681 8,852 4,151
Strategic Opportunities-B 29,936 8,432 4,522
Strategic Opportunities-Initial 23,178 3,191 5,609
Equity Income-A 23,857 3,350 5,898
Equity Income-B 24,205 3,350 6,055
Equity Income-Institutional 18,033 2,105 4,086
Income & Growth-A 10,750 248 479
Emerging Markets Income-A 10,731 260 451
Emerging Markets Income-B 23,956 467 8,089
High Yield-A 25,541 490 8,447
High Yield-B 10,093 0 93
Strategic Income-A 10,084 0 84
Strategic Income-B 17,342 333 5,038
Government Investment-A 17,657 350 5,261
Government Investment-B 23,973 230 8,552
Limited Term Bond-A 24,573 241 8,938
Limited Term Bond-B 24,933 241 9,089
Limited Term Bond-Institutional 17,505 0 5,582
Short Fixed-Income-A 17,299 362 5,171
High Income Municipal-A 17,588 380 5,384
High Income Municipal-B 18,965 972 5,489
Limited Term Tax-Exempt-A 19,339 1,020 5,724
Limited Term Tax-Exempt-B 19,522 1,020 5,820
Limited Term Tax-Exempt-Institutional 10,258 0 255
Short-Intermediate Tax-Exempt-A 10,328 0 324
</TABLE>
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<PAGE>
International Indices, Market Capitalization, and National Stock
Market Return. The following tables show the indexed market capitalization
of certain countries included in the Morgan Stanley Capital International
Indices (MSCI) database as of December 31, 1994 and the performance of
national stock markets as measured in U.S. dollars and in local currency
by the Morgan Stanley Capital International stock market indices for the
twelve months ended October 31, 1994. Of course, these results are not
indicative of future stock market performance or the classes' performance.
Market conditions during the periods measured fluctuated widely. Brokerage
commissions and other fees are not factored into the values of the
indices.
Market Capitalization. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization. According
to Morgan Stanley Capital International, the size of the markets as
measured in U.S. dollars grew from $2,011 billion in 1982 to $7,659
billion in 1994.The following table measures the indexed market
capitalization of certain countries according to the Morgan Stanley
Capital International Indices database. The value of the markets are
measured in billions of U.S. dollars as of December 31, 1994.
MSCI Index Market Capitalization
Australia $125.10 Japan $2,145.70
Austria 18.00 Netherlands 167.90
Belgium 49 .30 Norway 19.90
Canada 171.10 Singapore/Malaysia 175.00
Denmark 35.30 Spain 74.30
France 265.60 Sweden 76.10
Germany 300.10 Switzerland 215.00
Hong Kong 196.50 United Kingdom 731.00
Italy 102.90 United States 2,784.70
The following table measures the total market capitalization of
certain Latin American countries according to the MSCI Index database. The
value of the markets is measured in billions of U.S. dollars as of
December 31, 1994.
MSCI Index Market Capitalization - Latin America
Argentina $23,742
Brazil 95,841
Chile 38,160
Colombia 7,764
Mexico 70,281
Venezuela 3,328
Total Latin America $239,116
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<PAGE>
National Stock Market Performance. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents the
performance of national stock markets as measured in U.S. dollars by the
Morgan Stanley Capital International stock market indices for the twelve
months ended October 31, 1994. The second table shows the same performance
as measured in local currency. Each table measures total return based on
the period's change in price, dividends paid on stocks in the index, and
the effect of reinvesting dividends net of any applicable foreign taxes.
These are unmanaged indices composed of a sampling of selected companies
representing an approximation of the market structure of the designated
country.
<TABLE>
<CAPTION>
Stock Market Performance (Cumulative Total Returns)
Measured in U.S. Dollars
<S> <C> <C> <C>
Australia 2.932% Japan 8.122%
Austria -5.91 Netherlands 14.089
Belgium 13.47 Norway 15.120
Canada 1.173 Singapore/Malaysia 33.750/7.946
Denmark 7.285 Spain -1 .426
France 2.592 Sweden 19.165
Germany 8.752 Switzerland 11.086
Hong Kong 2.047 United Kingdom 7.843
Italy 17.332 United States 1.679
Stock Market Performance (Cumulative Total Returns)
Measured in Local Currency
Australia -2.232% Japan -3.213%
Austria -15.340 Netherlands 2.517
Belgium -3 .057 Norway 3.208
Canada 3.599 Singapore/Malaysia 23.794/7.963
Denmark -6.058 Spain -7.860
France -9.690 Sweden 5.680
Germany -2.090 Switzerland 5.573
Hong Kong 2.034 United Kingdom -1.884
Italy 11.405 United States 1.679
</TABLE>
The following table shows the average annualized stock market returns as
of October 31, 1994.
Stock Market Performance Measured in U.S. Dollars
Five Years Ended Ten Years Ended
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<PAGE>
Germany 11.01% 18.19%
Hong Kong 31.98 30.82
Japan -1.87 17.68
Spain 1.52 19.61
United Kingdom 12.81 18.64
United States 9.51 13 .60
Performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds.
These comparisons may be expressed as mutual fund rankings prepared by
Lipper Analytical Services, Inc. (Lipper), an independent service located
in Summit, New Jersey that monitors the performance of mutual funds.
Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank bond funds based on yield. In addition
to mutual fund rankings, performance may be compared to stock, bond, and
money market mutual fund performance indices prepared by Lipper or other
organizations. When comparing these indices, it is important to remember
the risk and return characteristics of each type of investment. For
example, while stock mutual funds may offer higher potential returns, they
also carry the highest degree of share price volatility. Likewise, money
market funds may offer greater stability of principal, but generally do
not offer the higher potential returns available from stock mutual funds.
From time to time, performance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, a class may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, a fund may offer greater liquidity or higher
potential returns than CDs, a fund does not guarantee your principal or
your return, and fund shares are not FDIC-insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to assess
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<PAGE>
savings needs based on assumed rates of inflation and hypothetical rates
of return; and action plans offering investment alternatives. Materials
may also include discussions of Fidelity's asset allocation funds and
other Fidelity funds, products, and services.
Each fund may be advertised as part of certain asset allocation
programs involving other Fidelity mutual funds. These asset allocation
programs may advertise a model portfolio and its performance results.
Each fund may be advertised as part of a no transaction fee (NTF)
program in which Fidelity and non-Fidelity mutual funds are offered. The
Fidelity Spectrum Program, an NTF program offered to institutional
clients, may include the funds and may advertise performance results.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States, including
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the funds. Ibbotson calculates total returns in the same method
as the classes. Performance comparisons may also be made to other
compilations or indices that may be developed and made available in the
future.
Each class of a fixed-income fund may compare its performance or the
performance of securities in which that fixed-income fund may invest to
averages published by IBC USA (Publications), Inc. of Ashland,
Massachusetts. These averages assume reinvestment of distributions. The
BOND FUND REPORT AVERAGES /All Taxable (Strategic Income, Government
Investment, Limited Term Bond, High Yield, Short-Fixed Income) covers
over 488 taxable bond funds, The BOND FUND REPORT AVERAGES /Municipal
(Limited Term Tax-Exempt, High Income Municipal, Short-Intermediate
Tax-Exempt) covers over 433 tax-exempt bond funds. The averages are
reported in the BOND FUND REPORT . Each class of a fixed-income fund may
compare its performance or the performance of securities in which it may
invest to the IBC/Donohgue's MONEY FUND AVERAGES , reported in the MONEY
FUND REPORT , which monitor the performance of money market funds. When
evaluating comparisons to money market funds, investors should consider
the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price. A bond fund,
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<PAGE>
however, invests in longer-term instruments and its share price changes
daily in response to a variety of factors.
A tax-exempt fund may compare and contrast in advertising the
relative advantages of investing in a mutual fund versus an individual
municipal bond. Unlike tax-exempt mutual funds, individual municipal
bonds offer a stated rate of interest and, if held to maturity, repayment
of principal. Although some individual municipal bonds might offer a
higher return, they do not offer the reduced risk of a mutual fund that
invests in many different securities. The initial investment requirements
and sales charges of many tax-exempt mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally issued in
$5,000 denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include: other Fidelity funds; retirement
investing; the effects of periodic investments plans and dollar cost
averaging; and saving for college or other goals. In addition, Fidelity
may quote or reprint financial or business publications or periodicals,
including descriptions of model portfolios or allocations, as they relate
to current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services and
products.
Each fund may present its fund number, Quotron number and CUSIP
number, and discuss or quote its current portfolio manager.
Volatility. Various measures of volatility and benchmark correlation
may be quoted in advertising. In addition, a fund may compare these
measures to those of other funds. Measures of volatility seek to compare a
class' historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
Momentum Indicators indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents the
class's percentage change in price movements over that period.
Examples of the effects of periodic investment plans, including the
principle of dollar cost averaging may be advertised. In such a program,
an investor invests a fixed dollar amount in a class at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at
the same intervals. In evaluating such a plan, investors should consider
their ability to continue purchasing shares during periods of low price
levels.
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<PAGE>
A fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes,
which may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have an
after-tax value of $1,949 after ten years, assuming tax was deducted from
the return each year at a 31% rate. An equivalent tax-deferred investment
would have an after-tax value of $2,100 after ten years, assuming tax was
deducted at a 31% rate from the tax-deferred earnings at the end of the
ten-year period.
As of December 31, 1994, FMR advised over $25 billion in tax-free
fund assets, $55 billion in money market fund assets, $165 billion in
equity fund assets, and $19 billion in international fund assets. The
funds may reference the growth and variety of money market mutual funds
and the adviser's innovation and participation in the industry. The "
equity funds under management" figure represents the largest amount of
equity fund assets under management by a mutual fund investment adviser in
the United States, making FMR America's leading equity (stock) fund
manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, each class of each bond fund may
compare its total expense ratio to the average total expense ratio of
similar funds tracked by Lipper. A class's total expense ratio is a
significant factor in comparing bond and money market investments because
of its effect on yield.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
Class A Shares Only
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class A shares' maximum 4.75% (all funds except Short-Fixed Income
and Short-Intermediate Tax-Exempt) or 1.50% (Short-Fixed Income and
Short-Intermediate Tax-Exempt) front-end sales charge in connection with
the fund's merger with or acquisition of any investment company or trust.
In addition, FDC has chosen to waive Class A shares front-end sales
charge in certain instances because of efficiencies involved in those
sales of shares. The sales charge will not apply:
1. to shares purchased by a bank trust officer, registered
representative, or other employee (and their immediate families) of
Investment Professionals under special arrangements in connection with
FDC's sales activities;
2. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
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<PAGE>
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor
child of a Fidelity Trustee or employee;
3. to shares purchased by a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or
more;
4. to shares purchased for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code);
5. to shares purchased by a trust institution or bank trust department
which has executed a Participation Agreement with Fidelity Investments
Institutional Services Company (FIIS) specifying certain asset minimums,
and qualifications, marketing program and trading restrictions;
6. to shares purchased by a Wrap Program provider which has executed
a Participation Agreement with FIIS specifying certain asset minimums, and
qualifications, marketing program and trading restrictions ;
7. to shares purchased in connection with an employee benefit plan
(including the Fidelity-sponsored 403(b) and corporate IRA programs but
otherwise as defined in the Employee Retirement Income Security Act
(ERISA)) maintained by a U.S. employer and having more than 200 eligible
employees, or a minimum of $1,000,000 in plan assets invested in the
assets of which are held in a bona fide trust for the exclusive benefit of
employees participating therein;
8. to shares in a Fidelity IRA or Fidelity Advisor IRA account
purchased (including purchases by exchange) with the proceeds of a
distribution from an employee benefit plan having more than 200 eligible
employees or a minimum of $3,000,000 in plan assets invested in Fidelity
mutual funds or $1,000,000 invested in Fidelity Advisor mutual funds;
9. to shares purchased by an insurance company separate account used
to fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA)), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor funds;
10. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency; or
11. to shares purchased with redemption proceeds from other mutual
fund complexes on which the investor has paid a front-end or contingent
deferred sales charge;
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<PAGE>
12. to shares purchased by a registered investment advisor which is
not part of an organization principally engaged in the brokerage business
and which has executed a Participation Agreement with FIIS specifying
certain asset minimums, and qualifications, marketing program and trading
restrictions.
Class B Shares Only
The contingent deferred sales charge (CDSC) on Class B shares may be
waived in the case of (1) disability or death, provided that the
redemption is made within one year following the death or initial
determination of disability, or (2) in connection with a total or partial
redemption made in connection with distributions from retirement plan
accounts at age 70 1/2, which are permitted without penalty pursuant tot
he Internal Revenue Code.
A sales load waiver form must accompany these transactions.
FDC compensates investment professionals with a fee of .25% on
purchases of $1 million or more, except for purchases made through a bank
or bank affiliated broker-dealer that qualify for a Class A Sales Charge
Waiver. All assets on which the .25% fee is paid must remain within the
Fidelity Advisor Funds (including shares exchanged into Daily Money Fund
and Daily Tax-Exempt Money Fund) for a period of one uninterrupted year or
the investment professional will be required to refund this fee to FDC.
Purchases by insurance company separate accounts will qualify for the .25%
fee only if an insurance company's client relationship underlying the
separate account exceeds $1 million. It is the responsibility of the
insurance company to maintain records of purchases by any such client
relationship. FDC may request records evidencing any fees payable through
this program.
Class A and Class B Shares Only
Quantity Discounts. To obtain a reduction of the front-end sales
charge on Class A shares, you or your Investment Professional must notify
the transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges
under the Combined Purchase, Rights of Accumulation or Letter of Intent
programs, the following may qualify as an individual or a "company" as
defined in Section 2(a)(8) of the 1940 Act: an individual, spouse, and
their children under age 21 purchasing for his, her, or their own account;
a trustee, administrator or other fiduciary purchasing for a single trust
estate or a single fiduciary account or for a single or a
parent-subsidiary group of "employee benefits plans" (as defined in
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<PAGE>
Section 3(3) of ERISA); and tax-exempt organizations as defined under
Section 501(c)(3) of the Internal Revenue Code.
Rights of Accumulation permit reduced front-end sales charges on any
future purchases of Class A shares after you have reached a new breakpoint
in a fund's sales charge schedule. The value of currently held Fidelity
Advisor Fund Class A and Class B shares, Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio and shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund
acquired by exchange from any Fidelity Advisor fund, is determined at the
current day's NAV at the close of business, and is added to the amount of
your new purchase valued at the current offering price to determine your
reduced front-end sales charge.
Letter of Intent. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Short Fixed-Income or Short-Intermediate Tax-Exempt) had
been invested at one time. To ensure that the reduced front-end sales
charge will be received on future purchases, you or your Investment
Professional must inform the transfer agent that the Letter is in effect
each time Class A shares are purchased. Neither income nor capital gain
distributions taken in additional Class A or Class B shares will apply
toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you
plan to invest. Out of the initial purchase, 5% of the dollar amount
specified in the Letter will be registered in your name and held in
escrow. The Class A shares held in escrow cannot be redeemed or exchanged
until the Letter is satisfied or the additional sales charges have been
paid. You will earn income dividends and capital gain distributions on
escrowed Class A shares. The escrow will be released when your purchase of
the total amount has been completed. You are not obligated to complete the
Letter
If you purchase more than the amount specified in the Letter and
qualify for a future front-end sales charge reduction, the front-end
sales charge will be adjusted to reflect your total purchase at the end of
13 months. Surplus funds will be applied to the purchase of additional
Class A shares at the then current offering price applicable to total
purchase.
If you do not complete your purchase under the Letter within the
13-month period, 30 days' written notice will be provided for you to pay
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<PAGE>
the increased front-end sales charges due. Otherwise, sufficient escrowed
Class A shares will be redeemed to pay such charges.
Fidelity Advisor Systematic Investment Program.
You can make regular investments in Class A or Class B shares of the
funds with the Systematic Investment Program by completing the appropriate
section of the account application and attaching a voided personal check
with your bank's magnetic ink coding number across the front. If your
bank account is jointly owned, be sure that all owners sign. Investments
may be made monthly by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at
any time. There is a $1,000 minimum initial investment requirement for
Systematic Investment Programs.
Your account will be drafted on or about the first business day of
every month. Class A or Class B shares will be purchased at the offering
price next determined following receipt of the order by the transfer
agent. You may cancel your participation in the Systematic Investment
Program at any time without payment of a cancellation fee. You will
receive a confirmation from the transfer agent for every transaction, and
a debit entry will appear on your bank statement.
Exchange Information
Fidelity Advisor Systematic Exchange Program. With the Systematic
Exchange Plan, you can exchange a specific dollar amount of Class A or
Class B shares of one fund into the same class of other Fidelity Advisor
funds on a monthly, quarterly or semiannual basis.
1. The account from which the exchanges are to be processed must have
a minimum value of $10,000 before you may elect to begin exchanging
systematically. The account into which the exchanges are to be
processed must be an existing account with a minimum balance of
$1,000.
2. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount to be exchanged
systematically is $100.
3. Systematic Exchanges will be processed at the NAV determined on the
transaction date, except that Systematic Exchanges into a Fidelity
Advisor fund from any eligible money market fund will be processed
at the offering price next determined on the transaction date,
unless the shares were acquired by exchanges from another Fidelity
Advisor fund.
Redemption Information
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<PAGE>
Reinstatement Privilege. If you have sold all or part of your Class A
or Class B shares of a fund you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or any of
the other Fidelity Advisor funds, at the NAV next determined after receipt
of your investment order, provided that such reinvestment is made within
30 days of redemption. You must reinstate your shares into an account
with the same registration. This privilege may be exercised only once by
a shareholder with respect to a fund.
Fidelity Advisor Systematic Withdrawal Program. If you own Class A
shares worth $10,000 or more, you can have monthly, quarterly or
semiannual checks sent from your account to you, to a person named by you,
or to your bank checking account. You may obtain information about the
Systematic Withdrawal Program by contacting your investment professional.
Your Systematic Withdrawal Program payments are drawn from Class A share
redemptions. If Systematic Withdrawal Plan redemptions exceed income
dividends earned on your shares, your account eventually may be exhausted.
Since a front-end sales charge is applied on new shares you buy, it is to
your disadvantage to buy Class A shares while also making systematic
redemptions.
Class A, Class B, and Institutional Class Shares
Each fund is open for business and the NAV for each class is
calculated each day the New York Stock Exchange (NYSE) is open for
trading. The NYSE has designated the following holiday closings for 1995:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. Although FMR expects
the same holiday schedule to be observed in the future, the NYSE may
modify its holiday schedule at any time. Each class's NAV is calculated as
of the close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV
may be calculated earlier if trading on the NYSE is restricted or as
permitted by the SEC. To the extent that portfolio securities are traded
in other markets on days when the NYSE is closed, a class's NAV may be
affected on days when investors do not have access to the fund to purchase
or redeem shares. In addition, trading in some of a fund's portfolio
securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued
in computing a fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940
(1940 Act), each fund is required to give shareholders at least 60 days'
notice prior to terminating or modifying its exchange privilege. Under the
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Rule, the 60-day notification requirement may be waived if (i) the only
effect of a modification would be to reduce or eliminate an administrative
fee, redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of
its shares because it is unable to invest amounts effectively in
accordance with its investment objective and policies.
In the prospectuses, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
Distributions. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks
remain uncashed for six months, Fidelity may reinvest your distributions
at the then-current NAV. All subsequent distributions will then be
reinvested until you provide Fidelity with alternate instructions.
Dividends. A portion of each equity fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that a fund's income is derived from qualifying dividends. For
any fund that invests significantly in foreign securities, corporate
shareholders should not expect fund dividends to qualify for the
dividend-received deduction for those funds that may also earn other types
of income, such as interest, income from securities loans,
non-qualifying dividends and short-term capital gains, the percentage of
dividends from the equity funds that qualify for the deduction will
generally be less than 100%. A fund will notify corporate shareholders
annually of the percentage of fund dividends which qualify for the
dividends-received deduction. A portion of a fund's dividends derived from
certain U.S. Government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore will increase
(decrease) dividend distributions. As a consequence, FMR may adjust a
fund's income distributions to reflect the effect of currency
fluctuations. However, if foreign currency losses exceed a fund's net
investment income during a taxable year, all or a portion of the
distributions made in the same taxable year would be recharacterized as a
return of capital to shareholders, thereby reducing each shareholder's
cost basis in his or her fund. Short-term capital gains are distributed
as dividend income.
For those funds whose income is primarily derived from interest,
dividends will not qualify for the dividends-received deduction available
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<PAGE>
to corporate shareholders. Mortgage security paydown gains (losses) are
generally taxable as ordinary income and, therefore, increase (decrease)
taxable dividend distributions. Gains (losses) attributable to foreign
currency fluctuations are generally taxable as ordinary income and
therefore will increase (decrease) dividend distributions.
To the extent that a fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income.
Each fund will send each of its shareholders a notice in January
describing the tax status of dividends and capital gain distributions, if
any, for the prior year.
Shareholders are required to report tax-exempt income on their federal
tax returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each purchases securities that are free of federal income tax
based on opinions of counsel regarding the tax status. These opinions
will generally be based on covenants by the issuers or other parties
regarding continuing compliance with federal tax requirements. If at any
time the covenants are not complied with, distribution to shareholders of
interest on a security could become federally taxable retroactive to the
date the security was issued. For certain types of structured securities,
opinions of counsel may also be based on the effect of the structure on
the federal tax treatment of the income municipal obligations based on
opinions of bond counsel regarding the federal income tax status of the
obligations. These opinions generally will be based on covenants by the
issuers regarding continuing compliance with federal tax requirements. If
the issuer of an obligation fails to comply with its covenants at any
time, interest on the obligation could become federally taxable
retroactive to the date the obligation was issued.
As a result of The Tax Reform Act of 1986, interest on certain "
private activity" securities (referred to as "qualified bonds" in the
Internal Revenue Code) is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of Limited Term Tax-Exempt's policy
of investing so that at least 80% of its income is free from federal
income tax and Short-Intermediate Tax-Exempt's and High Income Municipal's
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<PAGE>
policies of investing so that 80% of each fund's net assets are invested
in securities whose interest is free from federal income tax. Interest
from private activity securities is a tax preference item for the purpose
of determining whether a taxpayer is subject to the AMT and the amount of
AMT tax to be paid, if any. Private activity securities issued after
August 7, 1986 to benefit a private or industrial user or to finance a
private facility are affected by this rule.
A portion of the gain on bonds purchased at a discount after April 30,
1993 and short-term capital gains distributed by a fund are federally
taxable to shareholders as dividends, not as capital gains. Distributions
from the short-term capital gains do not qualify for the
dividends-received deduction. Dividend distributions resulting from a
recharacterization of gain from the sale of bonds purchased at a discount
after April 30, 1993 are not considered income for the purposes of Limited
Term Tax-Exempt's policy of investing so that at least 80% of its income
is free from federal income tax and Short-Intermediate Tax-Exempt's and
High Income Municipal's policies of investing so that 80% of each fund's
net assets are invested in securities whose interest is free from federal
income tax.
Corporate investors should note that a tax preference item for
purposes of the corporate AMT is 75% of the amount by which adjusted
current earnings (which include tax-exempt interest) exceed the
alternative minimum taxable income of the corporation. If a shareholder
receives an exempt interest dividend and sells shares at a loss after
holding them for a period of six months or less, the loss will be
disallowed to the extent of the amount of the exempt-interest dividend.
Capital Gain Distributions. Long-term capital gains earned by a fund
on the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time that
shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of a fund, and such shares
are held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the long-term capital gain distribution will
be considered a long-term loss for tax purposes. Short-term capital
gains distributed by each fund are taxable to shareholders as dividends,
not as capital gains.
As of December 31, 1994, Strategic Opportunities had a capital loss
carryover, available to offset future capital gains, of approximately
$1,141,000, which will expire on December 31, 2002.
As of October 31, 1994, Income & Growth had a capital loss carryover,
available to offset future capital gains, of approximately $18,212,000,
which will expire on October 31, 2002.
As of October 31, 1994, High Yield had a capital loss carryover,
available to offset future capital gains, of approximately $9,447,000,
which will expire on October 31, 2002.
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<PAGE>
As of October 31, 1994, Government Investment had a capital loss
carryover, available to offset future capital gains, of approximately
$4,569,000, which will expire on October 31, 2002.
As of November 30, 1994, Limited Term Bond had a capital loss
carryover, available to offset future capital gains, of approximately
$6,852,000, of which $5,673,000, $1,034,000, and $145,000 will expire on
November 30, 1998, 1999, and 2002, respectively.
As of October 31, 1994, Short Fixed-Income had a capital loss
carryover, available to offset future capital gains, of approximately
$18,238,000 of which $1,000, $19,000, $128,000, $63,000, $286,000,
$38,000, $336,000, and $17,367,000 will expire between October 31, 1995 to
October 31, 2002.
As of October 31, 1994, High Income Municipal had a capital loss
carryover, available to offset future capital gains, of approximately
$3,173,000, which will expire on October 31, 2002.
As of November 30, 1994, Limited Term Tax-Exempt had a capital loss
carryover, available to offset future capital gains, of approximately
$627,000, which will expire on November 30, 2002.
As of November 30, 1994, Short-Intermediate Tax-Exempt had a capital
loss carryover, available to offset future capital gains, of approximately
$8,000, which will expire on November 30, 2002.
State and Local Taxes. For mutual funds organized as business trusts,
state law provides for a pass-through of the state and local income tax
exemption afforded to direct owners of U.S. government securities. Some
states limit this pass-through to mutual funds that invest a certain
amount in U.S. government securities, and some types of securities, such
as repurchase agreements and some agency-backed securities, may not
qualify for this benefit. The tax treatment of your dividend distributions
from a fund will be the same as if you directly owned your proportionate
share of the U.S. government securities in each fund's portfolio. Because
the income earned on most U.S. government securities in which a fund
invests is exempt from state and local income taxes, the portion of your
dividends from the fund attributable to these securities will also be free
from income taxes. The exemption from state and local income taxation does
not preclude states from assessing other taxes on the ownership of U.S.
government securities. In a number of states, corporate franchise (income)
tax laws do not exempt interest earned on U.S. government securities,
whether such securities are held directly or through a fund.
Foreign Taxes. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of a fund's
total assets are invested in securities of foreign issuers, the fund may
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<PAGE>
elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
Tax Status of the Funds. Each fund has qualified and intends to
continue to qualify as a "regulated investment company" for tax purposes,
so that it will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to qualify as a regulated investment
company and avoid being subject to federal income or excise taxes at the
fund level, each fund intends to distribute substantially all of its net
investment income and realized capital gains within each calendar year as
well as on a fiscal year basis. Each fund also intends to comply with
other tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held for less
than three months constitute less than 30% of the fund's gross income
for each fiscal year. Gains from some forward currency contracts, futures
contracts, and options are included in this 30% calculation, which may
limit a fund's investments in such instruments.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs in the Internal
Revenue Code), it may be subject to U.S. federal income tax on a portion
of any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains. Generally, a fund will
elect to mark to market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
Each fund is treated as a separate entity from the other funds in its
Trust, if any, for tax purposes.
Other Tax Information. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders of a fund
may be subject to state and local personal property taxes . Investors
should consult their tax advisers to determine whether a fund is suitable
for their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the
execution of a shareholders' voting agreement, Edward C. Johnson 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
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<PAGE>
and shareholder servicing agent for certain of the funds advised by FMR;
FIIOC, which performs shareholder servicing functions for institutional
customers and funds sold through intermediaries; and Fidelity Investments
Retail Marketing Company, which provides marketing services to various
companies within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and
participation in initial public offerings is prohibited. In addition,
restrictions on the timing of personal investing in relation to trades by
Fidelity funds and on short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Trusts are listed
below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. All persons
named as Trustees and officers also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts
02109, which is also the address of FMR. Those Trustees who are
"interested persons" (as defined in the 1940 Act) by virtue of their
affiliation with either a fund or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (65), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director
of FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD (54), Trustee and Senior Vice President, is
President of FMR; and President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX (63), 200 Rivercrest Drive, Fort Worth, TX, Trustee
(1991), is a consultant to Western Mining Corporation (1994). Prior to
February 1994, he was President of Greenhill Petroleum Corporation
(petroleum exploration and production, 1990). Until March 1990, Mr. Cox
was President and Chief Operating Officer of Union Pacific Resources
Company (exploration and production). He is a Director of Sanifill
Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
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<PAGE>
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS (63), P.O. Box 264, Bridgehampton, NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN (71), 77 Fiske Hill, Sturbridge, MA, Trustee, is a
financial consultant. Prior to September 1986, Mr. Flynn was Vice
Chairman and a Director of the Norton Company (manufacturer of industrial
devices). He is currently a Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc.
E. BRADLEY JONES (67), 3881-2 Lander Road, Chagrin Falls, OH, Trustee
(1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was
Director of National City Corporation (a bank holding company) and
National City Bank of Cleveland. He is a Director of TRW Inc. (original
equipment and replacement products), Cleveland-Cliffs Inc. (mining),
NACCO Industries, Inc. (mining and marketing), Consolidated Rail
Corporation, Birmingham Steel Corporation, Hyster-Yale Materials
Handling, Inc., and RPM, Inc. (manufacturer of chemical products, 1990).
In addition, he serves as a Trustee of First Union Real Estate
Investments, a Trustee and member of the Executive Committee of the
Cleveland Clinic Foundation, a Trustee and member of the Executive
Committee of University School (Cleveland), and a Trustee of Cleveland
Clinic Florida.
DONALD J. KIRK (62), One Harborside, 680 Steamboat Road, Greenwich,
CT, Trustee, is Executive-in-Residence (1995) at Columbia University
Graduate School of Business and a financial consultant. From 1987 to
January 1995, Mr. Kirk was a Professor at Columbia University Graduate
School of Business. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund, Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association, and as a Member
of the Public Oversight Board of the American Institute of Certified
Public Accountants' SEC Practice Section (1995).
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<PAGE>
*PETER S. LYNCH (52), Trustee (1990) is Vice Chairman and Director of
FMR (1992). Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals) and Morrison Knudsen Corporation (engineering
and construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield and Society for the
Preservation of New England Antiquities, and as an Overseer of the Museum
of Fine Arts of Boston (1990).
GERALD C. McDONOUGH (66), 135 Aspenwood Drive, Cleveland, OH, Trustee,
is Chairman of G.M. Management Group (strategic advisory services). Prior
to his retirement in July 1988, he was Chairman and Chief Executive
Officer of Leaseway Transportation Corp. (physical distribution services).
Mr. McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE (70), 5601 Turtle Bay Drive #2104, Naples, FL,
Trustee. Prior to his retirement in 1985, Mr. Malone was Chairman,
General Electric Investment Corporation and a Vice President of General
Electric Company. He is a Director of Allegheny Power Systems, Inc.
(electric utility), General Re Corporation (reinsurance) and Mattel Inc.
(toy manufacturer). In addition, he serves as a Trustee of Corporate
Property Investors, the EPS Foundation at Trinity College, the Naples
Philharmonic Center for the Arts, and Rensselaer Polytechnic Institute,
and he is a member of the Advisory Boards of Butler Capital Corporation
Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (62), 55 Railroad Avenue, Greenwich, CT, Trustee (1993)
is Chairman of the Board, President, and Chief Executive Officer of
Lexmark International, Inc. (office machines, 1991). Prior to 1991, he
held the positions of Vice President of International Business Machines
Corporation ("IBM") and President and General Manager of various IBM
divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company
(chemicals, 1993) and Infomart (marketing services, 1991), a Trammell Crow
Co. In addition, he serves as the Campaign Vice Chairman of the
Tri-State United Way (1993) and is a member of the University of Alabama
President's Cabinet (1990).
THOMAS R. WILLIAMS (66), 21st Floor, 191 Peachtree Street, N.E.,
Atlanta, GA, Trustee, is President of The Wales Group, Inc. (management
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<PAGE>
and financial advisory services). Prior to retiring in 1987, Mr. Williams
served as Chairman of the Board of First Wachovia Corporation (bank
holding company), and Chairman and Chief Executive Officer of The First
National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company
(electric utility), Gerber Alley & Associates, Inc. (computer software),
National Life Insurance Company of Vermont, American Software, Inc., and
AppleSouth, Inc. (restaurants, 1992).
WILLIAM J. HAYES (61), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ROBERT H. MORRISON (55), Manager of Security Transactions of
Fidelity's equity funds, is Vice President of FMR.
ROBERT A. LAWRENCE (43), Vice President (1994), is Vice President of
Fidelity's high income funds and Senior Vice President of FMR (1993).
Prior to joining FMR, Mr. Lawrence was Managing Director of the High Yield
Department for Citicorp (1984-1991).
MARGARET L. EAGLE (45), is Vice President of High Yield and an
employee of FMR.
DANIEL R. FRANK (38), is Vice President of Strategic Opportunities
and an employee of FMR.
MICHAEL GRAY (38), is Vice President of Limited Term Bond (1989) and
an employee of FMR.
ROBERT HABER (37), is Vice President of Income & Growth (1989) and an
employee of FMR.
JOHN F. HALEY, JR. (41), is Vice President of Limited Term Tax-Exempt
and an employee of FMR.
ROBERT LAWRENCE ( ) is Vice President of Emerging Markets Income
(1995) and an employee of FMR.
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<PAGE>
MALCOLM W. MacNAUGHT II (61), is Vice President of Global Resources
(1991) and an employee of FMR.
ROBERT STANSKY (39), is Vice President of Equity Portfolio Growth
(1991) and of other funds advised by FMR, and an employee of FMR.
GEORGE A. VANDERHEIDEN (49), is Vice President of Growth Opportunities
(1990) and an employee of FMR.
GUY E. WICKWIRE ( ), is Vice President of High Income Municipal
(1994) and an employee of FMR.
ARTHUR S. LORING (47), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
STEPHEN P. JONAS (42), Treasurer (1995) is Treasurer and Vice
President of FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc.
(1994), Fidelity Management & Research (U.K.) Inc. (1994), and Fidelity
Management & Research (Far East) Inc. (1994). Prior to becoming Treasurer
of FMR, Mr. Jonas was Senior Vice President, Finance - Fidelity Brokerage
Services, Inc. (1991-1992) and Senior Vice President, Strategic Business
Systems - Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO (48), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (49), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity funds,
Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993); and
Vice President, Assistant Controller, and Director of the Accounting
Department - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation
of each current Trustee of each fund for his or her services as trustee
for the 1994 fiscal year ended as indicated.
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<PAGE>
<TABLE>
<CAPTION>
Compensation Table
Aggregate Compensation
<S>
Fiscal
Period
Ended: <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31 - * <C> <C> Phyllis Richard E. Edward C. Donald Peter Gerald Edward Marvin Thomas
11/30 - ** J. Gary Ralph Burke J. Bradley Johnson J. S. C. H. L. R.
12/31 - *** Burkhead# F. Cox Davis Flynn Jones 3d# Kirk Lynch#McDonough Malone Mann Williams
Overseas* $0 $ 190 $187 $229 $185 $0 $187 $0 $191 $194 $287 $188
Equity
Portfolio 0 473 460 569 462 0 467 0 473 479 474 469
Growth**
Global Re- 0 49 48 59 47 0 48 0 49 50 48 48
sources*
Growth
Oppor- 0 1,467 1,446 1,766 1,432 0 1,448 0 1,480 1,501 1,447 1,453
tunities*
Strategic
Opportun- 0 183 179 227 181 0 181 0 183 188 183 185
ities***
Equity 0 126 123 152 123 0 125 0 126 128 127 125
Income**
Income &
Growth* 0 1,201 1,185 1,447 1,173 0 1,186 0 1,213 1,230 1,186 1,191
Emerging
Markets 0 11 8 11 9 0 9 0 9 9 10 9
Income***+
High Yield* 0 296 292 356 288 0 292 0 299 303 292 292
Strategic
Income***+ 0 3 2 3 3 0 2 0 2 3 2 3
Government
Investment* 0 43 42 52 42 0 42 0 43 44 42 42
Limited Term 0 139 136 168 136 0 138 0 139 141 139 138
Bond**
Short
Fixed- 0 400 395 481 391 0 396 0 405 410 395 396
Income*
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<PAGE>
High Income
Municipal* 0 275 271 330 268 0 271 0 278 281 271 271
Limited Term 0 34 33 41 33 0 33 0 34 34 34 33
Tax-Exempt**
Short-Inter-
mediate Tax- 0 5 4 6 5 0 5 0 5 5 5 5
Exempt**+
</TABLE>
# Interested Trustees of each fund are compensated by FMR.
+ Estimated
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<PAGE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Pension or
Retirement Benefits Estimated Annual Total
Accrued as Part of Benefits Upon Compensation from the
Fund Expenses from Retirement from the Fund
the Fund Complex* Fund Complex* Complex*
Ralph F. Cox $5,200 $52,000 $125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABlLE>
* Information is as December 31, 1994 for all 206 funds in the complex.
Under a retirement program that was adopted in July 1988 Trustees,
upon reaching age 72, become eligible to participate in a retirement
program under which they receive payments during their lifetime from a
fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served
on the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program .
On January 31, 1995 the trustees and officers owned in the aggregate
less than 1% of each fund's outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other
services. Under its management contract with each fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of each fund in accordance with its
investment objective, policies and limitations. FMR also provides each
fund with all necessary office facilities and personnel for servicing each
fund's investments, compensates all officers of each fund and all Trustees
who are "interested persons" of the Trust or of FMR, and all personnel of
each fund or FMR performing services relating to research, statistical,
and investment activities.
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<PAGE>
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include providing
facilities for maintaining each fund's organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters
and other persons dealing with each fund; preparing all general
shareholder communications and conducting shareholder relations;
maintaining each fund's records and the registration of each fund's shares
under federal and state laws; developing management and shareholder
services for each fund; and furnishing reports, evaluations, and analyses
on a variety of subjects to the Trustees.
In addition to the management fee payable to FMR and the fees payable
to the transfer agent and the pricing and bookkeeping agent , each fund
pays all of its expenses, without limitation, that are not assumed by
those parties. Each fund pays for the typesetting, printing, and mailing
of its proxy materials to shareholders, legal expenses, and the fees of
the custodian, auditor and non-interested Trustees. Although each fund's
current management contract provides that each fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices and reports to shareholders, each Trust, on behalf
of each of its funds has entered into a revised transfer agent agreement,
pursuant to which the transfer agent bears the costs of providing these
services to existing shareholders. Other expenses paid by each fund
include interest, taxes, brokerage commissions, each fund's proportionate
share of insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal and state securities laws. Each
fund is also liable for such non-recurring expenses as may arise,
including costs of any litigation to which each fund may be a party, and
any obligation it may have to indemnify its officers and Trustees with
respect to litigation.
FMR is each fund's manager pursuant to management contracts approved
by shareholders on the dates shown in the table below.
Fund Date of Management Contract
Overseas 1/1/93 12/1/92
Equity Portfolio Growth 12/1/90 11/14/90
Global Resources 12/30/88 11/16/94
Growth Opportunities 1/1/95 12/14/94
Strategic Opportunities 11/29/90 12/19/90
Equity Income 8/1/86 7/23/86
Income & Growth 1/1/95 12/14/94
Emerging Markets Income 1/20/94 2/10/94
High Yield 1/1/95 12/14/94
Strategic Income 9/16/94 10/14/94
Government Investment 12/30/88 10/18/88
Limited Term Bond 1/1/95 12/14/94
Short Fixed Income 12/30/80 10/18/88
High Income Municipal 12/30/88 10/18/88
- 141 -
<PAGE>
Limited Term Tax-Exempt 1/29/89 11/16/88
Short-Intermediate 1/21/94 2/10/94
Tax-Exempt
For the services of FMR under its contract, Equity Income pays FMR a
monthly management fee at the annual rate of .50% of its average net
assets throughout the month. For the fiscal years ended November 30, 1994,
1993, and 1992, FMR received $1,392,206, $933,830 and $736,344,
respectively.
For the services of FMR under each contract, Equity Portfolio Growth,
Global Resources, Income & Growth, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, Short
Fixed-Income, High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt each pay FMR a monthly management fee
composed of the sum of two elements: a group fee rate and an individual
fund fee rate.
For the services of FMR under each contract, Overseas, Growth
Opportunities, and Strategic Opportunities pay FMR a monthly management
fee composed of the sum of two elements: a basic fee and a performance
adjustment based on a comparison of Overseas, Growth Opportunities, and
Strategic Opportunities' performance to that of the S&P 500, EAFE, and the
S&P 500, respectively.
Computing the Basic Fee. The basic fee rate for Overseas, Equity
Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Income & Growth, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, Short Fixed
Income, High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt's basic fee rates are composed of two
elements: a group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown below on the left. The schedule below
on the right shows the effective annual group fee rate at various asset
levels, which is the result of cumulatively applying the annualized rates
on the left. For example, the effective annual fee rate at $273 billion of
group net assets - the approximate level for October 31, 1994 - was
0.3191% for equity funds and 0.1561% for fixed income funds, which is the
weighted average of the respective fee rates for each level of group net
assets up $273 billion. The effective annual fee rate at $274 billion of
group net assets - the approximate level for November 30, 1994 - was
0.3190% for equity funds and 0.1560% for fixed income funds. The effective
annual fee rate at $271 billion of group net assets - the approximate
- 142 -
<PAGE>
level for December 31, 1994 - was 0.3193% for equity funds and 0.1563% for
fixed income funds.
FIXED-INCOME FUNDS
The following fee schedule is the current fee schedule for all
fixed-income funds.
</TABLE>
<TABLE>
<CAPTION>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
</TABLE>
Under the fund's current management contract with FMR, the group fee
rate is based on a schedule with breakpoints ending at .1400% for average
group assets in excess of $174 billion. Prior to ________________, the
group fee rate breakpoints shown above for average group assets in excess
- 143 -
<PAGE>
of $120 billion and under $228 billion were voluntarily adopted by FMR,
and went into effect on January 1, 1992. The additional breakpoints shown
above for average group assets in excess of $28 billion were voluntarily
adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule provides for lower management fee rates as FMR's assets
under management increase. The revised group fee rate schedule is
identical to the above schedule for average group assets under $156
billion.
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity
funds (except Equity Income, see above, p. __).
<TABLE>
<CAPTION>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
- 144 -
<PAGE>
</TABLE>
This fee schedule was approved by shareholders of all equity funds
except Overseas, Equity Portfolio Growth, Strategic Opportunities, and
Equity Income (see chart indicating date of management contract and date
of shareholder approval.)
Under the current management contracts for Overseas, Equity Portfolio
Growth, and Strategic Opportunities', the group fee rate is based on a
schedule with breakpoints ending at .3000% for average group net assets in
excess of $174 billion.
The following fee schedule is the fee schedule which was in effect
through August 1, 1994, and was either approved by shareholders or
voluntarily adopted by FMR.
Group fee rate breakpoints shown for average group net assets in
excess of $138 billion and under $228 billion were voluntarily adopted by
FMR, and went into effect on January 1, 1992. Additional breakpoints for
average group net assets in excess of $228 billion were voluntarily
adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
<TABLE>
<CAPTION>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
- 145 -
<PAGE>
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
</TABLE>
The individual fund fee rates for each fund (except Equity Income)
are set forth in the following chart. Based on the average group net
assets of the funds advised by FMR for December 1994, the annual basic fee
rate would be calculated as follows:
- 146 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
Overseas
.3193% + .45% = .7693%
Equity Portfolio Growth
.3193% + .30%* = .6193%
Global Resources
.3193% + .30% = .6193%
Growth Opportunities
.3193% + .30% = .6193%
Strategic Opportunities
.3193% + .30% = .6193%
Income & Growth
.3193% + .20% = .5193%
Emerging Markets Income
.1563% + .55% = .7063%
High Yield
.1563% + .45% = .6063%
Strategic Income
.1563% + .45% = .6063%
Government Investment
.1563% + .30% = .4563%
Limited Term Bond
.1563% + .30%** = .4563%
Short Fixed-Income
.1563% + .30% = .4563%
High Income Municipal
.1563% + .25% = .4063%
Limited Term Tax-Exempt
.1563% + .25% = .4063%
Short Intermediate Tax-Exempt
.1563% + .25% = .4063%
</TABLE>
* Effective August 1, 1994, FMR voluntarily agreed to reduce the
individual fund fee rate from 0.33% to 0.30%. If this reduction were not
in effect during fiscal 1994, the total management fee would have been
0.65%.
** On December 14, 1994, shareholders of the fund approved an increase
for the individual fund fee rate from 0.25% to 0.30% effective February
24, 1995. If this increase were in effect during fiscal 1994, the total
fee would have been 0.46%.
One-twelfth (1/12) of this annual basic fee or management fee, as
applicable, rate is applied to each fund's net assets averaged for the
- 147 -
<PAGE>
most recent month, giving a dollar amount, which is the fee for that
month.
Computing the Performance Adjustment. The basic fee for Strategic
Opportunities, Overseas, and Growth Opportunities is subject to upward or
downward adjustment, depending upon whether, and to what extent, the
investment performance of Strategic Opportunities, Overseas, and Growth
Opportunities' investment performance for the performance period exceeds,
or is exceeded by, the record of the S&P 500, EAFE, and S&P 500,
respectively (the Indices) over the same period. Starting with the twelfth
month, the performance adjustment takes effect. Each month subsequent to
the twelfth month, a new month is added to the performance period until
the performance period equals 36 months. Thereafter, the performance
period consists of the most recent month plus the previous 35 months. Each
percentage point of difference, calculated to the nearest 1.0% (up to a
maximum difference of +/- 10.00 ) is multiplied by a performance
adjustment rate of .02%. Thus, the maximum annualized adjustment rate is
+/- .20%. Strategic Opportunities is comprised of four classes of
shares: Initial Class shares, Class A shares, Class B shares, and
Institutional Class shares. Overseas is comprised of three classes of
shares: Class A shares, Class B shares, and Institutional Class shares.
Growth Opportunities is comprised of two classes of shares: Class A shares
and Institutional Class shares. For each fund, investment performance
will be measured separately for each class . For Strategic Opportunities
the least of the results obtained will be used in calculating the
performance adjustment to the management fee paid by the fund. For Global
Resources and Overseas, investment performance for Class A shares will be
used in calculating the performance adjustment to the management fee paid
by each fund. This performance comparison is made at the end of each
month. One twelfth (1/12) of this rate is then applied to each fund's
average net assets for the entire performance period, giving a dollar
amount which will be added to (or subtracted from) the basic fee.
Each class's performance is calculated based on change in net asset
value. For purposes of calculating the performance adjustment, any
dividends or capital gain distributions paid by each class are treated as
if reinvested in that class's shares at the net asset value as of the
record date for payment. The record of the each Index is based on change
in value and is adjusted for any cash distributions from the companies
whose securities compose the Index.
Because the adjustment to the basic fee is based on each class's
performance compared to the investment record of the applicable Index, the
controlling factor is not whether each class's performance is up or down
per se, but whether it is up or down more or less than the record of the
Index. Moreover, the comparative performance of each class is based solely
on the relevant performance period without regard to the cumulative
performance over a longer or shorter period of time.
- 148 -
<PAGE>
The table below shows the management fees received by FMR for its
services as investment adviser to the funds as of the end of each fund's
three most recent fiscal years. The fees were equivalent to the percentage
of the average net assets of each fund, as indicated.
<TABLE>
<CAPTION>
<C>
<C> <C> Management Fee As a
Management Performance Percentage of
<S> Fee + Adjustment Average Net Assets
---------- ----------- --------------------
Overseas
10/31/94 $3,435,695 $133,032 (upward) .80%
10/31/93 503,110 3,885 (downward) .77
10/31/92 139,234 6,062 (downward) .75
Equity Portfolio Growth
11/30/94 6,567,305 N/A .64
11/30/93 2,646,631 N/A .66
11/30/92 860,709 N/A .67
Global Resources
10/31/94 890,892 N/A .77
10/31/93 111,465 N/A .77
10/31/92 49,323 N/A .79
Growth Opportunities
10/31/94 22,087,985 2,130,192 (upward) .69
10/31/93 8,250,306 709,376 (upward) .68
10/3192
2,747,645 240,501 (upward) .69
Strategic Opportunities +++
10/1/94 - 12/31/94 682,856 37,843 (upward) .67 (annualized)
10/1/93 - 9/30/94 2,582,584 359,674 (upward) .72
12/31/93 1,291,906 81,040 (upward) .54
12/31/92 1,087,250 268,871 (downward) .51
Equity Income
11/30/94 1,392,206 N/A .50
11/30/93 933,830 N/A .50
11/30/92 ++++ 736,344 N/A .50
Income & Growth
10/31/94 13,325,884 N/A .52
10/31/93 4,578,813 N/A .53
10/31/92 1,291,531 N/A .53
Emerging Markets Income
12/31/94 ++ 122,088 N/A .70
High Yield
11/30/94 3,737,959 N/A .60
11/30/93 1,539,682 N/A .51
11/30/92 397,638 N/A .52
Strategic Income
- 149 -
<PAGE>
<C>
<C> <C> Management Fee As a
Management Performance Percentage of
<S> Fee + Adjustment Average Net Assets
---------- ----------- --------------------
12/31/94 ++ 10,348 N/A .60
Government Investment
11/30/94 422,255 N/A .46
11/30/93 186,973 N/A .46
11/30/92 78,107 N/A .47
Limited Term Bond
11/30/94 1,180,785 N/A .41
11/30/93 818,426 N/A .42
11/30/92 963,611 N/A .42
Short Fixed-Income
10/31/94 $3,713,144 N/A .46%
10/31/93 1,674,841 N/A .47
10/31/92 368,993 N/A .47
High Income Municipal
11/30/94 2,257,113 N/A .41
11/30/93 1,314,060 N/A .42
11/30/92 439,804 N/A .42
Limited Term Tax-Exempt
11/30/94 286,027 N/A .41
11/30/93 156,087 N/A .42
11/30/92 268,825 N/A .42
Short-Intermediate Tax-Exempt
11/30/94++ 31,109 N/A .41
</TABLE>
+ Management fee includes performance adjustments for Overseas, Growth
Opportunities, and Strategic Opportunities.
++ Emerging Markets Income, Strategic Income, and Short Intermediate
Tax-Exempt commenced operations on March 10, 1994, October 31, 1994, and
March 16, 1994, respectively. Management fee percentages for these funds
are annualized.
+++ On November 9, 1994, the Board of Trustees voted to change Strategic
Opportunities' fiscal year end from September 30 to December 31.
++++ Management fee does not include a voluntary reimbursement of 0.10% of
average net assets for the period December 1, 1991 to September 10, 1992.
Expense Reimbursements. FMR may, from time to time, voluntarily
reimburse all or a portion of a fund's operating expenses (exclusive of
interest, taxes, brokerage commissions, and extraordinary expenses) above
a specified percentage of average net assets. FMR retains the ability to
- 150 -
<PAGE>
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year. Expense
reimbursements by FMR will increase each fund's total returns and yield
and reimbursement by each fund will lower its total returns and yield.
FMR has voluntarily agreed to reimburse Class A and Class B of
Emerging Markets Income, Strategic Income, Government Investment, Limited
Term Bond, Limited Term Tax-Exempt, and Class A of Short-Intermediate
Tax-Exempt to the extent that total operating expenses (as a percentage of
average net assets) of each of their respective average net assets exceeds
the following: for Emerging Markets Income 1.50% (Class A) and 2.25%
(Class B); for Strategic Income 1.35% (Class A) and 2.10% (Class B); for
Government Investment 0.95% (Class A) and 1.70% (Class B); for Limited
Term Bond .90% (Class A) and 1.65% (Class B); for Limited Term Tax-Exempt
0.90% (Class A) and 1.65% (Class B); and for Short-Intermediate Tax-Exempt
0.75% (Class A). If these agreements were not in effect, other expenses
and total operating expenses would have been:
Other Expenses Total Expenses
Class A Class B Class A Class B
Emerging Markets Income + 1.20% 0.90% 2.15% 2.60%
Strategic Income + 1.64% 0.89% 2.50%* 2.50%*
Government Investment 0.76% 1.16% 1.47% 2.62%+
Limited Term Bond 0.43% 1.00% 1.09% 2.41%+
Limited Term Tax-Exempt 0.38% 0.95% 1.04% 2.36%+
Short-Intermediate 0.98% n/a 1.54% n/a
Tax-Exempt +
* Reflects limitations that would have been in effect under a state
expense limitation.
+ Annualized
To comply with the California Code of Regulations, FMR will reimburse
each fund if and to the extent that each fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating each fund's expenses for purposes of this regulation,
each fund may exclude interest, taxes, brokerage commissions, and
extraordinary expenses, as well as a portion of its distribution plan
expenses and custodian fees attributable to investments in foreign
securities.
Sub-Advisers. On behalf of Strategic Opportunities, Global Resources,
Growth Opportunities, Income & Growth, High Yield, Equity Income, Limited
Term Bond, Equity Portfolio Growth, and Short Fixed-Income, FMR has
entered into sub-advisory agreements with FMR U.K. and FMR Far East. On
behalf of Overseas, FMR has entered into sub-advisory agreements with
- 151 -
<PAGE>
FMR U.K., FMR Far East, and FIIA. FIIA, in turn, has entered into a
sub-advisory agreement with FIIAL U.K. On behalf of Emerging Markets
Income and Strategic Income, FMR has entered into sub-advisory agreements
with FMR U.K., FMR Far East, FIJ, and FIIA. FIIA, in turn, has entered
into a sub-advisory agreement with FIIAL U.K. Pursuant to the
sub-advisory agreements, FMR may receive investment advice and research
services outside the United States from the sub-advisers.
On behalf of Global Resources, Growth Opportunities, Strategic Income,
Income & Growth, High Yield, Limited Term Bond, Emerging Markets Income,
and Short Fixed-Income, FMR may also grant FMR U.K. and FMR Far East
investment management authority as well as the authority to buy and sell
securities if FMR believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIAL U.K. each
focus on issuers in countries other than the United States such as those
in Europe, Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. FIJ and FIIA are wholly owned subsidiaries of
Fidelity International Limited (FIL), a Bermuda company formed in 1968
which primarily provides investment advisory services to non-U.S.
investment companies and institutional investors investing in securities
throughout the world. Edward C. Johnson 3d, Johnson family members, and
various trusts for the benefit of the Johnson family own, directly or
indirectly, more than 25% of the voting common stock of FIL. FIJ was
organized in Japan in 1986. FIIA was organized in Bermuda in 1983. FIIAL
U.K. was organized in the United Kingdom in 1984, and is a wholly owned
subsidiary of Fidelity International Management Holdings Limited, an
indirect wholly owned subsidiary of FIL.
Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR
Far East, FIJ, and FIIA. FIIA, in turn, pays the fees of FIIAL U.K. For
providing non-discretionary investment advice and research services the
sub-advisers are compensated as follows:
. FMR pays FMR U.K. and FMR Far East fees equal to 110% and 105%,
respectively, of FMR U.K.'s and FMR Far East's costs incurred in
connection with providing investment advice and research services.
. FMR pays FIIA and FIJ fees equal to 30% of FMR's monthly management
fee with respect to the average net assets held by the fund for which the
sub-adviser has provided FMR with investment advice and research services.
. FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing investment advice and research
services.
On behalf of Global Resources, Growth Opportunities, Income & Growth,
Emerging Markets Income, High Yield, Short Fixed-Income, and Limited Term
- 152 -
<PAGE>
Bond, for providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as follows:
. FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its monthly management fee (including any performance adjustment, if
applicable) with respect to the fund's average net assets managed by the
sub-adviser on a discretionary basis.
. FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing discretionary investment management
services.
The table below shows the fees paid by FMR to FMR U.K., FMR Far East,
FIIA, and FIJ, and by FIIA to FIIAL U.K. for providing investment advice
and research services with respect to certain of the funds for the fiscal
periods ended 1994, 1993, and 1992.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fund Fees Paid by FMR to FMR U.K. Fees Paid by FMR to FMR Far East
1994 1993 1992 1994 1993 1992
Overseas 153,288 14,363 13,189 174,129 22,357 16,736
Equity Portfolio
Growth 13,191 3,144 2,425 15,192 5,021 2,126
Global Resources 2,598 N/A N/A 2,932 N/A N/A
Growth Opportunities 67,818 N/A N/A 82,741 N/A N/A
Strategic
Opportunities
(10/1/93 - 9/30/94) 7,794 N/A N/A 7,712 N/A N/A
Strategic
Opportunities
(10/1/94 -
12/31/94) 7,352 4,560 88 7,701 11,267 117
Equity Income 12,197 4,669 5,237 13,970 7,199 6,544
Income & Growth 248,936 N/A N/A 299,094 N/A N/A
TOTAL
TOTAL
</TABLE>
CONTRACTS WITH FMR AFFILIATES
State Street is transfer and shareholders' servicing agent for Class A
shares of the taxable funds. FIIOC is transfer and shareholders' servicing
agent for Class B and Institutional Class shares of the taxable funds. UMB
is the transfer and shareholders' servicing agent for Class A, Class B and
- 153 -
<PAGE>
Institutional Class shares of the tax-exempt funds. On behalf of Class A
shares of the tax-exempt funds, UMB has entered into sub-arrangements with
State Street pursuant to which State Street performs as transfer and
shareholders' servicing agent. State Street has further delegated certain
transfer and shareholders' services for Class A shares of the tax-exempt
funds to FIIOC. On behalf of Class B shares of tax-exempt funds and
Institutional Class of Limited Term Tax-Exempt, UMB has entered into
sub-arrangements with FIIOC pursuant to which FIIOC performs as transfer
and shareholders' servicing agent. For every account, Class A, Class B and
Institutional Class of each fund pay an annual fee and an asset-based fee
based on account size. The asset-based fees of the equity and growth and
income funds are subject to adjustment if the year-to-date total return of
the Standard & Poor's Composite Index of 500 Stocks is greater than
positive or negative 15%.
For accounts that State Street maintains on behalf of UMB, State
Street receives all such fees. For accounts that FIIOC maintains on behalf
of UMB or State Street, FIIOC receives all such fees. For accounts for
which FIIOC provides limited services, FIIOC receives a portion of related
account fees and asset-based fees, less applicable charges and expenses of
State Street for account maintenance and transactions.
State Street and FIIOC, as applicable, pay out-of-pocket expenses
associated with providing transfer agent services. In addition, FIIOC
bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements.
FSC performs the calculations necessary to determine NAV and dividends
for Class A, Class B, and Institutional Class of each taxable fund,
maintains each taxable fund's accounting records and administers each
taxable fund's securities lending program. UMB has sub-arrangements with
FSC pursuant to which FSC performs the calculations necessary to determine
the NAV and dividends for the Class A, Class B, and Institutional Class of
each tax-exempt fund, and maintains the accounting records for each
tax-exempt fund. The fee rates for pricing and bookkeeping services are
based on each fund's average net assets, specifically, 0.06% for the first
$500 million of average net assets and 0.03% for average net assets in
excess of $500 million. The fee is limited to a minimum of $45,000 and a
maximum of $750,000 per year. Pricing and bookkeeping fees, including
related out-of-pocket expenses, paid by the funds for the past three
fiscal years were as follows:
- 154 -
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
Fund
<S> <C> <C> <C>
Overseas $251,241 $ 57,711 $ 48,617
Equity Portfolio Growth $461,039 $234,813 $ 79,601
Global Resources $ 73,164 $ 45,425 $ 46,390
Growth Opportunities $758,343 $513,950 $236,689
Strategic Opportunities (10/1/94 - 12/31/94) $ 61,356 $145,494 $129,183
Strategic Opportunities (10/1/93 - 9/30/94) $215,648 $ N/A $ N/A
Equity Income $168,364 $113,026 $ 91,899
Income & Growth $750,743 $410,561 $148,775
Emerging Markets Income $ 36,412* $ N/A $ N/A
High Yield $223,567 $121,204 $ 46,036
Strategic Income $ 7,500* $ N/A $ N/A
Government Investment $ 46,218 $ 46,457 $ 45,676
Limited Term Bond $118,125 $ 81,106 $ 97,683
Short Fixed-Income $264,455 $143,813 $ 47,624
High Income Municipal $220,222 $157,559 $ 65,541
Limited Term Tax-Exempt $ 48,062 $ 45,724 $ 59,094
Short-Intermediate Tax-Exempt $ 31,953* $ N/A $ N/A
</TABLE>
* Emerging Markets Income, Strategic Income, and Short Intermediate
Tax-Exempt commenced operations on March 10, 1994, October 31, 1994, and
March 16, 1994, respectively.
FSC also receives fees for administering Limited Term Bond's
securities lending program. Securities lending fees are based on the
number and duration of individual securities loans. For the fiscal years
ended 1994, 1993, and 1992, Limited Term Bond incurred securities lending
fees of $0, $0, and $25, respectively.
For the tax-exempt funds, the transfer agent fees and charges, and
pricing and bookkeeping fees described above are paid to FIIOC and FSC,
respectively, by UMB, which is entitled to reimbursement from the fund for
these expenses.
Each fund has a Distribution Agreement with FDC, a Massachusetts
corporation organized July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of a fund, which are continuously offered.
- 155 -
<PAGE>
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each class of shares of the funds (the Plans) pursuant to Rule 12b-1
under the 1940 Act (the Rule). The Rule provides in substance that a
mutual fund may not engage directly or indirectly in financing any
activity that is primarily intended to result in the sale of shares of a
fund except pursuant to a plan approved on behalf of the fund under the
Rule. The Plans, as approved by the Trustees, allow Class A, Class B, and
Institutional Class shares of each fund and FMR to incur certain expenses
that might be considered to constitute direct or indirect payment by the
funds of distribution expenses.
Pursuant to the Class A Plans, FDC is paid a distribution fee as a
percentage of Class A's average net assets at an annual rate of up to
0.75% for Equity Portfolio Growth and Strategic Opportunities; up to 0.40%
for each of Emerging Markets Income, High Yield, Strategic Income, Limited
Term Bond, High Income Municipal, and Limited Term Tax-Exempt; up to
0.65% for each of Overseas, Growth Opportunities, Global Resources,
Equity Income, and Income & Growth; and up to 0.15% for Short
Fixed-Income and Short-Intermediate Tax-Exempt. Pursuant to the Class B
Plans, FDC is paid a distribution fee as a percentage of Class B's
average net assets at an annual rate of 0.75% for each fund with Class B
shares. For the purpose of calculating the distribution fees, average net
assets are determined as of the close of business on each day throughout
the month, but excluding assets attributable to Class A shares of Equity
Portfolio Growth, Equity Income, Emerging Markets Income, Strategic
Income, Strategic Opportunities, Short-Intermediate Tax-Exempt, Limited
Term Tax-Exempt, and Overseas purchased more than 144 months prior to such
day. Currently, the Trustees have approved a distribution fee for Class A
of Equity Portfolio Growth and Strategic Opportunities at an annual rate
of 0.65%; and for Class A of Emerging Markets Income, Government
Investment, High Yield, High Income Municipal, Limited Term Bond,
Limited Term Tax-Exempt, and Strategic Income at an annual rate of 0.25%.
This fee may be increased only when, in the opinion of the Trustees, it is
in the best interests of the shareholders of Class A to do so. Class B of
each fund also pays Investment Professionals a service fee at an annual
rate of 0.25% of its average daily net assets determined as of the close
of business on each day throughout the month for personal service and/or
the maintenance of shareholder accounts.
The tables below show the distribution fees paid for Class A shares
for the fiscal years ended 1994, 1993, and 1992, and for Class B shares
for the fiscal periods ended 1994. (Class B shares commenced operations on
July 1, 1994.)
- 156 -
<PAGE>
<TABLE>
<CAPTION>
CLASS A DISTRIBUTION FEES
1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paid to Paid to Paid to
Invest- Retained Investment Retained Investment Retained
Fund ment by FDC Total Profes- by FDC Total Profes- by FDC Total
Profes- Fees sionals Fees sionals Fees
sionals
Overseas 93,132 27,492 120,624 325,181 97,554 422,735 2,139,864 641,9582,781,822
Equity Portfolio 9,477 2,843 12,320 258,713 883,141 3,312,525 999,9874,312,512
Growth 1,141,854
Global 31,323 9,198 50,521 69,457 23,643 93,100 577,607 173,281 750,888
Resources
Growth 2,004,271 559,131 2,563,402 5,996,7701,799,7707,795,80016,056,714 4,817,01620,873,73
Opportunities 0
Strategic 993,375 273,263 1,266,638 1,092,965 330,4911,423,456 470,225 141,067 611,292
Opportunities
Equity Income 614 136 750 94,623 28,435 123,058 441,208 132,362 573,570
Income & Growth 314,5061,252,622 1,567,128 1,299,0264,330,092 13,406,000 3,203,00016,609,00
5,629,118 0
Emerging Markets N/A N/A N/A N/A N/A N/A 31,604 8,331 39,935
Income
High Yield 190,342 0 190,342 745,985 0 745,985 1,526,214 01,526,214
Strategic Income N/A N/A N/A N/A N/A N/A 1,626 488 2,144
Government 41,048 0 41,048 101,981 0 101,981 227,532 0 227,532
Investment
Limited Term 549 0 549 56,220 0 56,220 264,949 0 264,949
Bond
Short 117,265 0 117,265 538,933 0 538,933 1,212,008 01,212,008
Fixed-Income
High Income 41,048 0 41,048 101,981 0 101,981 1,374,438 01,374,438
Municipal
Limited Term 576 0 576 38,552 0 38,552 138,512 0 138,512
Tax-Exempt
Short-Inter- N/A N/A N/A N/A N/A N/A 11,446 0 11,446
mediate
Tax-Exempt
</TABLE>
<TABLE>
CLASS B DISTRIBUTION FEES 1994
<C> <C> <C>
Fund Shareholder Retained Total Fees
Service Fee by FDC
- 157 -
<PAGE>
Strategic 7,964 23,892 31,856
Opportunities
Equity Income 16,215 54,580 70,795
Emerging 3,215 9,771 12,986
Markets
Income
High Yield 7,052 21,157 28,209
Strategic 2,155 6,465 8,620
Income
Government 817 2,449 3,266
Investment
Limited Term 1,689 5,070 6,759
Bond
High Income 3,238 9,713 12,951
Municipal
Limited Term 965 2,893 3,858
Tax-Exempt
</TABLE>
Under each Plan, if the payment of management fees by the funds to FMR
is deemed to be indirect financing by the funds of the distribution of
their shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of the applicable class of each fund. In
addition, each Plan provides that FMR may use its resources, including its
management fee revenues, to make payments to third parties that assist in
selling shares of the applicable class of each fund or to third parties,
including banks that render shareholder support services. No third party
payments were made by FMR in fiscal 1994, 1993, and 1992 under the
Institutional Class Plan on behalf of the funds, and the Trustees have not
authorized such payments to date for any funds except Limited Term Bond,
Equity Income, and Equity Portfolio Growth.
Prior to approving each Plan , the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan , and have
determined that there is a reasonable likelihood that the Plan will
benefit the applicable class and its shareholders. In particular, the
Trustees noted that the Institutional Class Plans do not authorize
payments by the Institutional Class of each fund other than those made to
FMR under its management contract with the fund. To the extent that each
Plan gives FMR and FDC greater flexibility in connection with the
distribution of shares of the applicable class of each fund, additional
sales of fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by local
entities with whom shareholders have other relationships.
- 158 -
<PAGE>
The Class A and Class B Plans do not provide for specific payments by
the applicable class of any of the expenses of FDC, or obligate FDC or
FMR to perform any specific type or level of distribution activities or
incur any specific level of expense in connection with distribution
activities. After payments by FDC for advertising, marketing and
distribution, and payments to third parties, the amounts remaining, if
any, may be used as FDC may elect.
The Plans were approved by the shareholders of each class on the dates
shown in the table below:
<TABLE>
<CAPTION>
Date of Shareholder Approval
<S> <C> <C> <C>
Class A Class B
Fund Institutional
Overseas 10/90 05/26/94 ---
Equity Portfolio Growth 9/25/86 05/26/94 09/25/86
Global Resources 12/01/94 --- ---
Growth Opportunities 1/1/95 N/A ---
Strategic Opportunities 8/25/87 05/26/94 ---
Equity Income 7/23/86 05/26/94 07/23/86
Income & Growth 1/1/95 1/1/95 ---
Emerging Markets Income 2/10/94 N/A ---
High Yield 1/1/95 1/1/95 ---
Strategic Income 10/14/94 10/14/94 ---
Government Investment 1/1/95 1/1/95 12/23/87
Limited Term Bond 1/1/95 1/1/95 12/23/87
Short Fixed Income 1/1/95 1/1/95 ---
High Income Municipal 12/1/94 12/1/94 ---
Limited Term Tax-Exempt 11/5/86 5/26/94 10/21/87
Short-Intermediate Tax-Exempt 11/26/86 11/26/86 ---
</TABLE>
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
- 159 -
<PAGE>
continue to provide efficient and effective shareholder services. In such
event, changes in the operation of the funds might occur, including
possible termination of any automatic investment or redemption or other
services then provided by the bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of
these occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks
and other financial institutions may be required to register as dealers
pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments under
the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
Trust Organization. Equity Portfolio Growth is a series of Fidelity
Advisor Series I, an open-end management investment company organized as
a Massachusetts business trust by a Declaration of Trust dated June 24,
1983, as amended and restated July 18, 1991, and as supplemented April 15,
1993. On July 18, 1991, the name was changed from Equity Portfolio Growth
to Fidelity Broad Street Trust. On April 15, 1993, its name was changed by
an amendment to the Declaration of Trust from Fidelity Broad Street Trust:
Equity Portfolio: Growth to Fidelity Advisor Series I: Equity Portfolio
Growth.
Short-Fixed Income Fund, Government Investment Fund, High Yield Fund,
Growth Opportunities Fund, and Income & Growth Fund are series of Fidelity
Advisor Series II, an open-end management investment company organized as
a Massachusetts business trust by a Declaration of Trust dated April 24,
1986. On April 7, 1993, the Board of Trustees voted to change the name of
the Trust from Fidelity Diversified Trust to Fidelity Advisor Series II.
Equity Income Fund is a series of Fidelity Advisor Series III, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated May 17, 1982. On January
29, 1986, the name was changed from Equity Portfolio: Income to Fidelity
Franklin Street Trust. On April 15, 1993 the Trust's name was again
changed to Fidelity Advisor Series III.
Limited Term Bond Fund is a series of Fidelity Advisor Series IV, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated May 6, 1983. On January 29,
1992 the name of the Trust was changed from Income Portfolios to Fidelity
Income Trust, and on April 15, 1993, the Board of Trustees voted to change
the Trust's name to Fidelity Advisor Series IV.
- 160 -
<PAGE>
Global Resources Fund and High Income Municipal Fund are series of
Fidelity Advisor Series V, an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust
dated April 23, 1986, as amended and restated July 18, 1991, and as
supplemented April 15, 1993. On July 18, 1991, the Board of Trustees voted
to change the name of the Trust from Plymouth Investment Series to
Fidelity Investment Series, and on April 15, 1993, the Board voted to
change the Trust's name to Fidelity Advisor Series V. An amended and
restated Declaration of Trust dated March 16, 1995 was filed on
_______________.
Short-Intermediate Tax-Exempt Fund and Limited Term Tax-Exempt Fund
are series of Fidelity Advisor Series VI, an open-end management
investment company organized as a Massachusetts business trust by a
Declaration of Trust dated June 1, 1983, as amended and restated May 5,
1993. On January 29, 1992, the name of the Trust was changed from
Tax-Exempt Funds to Fidelity Oliver Street Trust and on April 15, 1993 the
Board of Trustees voted to change the name of the Trust to Fidelity
Advisor Series VI.
Overseas Fund is a series of Fidelity Advisor Series VII, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated March 21, 1980 as amended
and restated July 18, 1991 and as supplemented April 15, 1993. On July 18,
1991, the Board of Trustees voted to change the name of the Trust from
Plymouth Securities Trust from Plymouth Investment Series to Fidelity
Securities Trust, and on April 15, 1993 the Board of Trustees voted to
change the name of the Trust to Advisor Series VII.
Strategic Opportunities Fund, Strategic Income Fund, and Emerging
Markets Income Fund are series of Fidelity Advisor Series VIII, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated September 23, 1983, as
amended and restated October 1, 1986 and as supplemented November 29,
1990. On April 15, 1993 the name of the Trust was changed from Fidelity
Special Situations Fund to Fidelity Advisor Series VIII.
Each Declaration of Trust permits the Trustees to create additional
funds.
In the event that FMR ceases to be the investment adviser to a fund,
the right of the Trust or fund to use the identifying name "Fidelity" may
be withdrawn.
The assets of a Trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
- 161 -
<PAGE>
the general expenses of the Trust. Expenses with respect to the Trust are
to be allocated in proportion to the asset value of the respective fund,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In
the event of the dissolution or liquidation of the Trust, shareholders of
each fund are entitled to receive as a class the underlying assets of
such fund available for distribution.
Shareholder and Trustee Liability. Each Trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the Trust shall not have any claim against
shareholders except for the payment of the purchase price of shares and
requires that each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees include a provision limiting the
obligations created thereby to the Trust and its assets. The Declaration
of Trust provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the fund itself would be
unable to meet its obligations. FMR believes that, in view of the above,
the risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties in the conduct of their office. Claims asserted against
one class of shares may subject the shareholders of any other class to
certain liabilities.
Voting Rights. A fund's capital consists of shares of beneficial
interest. The shares have no preemptive rights, and Class A and
Institutional Class shares have no conversion rights; the voting and
dividend rights, the conversion rights of Class B shares, the right of
redemption, and the privilege of exchange are described in the
Prospectuses. Shareholders of Global Resources, Growth Opportunities,
Equity Income, Income & Growth, High Yield, High Income Municipal,
Government Investment, Limited Term Bond, Limited Term Tax-Exempt, Short
Fixed-Income, and Short-Intermediate Tax-Exempt receive one vote for each
dollar of net asset value owned. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of a Trust, a fund, or class
of a fund may, as set forth in the Declaration of Trust, call meetings of
- 162 -
<PAGE>
the Trust, fund or class, as applicable, for any purpose, related to the
Trust, fund, or class, as the case may be, including the case of meeting
of the Trust, the purpose of voting on removal of one or more Trustees.
The Trust or any fund may be terminated upon the sale of its assets to
another open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the outstanding shares of the funds of Advisor Series I, III,
VI, VII, and VIII, or, as determined by the current value of each
shareholder's investment in the funds of Advisor Series II, IV, and V. If
not so terminated, the Trust and funds will continue indefinitely. Global
Resources, Strategic Opportunities, High Yield, Government Investment,
Limited Term Bond, Short Fixed-Income, and High Income Municipal may
invest all of their assets in another investment company.
As of _______ __, 1995, the following owned of record or beneficially
more than 5% of the outstanding shares of the classes of the following
Fidelity Advisor funds:
[To be provided by subsequent amendment]
Custodians. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of Global Resources, Growth
Opportunities, and Strategic Opportunities. The Chase Manhattan Bank,
N.A., 1211 Avenue of the Americas, New York, New York, is custodian of the
assets of Overseas, Equity Portfolio Growth, Equity Income, Income &
Growth, and Emerging Markets Income. The Bank of New York, 110 Washington
Street, New York, New York, is custodian of the assets of High Yield,
Strategic Income, Government Investment, Limited Term Bond, and Short
Fixed Income. United Missouri Bank, 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of High Income Municipal, Limited
Term Tax-Exempt, and Short-Intermediate Tax-Exempt. The custodian is
responsible for the safekeeping of the fund's assets and the appointment
of subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of the fund or in deciding which
securities are purchased or sold by a fund. A fund may, however, invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the
Trust's Trustees may from time to time have transactions with various
banks, including banks serving as custodians for certain of the funds
advised by FMR. The Boston branch of the custodian bank of Global
Resources, Growth Opportunities, and Strategic Opportunities leases its
office space from an affiliate of FMR at a lease payment which, when
entered into, was consistent with prevailing market rates. Transactions
that have occurred to date have included mortgages and personal and
general business loans. In the judgment of FMR, the terms and conditions
- 163 -
<PAGE>
of those transactions were not influenced by existing or potential
custodial or other fund relationships.
Auditor. ________________________, serves as the independent
accountant for Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt.
____________________, serves as the independent accountant for Overseas.
The auditor examines financial statements for each fund and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal period ended October 31, November 30, or December 31, 1994, as
appropriate, are included in the Annual Reports, which are separate
reports supplied with this SAI. Each fund's financial statements and
financial highlights are incorporated herein by reference.
APPENDIX
Dollar-weighted average maturity is derived by multiplying the value
of each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of a fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call,
refunding, or redemption provision, the date on which the instrument will
probably be called, refunded, or redeemed may be considered to be its
maturity date. Also, the maturities of mortgage-backed securities and
some asset-backed securities, such as collateralized mortgage
obligations, are determined on a weighted average life basis, which is the
average time for principal to be repaid. For a mortgage security, this
average time is calculated by estimating the expected principal payments
during the life of the mortgage. The weighted average life of these
securities is likely to be substantially shorter than their stated final
maturity.
- 164 -
<PAGE>
FIDELITY ADVISOR INSTITUTIONAL CLASS PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. *
3 a .............................. Expenses
b .............................. Financial Highlights
c .............................. Performance
d .............................. Cover Page
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; Charter
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. FMR and Its Affiliates
d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates; Breakdown of Expenses
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions
iii.......................... *
b ............................. FMR and Its Affiliates
c .............................. Charter
d .............................. Cover Page; Charter
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. Transaction Details; Breakdown of Expenses
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY ADVISOR FUNDS
INSTITUTIONAL CLASS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
the applicable fund's most recent financial report and portfolio listing or
a copy of the Statement of Additional Information (SAI) dated June 30,
1995. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy of either document, contact
Fidelity Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA
02109, or your Investment Professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
EMERGING MARKETS INCOME, HIGH YIELD, STRATEGIC INCOME, AND HIGH INCOME
MUNICIPAL INVEST WITHOUT LIMITATION IN LOWER-QUALITY DEBT SECURITIES,
SOMETIMES CALLED "JUNK BONDS." INVESTORS SHOULD CONSIDER THAT THESE
SECURITIES CARRY GREATER RISKS, SUCH AS THE RISK OF DEFAULT, THAN OTHER
DEBT SECURITIES. REFER TO "INVESTMENT PRINCIPLES AND RISKS" ON PAGE __ FOR
FURTHER INFORMATION.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
GROWTH FUNDS:
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS:
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
TAXABLE-INCOME FUNDS :
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT/MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
PROSPECTUS
JUNE 30, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Institutional Class's yearly operating
expenses.
8 FINANCIAL HIGHLIGHTS A summary of each fund's
financial data.
PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL CHARTER How each fund is organized.
18 INVESTMENT PRINCIPLES AND RISKS Each fund's
overall approach to investing.
BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.
YOUR ACCOUNT 48 TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
HOW TO BUY SHARES Opening an account and
making additional investments.
HOW TO SELL SHARES Taking money out and closing
your account.
INVESTOR SERVICES Services to help you manage
your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
APPENDIX
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to (i) bank trust departments
and other trust institutions, (ii) accounts managed by a broker-dealer,
(iii) accounts managed by a registered investment advisor (RIA) and (iv)
insurance company general accounts. Shares are available only to entities
that have signed a Participation Agreement with Fidelity Institutional
Services Company (FIIS). The Participation Agreement specifies certain
asset minimums, asset qualifications, trading guidelines and marketing
program restrictions.
Shares of Equity Income, Equity Portfolio Growth, Limited Term Bond and
Limited Term Tax-Exempt are also offered to any investor who purchased
shares prior to June 30, 1995.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, Income & Growth, High Yield,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal and Limited Term Tax-Exempt are diversified funds.
Emerging Markets Income, Strategic Income, and Short-Intermediate
Tax-Exempt are non-diversified funds. Non-diversified funds may invest a
greater portion of their assets in securities of a single issuer than
diversified funds. As a result, changes in the financial condition or
market assessment of a single issuer could cause greater fluctuations in
share value than a diversified fund.
Overseas, Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income and Income &
Growth are designed for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns.
Overseas, Equity Portfolio Growth, Global Resources, Growth
Opportunities and Strategic Opportunities are designed for
investors who want to be invested in the stock market for its long-term
growth potential. These funds invest for growth and do not pursue
income. Equity Income and Income & Growth are designed for
those investors who seek a combination of growth and income from
equity and some bond investments.
Emerging Markets Income, High Yield, and Strategic Income are designed
for investors who want high current income with some potential for capital
growth from a portfolio of debt instruments with a focus on lower-quality
debt securities and income-producing equity securities. These funds may be
appropriate for long-term, aggressive investors who understand the
potential risks and rewards of investing in lower-quality debt securities,
including defaulted securities.
Government Investment, Limited Term Bond and Short Fixed-Income are
designed for investors who seek high current income from a portfolio of
investment-grade debt securities. These funds also invest consistent with
consideration of capital preservation.
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt are designed for investors in higher tax brackets who seek high
current income that is free from federal income tax. Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt also invest consistent with
consideration of capital preservation. High Income Municipal focuses on
lower-quality debt securities and may be appropriate for long-term,
aggressive investors who understand the potential risks and rewards of
investing in lower-quality debt securities, including defaulted
securities.
The value of each fund's investments and, as applicable, the income they
generate, varies from day to day, generally reflecting changes in
market conditions, interest rates and other company, political, and
economic news. In the short-term, stock prices can fluctuate
dramatically in response to these factors. The securities of small, less
well-known companies may be more volatile than those of larger companies.
The value of bonds fluctuates based on changes in interest rates and in the
credit quality of the issuer. Over time, however, stocks, although more
volatile, have shown greater growth potential than other types of
securities. Investments in foreign securities may involve risks in
addition to those of U.S. investments, including increased political and
economic risk, as well as exposure to currency fluctuations .
The investments of Strategic Income, Government Investment , Limited
Term Bond, and Short Fixed-Income are also subject to prepayments,
which can lower a fund's yield, particularly in periods of declining
interest rates.
In addition, Overseas, Global Resources, Emerging Markets Income and
Strategic Income may also be appropriate for investors who want to pursue
their investment goals in markets outside of the United States. By
including international investments in your portfolio, you can achieve an
extra level of diversification and also participate in opportunities around
the world. However, there are additional risks involved with international
investing. The performance of international funds depends upon currency
values, the political and regulatory environment, and overall economic
factors in the countries in which a fund invests. These risks may be more
significant for those funds that focus on emerging markets.
Each fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
Maximum sales charge on purchases and None
reinvested distributions
Maximum deferred sales None
charge on redemptions
Redemption fee None
Exchange fee None
Annual account maintenance fee $12.0
(for accounts under $2,500) 0
EXPENSE TABLE EXAMPLE: You would pay the following expenses (see table
on page 5) on a $1,000 investment in Institutional Class shares
assuming a 5% annual return and full redemption, at the end of each time
period.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
ANNUAL OPERATING EXPENSES are paid out of Institutional Class assets. Each
fund pays a management fee to Fidelity Management & Research Company
(FMR) that, for Overseas, Growth Opportunities and Strategic
Opportunities, varies based on performance , and incurs other expenses
for services such as maintaining shareholder records and furnishing
shareholder statements and financial reports.
Institutional Class expenses are factored into its share price or dividends
and are not charged directly to shareholder accounts (see "Breakdown of
Expenses") on page 26).
The following table shows projections based on estimated or historical
expenses of the Institutional class of each fund and are calculated as a
percentage of average net assets of each fund. .
Operating Expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OVERSEAS* Management fee 0.80% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
EQUITY PORTFOLIO GROWTH Management fee (after 0.62% After 1 $8
reimbursement) year
12b-1 fee (Distribution None After 3 $26
fee) years
Other expenses 0.20% After 5 $45
A years
Total operating expenses 0.82% After 10 $101
years
GLOBAL RESOURCES* Management fee 0.77% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
GROWTH OPPORTUNITIES* Management fee 0.69% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
STRATEGIC OPPORTUNITIES* Management fee 0.67% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
EQUITY INCOME Management fee 0.50% After 1 $7
year
12b-1 fee (Distribution None After 3 $23
fee) years
Other expenses 0.21% After 5 $40
A years
Total operating expenses 0.71% After 10 $88
years
INCOME & GROWTH* Management fee 0.52% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
</TABLE>
A A PORTION OF THE BROKERAGE COMMISSIONS THAT EACH FUND PAID WAS
USED TO REDUCE OTHER EXPENSES. WITHOUT THIS REDUCTION, OTHER EXPENSES
WOULD HAVE BEEN ___% (EQUITY PORTFOLIO GROWTH) AND 0.23% (EQUITY
INCOME).
* ESTIMATED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EMERGING MARKETS INCOME* Management fee 0.70% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
HIGH YIELD* Management fee 0.60% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
STRATEGIC INCOME* Management fee 0.61% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
GOVERNMENT INVESTMENT* Management fee 0.46% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
LIMITED TERM BOND Management fee 0.41% After 1 $6
year
12b-1 fee (Distribution None After 3 $20
fee) years
Other expenses 0.20% After 5 $34
years
Total operating expenses 0.61% After 10 $76
years
SHORT FIXED INCOME* Management fee 0.46% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
HIGH INCOME MUNICIPAL* Management fee 0.41% After 1
year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
</TABLE>
* ESTIMATED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIMITED TERM TAX-EXEMPT Management fee 0.41% After 1 $7
year
12b-1 fee (Distribution None After 3 $21
fee) years
Other expenses (after 0.24% After 5 $36
reimbursement) years
Total operating expenses 0.65% After 10 $81
years
SHORT-INTERMEDIATE Management fee 0.41% After 1
TAX-EXEMPT* year
12b-1 fee (Distribution none After 3
fee) years
Other expenses After 5
years
Total operating expenses After 10
years
</TABLE>
* ESTIMATED
FMR has voluntarily agreed to reimburse the Institutional Class of
Limited Term Bond and Limited Term Tax-Exempt to the extent that total
operating expenses are in excess of an annual rate of 0.65% of its average
net assets. If this agreement were not in effect, Limited Term
Tax-Exempt's other expenses and total operating expenses of
Institutional class shares would have been 0.35% and 0.76%
respectively . Total operating expenses for Limited Term Bond were
less than the percentage noted above for the fiscal period ended November
30, 1994. Interest, taxes, brokerage commissions, or extraordinary
expenses are not included in this expense limitation.
Effective August 1, 1994, FMR voluntarily agreed to implement a
management fee reduction for Equity Portfolio Growth. The individual fund
fee rate was reduced from 0.33% to 0.30%. If this agreement was not in
effect, the management fee would have been ___% of average net assets.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow and each fund's financial
statements are included in each fund's Annual Report. The annual
information has been audited by each fund's independent accountants. Their
reports on the financial statements and financial highlights are included
in each Annual Report. The financial statements, the financial highlights,
and the reports are incorporated by reference into the funds' SAI, which
may be obtained free of charge from FDC or your Investment
Professional .
OVERSEAS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1.Selected Per-Share
Data and Ratios 2. 3. 4.Class 5.
A
6.Years ended October 31 1990 1991 1992 1993 1994
7.Net asset value, beginning of
period $ 10.00 $ 9.55 $ 9.78 $ 9.07 $ 12.93
8.Income from Investment Operations
9. Net investment income .05 .14 .05 .03 .01
10. Net realized and unrealized gain
(loss) on investments (.50) .17 (.62) 3.93 1.14
11. Total from investment
operations (.45) .31 (.57) 3.96 1.15
12.Less Distributions
13. From net investment income -- (.07) (.14) (.07) --
14. From net realized gain -- (.01)E -- (.03)E (.02)
15. Total distributions -- (.08) (.14) (.10) (.02)
16.Net asset value, end of period $ 9.55 $ 9.78 $ 9.07 $ 12.93 $ 14.06
17.Total returnC (4.50)%D 3.25% (5.88)% 44.13% 8.91%
18.Net assets, end of period
(000 omitted) $ 18,161 $ 19,091 $ 18,652 $ 221,37 $ 653,77
0 4
19.Ratio of expenses to
average net assets 3.07% A,F 2.85% 2.64% 2.38% 2.12%
20.Ratio of net investment
income to average net assets 1.45%A 1.48% .48% (.18)% .05%
21.Portfolio turnover rate 137%A 226% 168% 42% 34%
</TABLE>
EQUITY PORTFOLIO GROWTH
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
22.Selected Institutional Class A
Per-Share Data Class
and Ratios
23.Years ended
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992C 1993 1994
November 30
24.Net asset
$ 8.03 $ 11.09 $ 13.18 $ 9.92 $ 12.02 $ 17.32 $ 15.55 $ 24.28 $ 26.37 $ 29.74 $ 23.78 $ 26.33 $ 29.50
value, beginning
of period
25.Income from
Investment
Operations
26. Net
.01 .03 .00D .28G .06 .01 .04 .17D .19D .30 .01D (.07)D .08
investment
income
27. Net
3.05 2.41 (2.03) 2.59 5.50 .34 8.69 4.55 3.78 .42 2.54 3.82 .39
realized and
unrealized gain
(loss) on
investments
28. Total from
3.06 2.44 (2.03) 2.87 5.56 .35 8.73 4.72 3.97 .72 2.55 3.75 .47
investment
operations
29.Less
Distributions
30. From net
- -- (.02) (.01) (.01) (.26) (.08) -- (.03) (.10) (.11) -- (.08) --
investment
income
31. From net
- -- (.33) (1.22) (.76) -- (2.04) -- (2.60) (.50) (1.45) -- (.50) (1.45)
realized gain
32. Total
- -- (.35) (1.23) (.77) (.26) (2.12) -- (2.63) (.60) (1.56) -- (.58) (1.45)
distributions
33.Net asset
$ 11.09 $ 13.18 $ 9.92 $ 12.02 $ 17.32 $ 15.55 $ 24.28 $ 26.37 $ 29.74 $ 28.90 $ 26.33 $ 29.50 $ 28.52
value, end of
period
34.Total
38.11% 22.55% (17.12) 29.77% 47.18% 2.75% 56.14% 21.14% 15.36% 2.46% 10.72% 14.52% 1.58%
return E,F %
35.Net assets,
$ 23,44 $ 63,60 $ 43,53 $ 20,18 $ 24,52 $ 27,47 $ 68,76 $ 179,3 $ 296,4 $ 410,45 $ 22,65 $ 377,8 $ 874,17
end of period
7 7 7 2 3 3 6 25 66 0 5 94 2
(000 omitted)
36.Ratio of
1.50%I 1.07% 1.11% 1.47% 1.60% 1.74% 1.13% .98% .94%H .84%H 1.47%A 1.84%H 1.70%H
expenses to
average net
assets
37.Ratio of
1.50%I 1.07% 1.11% 1.47% 1.60% 1.74% 1.13% .98% .95%H .86%H 1.47%A 1.85%H 1.71%H
expenses to
average net
assets before
expense
reductions
38.Ratio of net
.43% .29% -- 1.20% .38% .07% .25% .73% .66% 1.00% .25%A (.24)% .15%
investment
income
to average net
assets
39.Portfolio
108% 115% 226% 331% 269% 262% 254% 240% 160% 137% 240% 160% 137%
turnover
</TABLE>
A 1.ANNUALIZED.
B 2.APRIL 23, 1990 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1990.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
E INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY
RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
F EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE LIMITATION.
GLOBAL RESOURCES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
3.Selected Per-Share Data and Ratios 4. 5. 6. 7.Class 8. 9.
A
10.Years ended October 31 1988B 1989 1990 1991K 1992 1993 1994D
11.Net asset value, beginning of period $ 10.00 $ 11.47 $ 12.60 $ 12.30 $ 14.11 $ 13.88 $ 17.59
12.Income from Investment Operations
13. Net investment income (.05) .10J (.10) (.15) (.10) .22 (.11)
14. Net realized and unrealized gain (loss) on 1.52 1.96 .93 2.45 .79 4.91 .76
investments
15. Total from investment operations 1.47 2.06 .83 2.30 .69 5.13 .65
16.Less Distributions
17. From net investment income -- -- (.08) -- -- -- --
18. From net realized gain -- (.93) (1.05) (.49) (.92) (1.42) (.68)
19. Total distributions -- (.93) (1.13) (.49) (.92) (1.42) (.68)
20.Net asset value, end of period $ 11.47 $ 12.60 $ 12.30 $ 14.11 $ 13.88 $ 17.59 $ 17.56
21.Total returnE,F 14.70% 19.63% 6.37% 19.50% 5.97% 41.05% 3.97%
22.Net assets, end of period (000 omitted) $ 916 $ 2,049 $ 4,615 $ 5,940 $ 7,087 $ 40,309 $ 199,36
23.Ratio of expenses to average net assets 2.85% 3.23% 3.34%I 3.35%I 3.27%I 2.62%H 2.07%H
24.Ratio of expenses to average net assets before 2.85% 3.23% 3.34%I 3.35%I 3.94%I 2.63%H 2.10%H
expense reductions
25.Ratio of net investment income to average net assets (.64)% .83% (1.13)% (1.28)% (1.22)% (1.18)% (.67)%
26.Portfolio turnover rate 220% 249% 229% 256% 248% 208% 125%
</TABLE>
A ANNUALIZED
B DECEMBER 29, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G DURING THE PERIOD A SHAREHOLDER REDEEMED A SIGNIFICANT PORTION OF THE
ASSETS OF THE FUND. DUE TO THE TIMING OF THIS TRANSACTION, THE FUND
EXPERIENCED AN UNUSUALLY HIGH LEVEL OF INVESTMENT INCOME PER SHARE.
H FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
I EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
J NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.17 PER SHARE.
K AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
GROWTH OPPORTUNITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
27.Selected Per-Share Data and Ratios Class A
28.Years ended October 31 1988B. 1989 1990 1991 1992 1993 1994
29.Net asset value, beginning of period $ 10.00 $ 14.27 $ 16.53 $ 12.99 $ 20.58 $ 21.14 $ 25.39
30.Income from Investment Operations
31. Net investment income .05 .02 .18D .06 .14 .08 .22
32. Net realized and unrealized gain (loss) on 4.22 3.03 (2.50) 7.70 2.04 5.56 1.92
investments
33. Total from investment operations 4.27 3.05 (2.32) 7.76 2.18 5.64 2.14
34.Less Distributions
35. From net investment income -- (.03) (.05) (.17) (.09) (.13) (.07)
36. From net realized gain -- (.76) (1.17) -- (1.53) (1.26) (.84)
37. Total distributions -- (.79) (1.22) (.17) (1.62) (1.39) (.91)
38.Net asset value, end of period $ 14.27 $ 16.53 $ 12.99 $ 20.58 $ 21.14 $ 25.39 $ 26.62
39.Total returnF,G 42.70% 22.69% (15.05) 60.25% 12.09% 28.11% 8.71%
%
40.Net assets, end of period (000 omitted) $ 8,097 $ 34,351 $ 51,122 $ 213,09 $ 580,59 $ 2,054,9 $ 4,598,6
5 5 88 68
41.Ratio of expenses to average net assets 2.52%A,I 2.45% 2.00% 1.73% 1.60% 1.64%E 1.62%E
42.Ratio of expenses to average net assets before 2.52%A,I 2.45% 2.00% 1.73% 1.60% 1.65%E 1.63%E
expense reductions
43.Ratio of net investment income to average net assets .82%A .31% 1.49% .47% .80% .43% 1.12%
44.Portfolio turnover rate 143%A 163% 136% 142% 94% 69% 43%
</TABLE>
STRATEGIC OPPORTUNITIES - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45.Selected Per-Share Data and
Ratios
46.Years ended September
30 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994C 1994
47.Net asset value, beginning
of $ 11.05 $ 12.70 $ 16.71 $ 19.13 $ 15.65 $ 19.77 $ 17.37 $ 21.55 $ 19.72 $ 22.72 $ 20.23
period
48.Income from Investment
Operations
49. Net investment
income .35 .36 .53 .48 .64 .80 .77 .73 .45 .54 .13J
50. Net realized and
unrealized 1.56 5.05 2.95 (1.80) 4.08 (2.49) 4.26 .58 4.46 (.81) (.74)
gain (loss) on investments
51. Total from
investment 1.91 5.41 3.48 (1.32) 4.72 (1.69) 5.03 1.31 4.91 (.27) (.61)
operations
52.Less Distributions
53. From net
investment income (.06) (.24) (.09) (.25) (.60) (.71) (.85) (.72) (.70) (.51) (.50)
54. From net
realized gain (.20) (1.16) (.97) (1.91) - - - (2.42) (1.21) (1.71) (.26)
55. Total
distributions (.26) (1.40) (1.06) (2.16) (.60) (.71) (.85) (3.14) (1.91) (2.22) (.76)
56.Net asset value,
end of period $ 12.70 $ 16.71 $ 19.13 $ 15.65 $ 19.77 $ 17.37 $ 21.55 $ 19.72 $ 22.72 $ 20.23 $ 18.86
57.Total returnF,G 17.64% 46.10 21.87 (4.63) 31.19 (8.96) 30.01 7.89% 26.98 (1.51)% (3.02)
% % % % % % % %
58.Net assets, end
of period (000 $ 13,60 $ 31,99 $ 27,80 $ 19,22 $ 19,78 $ 15,98 $ 19,19 $ 17,93 $ 20,70 $ 18,850 $ 17,58
omitted) 2 1 9 1 0 8 3 3 7 3
59.Ratio of expenses
to average 1.50%K 1.50%K 1.30%K 1.49%K .64%L 1.03% 1.00% .87% .89%M 1.14%E 1.11%A,E
net assets
60.Ratio of expenses
to average 1.50%K 1.50%K 1.30%K 1.49%K 1.04% 1.03% 1.00% .87% 1.05% 1.15%E 1.14%A,E
net assets before expense
reductions
61.Ratio of net
investment income 2.87% 2.40% 2.88% 3.31% 4.08% 4.21% 4.12% 3.78% 2.74% 2.60% 2.65%A
to average net assets
62.Portfolio turnover214% 225% 255% 160% 89% 114% 223% 211% 183% 159% 228%A
</TABLE>
A ANNUALIZED.
B NOVEMBER 18, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
D NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.09 PER SHARE.
E FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
F TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
G THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
H AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
I EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
K EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. IN
ADDITION, DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987 FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
L INCLUDES REIMBURSEMENT OF $.08 PER SHARE FROM FIDELITY SERVICE COMPANY
FOR ADJUSTMENTS TO PRIOR PERIODS FEES.
M INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES.
STRATEGIC OPPORTUNITIES
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
63.Selected Per-Share
Class A Class B
Data and ratios
64.Years ended
1986B 1987 1988 1989 1990 1991 1992I 1993 1994 1994E 1994D 1994E
September 30
65.Net asset value,
$ 17.81 $ 16.71 $ 19.06 $ 15.53 $ 19.55 $ 17.21 $ 21.38 $ 19.53 $ 22.52 $ 19.96 $ 19.65 $ 19.98
beginning of period
66.Income from
Investment Operations
67. Net investment
.08J .46 .42 .50 .70 .66 .61 .33 .39P .10P .05P .06P
income
68. Net realized and
(1.18) 2.95 (1.80) 4.08 (2.49) 4.26 .58 4.44 (.81) (.75) .28 (.74)
unrealized gain (loss)
on investments
69. Total from
(1.10) 3.41 (1.38) 4.58 (1.79) 4.92 1.19 4.77 (.42) (.65) .33 (.68)
investment operations
70.Less Distributions
71. From net
- -- (.09) (.24) (.56) (.55) (.75) (.62) (.57) (.43) (.35) -- (.47)
investment income
72. From net realized
- -- (.97) (1.91) -- -- -- (2.42) (1.21) (1.71) (.26) -- (.26)
gain
73. Total distributions
- -- (1.06) (2.15) (.56) (.55) (.75) (3.04) (1.78) (2.14) (.61) -- (.73)
74.Net asset value, end
$ 16.71 $ 19.06 $ 15.53 $ 19.55 $ 17.21 $ 21.38 $ 19.53 $ 22.52 $ 19.96 $ 18.70 $ 19.98 $ 18.57
of period
75.Total returnG,H
(6.23) 21.28% (4.98) 30.45% (9.49) 29.51% 7.26% 26.33% (2.24)% (3.26)% 1.68% (3.41)%
% % %
76.Net assets, end of
$ 22,14 $ 283,1 $ 191,4 $ 198,1 $ 172,0 $ 199,6 $ 194,7 $ 269,8 $ 385,34 $ 375,69 $ 8,824 $ 17,090
period (000 omitted)
1 17 54 74 86 04 10 83 9 1
77.Ratio of expenses to
1.50%A,K 1.67%K 1.71% 1.51% 1.59% 1.56% 1.46% 1.57%L 1.84% 1.73%A,F,Q 2.63%A,F 2.53%A,F
average net assets
78.Ratio of expenses to
1.50%A,K 1.67%K 1.71% 1.51% 1.59% 1.56% 1.46% 1.73% 1.85% 1.84%A,F,Q 2.84%A,F 2.58%A,F
average net assets
before expense
reductions
79.Ratio of net
2.77%A 2.36% 3.10% 3.23% 3.70% 3.61% 3.22% 2.06% 1.89% 2.03%A 1.11%A 1.22%A
investment income to
average net assets
80.Portfolio turnover
- -- 225% 160% 89% 114% 223% 211% 183% 159% 228%A 159% 228%A
</TABLE>
EQUITY INCOME
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
81.Select Institutional Class Class B
ed Class A
Per-Share
Data and
Ratios
Years
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992C 1993 1994 1994D
ended
November
30
82.Net
$ 10.24 $ 11.95 $ 13.54 $ 10.93 $ 11.10 $ 12.27 $ 9.52 $ 11.08 $ 12.88 $ 14.93 $ 12.37 $ 12.86 $ 14.86 $ 15.21
asset
value,
beginning
of period
83.Incom
e from
Investmen
t
Operation
s
84. Net
.79 .78 .76 .75 .75 .69 .63O .49 .39 .41P .13 .33 .28P .08P
investmen
t income
85. Net
1.69 1.92 (1.53) 1.81 1.17 (2.42) 1.52 1.79 2.02 1.05 .47 1.97 1.03 .72
realized
and
unrealized
gain
(loss) on
investmen
ts
86. Total
2.48 2.70 (.77) 2.56 1.92 (1.73) 2.15 2.28 2.41 1.46 .60 2.30 1.31 .80
from
investmen
t
operations
87.Less
Distributio
ns
88. From
(.77) (.77) (.70) (.74) (.75) (.72) (.59) (.48) (.36) (.32) (.11) (.30) (.21) (.07)
net
investmen
t income
89. From
- -- (.34) (1.14) (1.65) -- (.30) -- -- -- -- -- -- -- --
net
realized
gain
90. Total
(.77) (1.11) (1.84) (2.39) (.75) (1.02) (.59) (.48) (.36) (.32) (.11) (.30) (.21) (.07)
distributio
ns
91.Net
$ 11.95 $ 13.54 $ 10.93 $ 11.10 $ 12.27 $ 9.52 $ 11.08 $ 12.88 $ 14.93 $ 16.07 $ 12.86 $ 14.86 $ 15.96 $ 15.94
asset
value, end
of period
92.Total
24.86 23.48 (7.28) 26.99 17.58 (14.90) 22.97 20.91 18.90 9.82% 4.88% 18.03 8.84% 5.25%
returnG,H
% % % % % % % % % %
93.Net
$ 349,2 $ 544,2 $ 443,6 $ 436,7 $ 463,6 $ 253,0 $ 168,5 $ 139,3 $ 191,1 $ 197,5 $ 1,462 $ 42,32 $ 179,5 $ 35,37
assets,
62 69 03 53 96 49 90 91 38 33 6 01 3
end of
period
(000
omitted)
94.Ratio
.63% .61% .54%N .55%N .55%N .61%N .67%N .71%N .79%F .71%F 1.55%A 1.77% 1.64%F 2.18%A,F
of
expenses
to
average
net assets
95.Ratio
.63% .61% .61%N .65%N .65%N .71%N .77%N .79%N .80%F .73%F 1.55%A 1.77% 1.67%F 2.24%A,F
of
expenses
to
average
net assets
before
expense
reductions
96.Ratio
7.36% 6.06% 5.58% 6.86% 6.09% 6.11% 5.66% 3.77% 3.00% 2.62% 3.39%A 2.02% 1.69% 1.15%A
of net
investmen
t income
to
average
net assets
97.Portfol
110%M 107% 137% 78% 93% 103% 91% 51% 120% 140% 51% 120% 140% 140%
io
turnover
</TABLE>
A ANNUALIZED.
B AUGUST 20, 1986 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1986.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
F FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
G TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
H THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD FMR NOT REIMBURSED CERTAIN
EXPENSES DURING THE PERIODS SHOWN.
I AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE AT THE END OF THE PERIOD LESS
THE AMOUNT OF UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE OF THE FUND AT
AUGUST 20, 1986.
K EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. IN
ADDITION, DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987 FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
L INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES
M IN JULY 1985, THE SEC ADOPTED REVISIONS TO EXISTING RULES WITH RESPECT TO
THE CALCULATION OF THE PORTFOLIO TURNOVER RATE. THE REVISED RULES REQUIRE
THE INCLUSION IN THE CALCULATION OF LONG-TERM U.S. GOVERNMENT SECURITIES
WHICH, PRIOR TO THESE REVISIONS, WERE EXCLUDED FROM THE CALCULATION.
N EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992, FMR REIMBURSED .10% OF THE
ANNUAL MANAGEMENT FEE OF .50%.
O INCLUDES $.04 PER SHARE FROM FOREIGN TAXES RECOVERED.
P NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
Q INCLUDES THE EFFECT OF ANNUALIZING A VOLUNTARY REIMBURSEMENT OF FEES BY
FMR.
INCOME & GROWTH
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
98.Selected Per-Share Data and Ratios
Class A
99.Years ended October 31
1987B 1988 1989 1990 1991 1992 1993 1994
100.Net asset value, beginning of period
$ 10.00 $ 9.44 $ 11.07 $ 12.77 $ 10.41 $ 14.13 $ 14.41 $ 15.91
101.Income from Investment Operations
102. Net investment income
.27 .62 1.01G .56 .51 .50 .48 .38
103. Net realized and unrealized gain (loss) on
(.63) 1.56 1.27 (1.34) 3.74 .85 2.18 (.79)
investments
104. Total from investment operations
(.36) 2.18 2.28 (.78) 4.25 1.35 2.66 (.41)
105.Less Distributions
106. From net investment income
(.20) (.55) (.58) (1.06) (.53) (.46) (.56) (.28)
107. In excess of net investment income
- -- -- -- -- -- -- -- (.02)
108. From net realized gain
- -- -- -- (.52) -- (.61) (.60) (.49)
109. Return of Capital
- -- -- -- -- -- -- -- (.04)
110. Total distributions
(.20) (.55) (.58) (1.58) (.53) (1.07) (1.16) (.83)
111.Net asset value, end of period
$ 9.44 $ 11.07 $ 12.77 $ 10.41 $ 14.13 $ 14.41 $ 15.91 $ 14.67
112.Total returnE,F
(3.90)% 23.66% 21.15% (7.15)% 41.73% 10.27% 19.66% (2.69)%
113.Net assets, end of period (000 omitted)
$ 34,376 $ 36,224 $ 46,139 $ 60,934 $ 135,53 $ 397,67 $ 1,654,1 $ 3,128,7
3 2 24 76
114.Ratio of expenses to average net assets
2.06%A 2.06% 1.91% 1.85% 1.71% 1.60% 1.51%H 1.58%H
115.Ratio of expenses to average net assets
2.06%A 2.06% 1.91% 1.85% 1.71% 1.60% 1.52%H 1.59%H
before expense reductions
116.Ratio of net investment income to average
3.95%A 5.83% 8.80% 5.29% 4.19% 3.97% 3.24% 3.79%
net assets
117.Portfolio turnover rate
206%A 204% 151% 297% 220% 389% 200% 202%
</TABLE>
EMERGING MARKETS INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
118.Selected Per-Share Data Class A Class B
119.Year ended December 31 1994C 1994D
120.Net asset value, beginning of period $ 10.000 $ 9.700
121.Income from Investment Operations
122. Net investment income .356 .167
123. Net realized and unrealized gain (loss) on investments (.073) .227
124. Total from investment operations .283 .394
125.Less Distributions
126. From net investment income (.353) (.220)
127. In excess of net investment income (.150) (.094)
128. From net realized gain (.010) (.010)
129. In excess of net realized gain (.250) (.250)
130. Total distributions (.763) (.574)
131.Net asset value, end of period $ 9.520 $ 9.520
132.Total return, 2.47% 3.67%
133.Net assets, end of period (000 omitted) $ 30,029 $ 5,034
134.Ratio of expenses to average net assets 1.50%A 2.25%A,I
135.Ratio of expenses to average net assets before expense reductions 2.15%A 2.60%A,I
136.Ratio of net investment income to average net assets 6.60%A 5.86%A
137.Portfolio turnover 354%A 354%A
</TABLE>
A ANNUALIZED.
B JANUARY 6, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C 3.MARCH 10, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $ .26 PER SHARE.
H FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
I 1.EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE LIMITATION.
HIGH YIELD
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
2.Selected Per-Share Data and Class A Class B
Ratios
3.Years ended October 31
1987B 1988 1989 1990 1991 1992 1993 1994 1994D
4.Net asset value, beginning of
$ 10.000 $ 9.090 $ 9.860 $ 8.970 $ 8.150 $ 10.120 $ 11.070 $ 12.010 $ 11.300
period
5.Income from Investment
Operations
6. Net investment income
.878 1.165 1.237 1.144 1.115 1.146 .980 .848 .223
7. Net realized and unrealized gain
(.910) .770 (.890) (.820) 1.948 .975 1.153 (.537) (.118)
(loss) on investments
8. Total from investment operations
(.032) 1.935 .347 .324 3.063 2.121 2.133 .311 .105
9.Less Distributions
10. From net investment income
(.878) (1.165) (1.237) (1.144) (1.093) (1.171) (.963) (.851)I (.195)
11. From net realized gain
- -- -- -- -- -- -- (.230) (.250)I --
12. Total distributions
(.878) (1.165) (1.237) (1.144) (1.093) (1.171) (1.193) (1.101) (.195)
13.Net asset value, end of period
$ 9.090 $ 9.860 $ 8.970 $ 8.150 $ 10.120 $ 11.070 $ 12.010 $ 11.220 $ 11.210
14.Total returnE,F
(.81)% 22.14% 3.34% 3.58% 39.67% 21.96% 20.47% 2.64% .93%
15.Net assets, end of period (000
$ 9,077 $ 11,900 $ 13,315 $ 15,134 $ 38,681 $ 136,31 $ 485,55 $ 679,623 $ 16,959
omitted) 6 9
16.Ratio of expenses to average net
1.24%A 1.10% 1.10% 1.10% 1.10% 1.10% 1.11% 1.20% 2.20%A
assets
17.Ratio of expenses to average net
2.25%A,G 2.22% 2.17% 2.04% 1.76% 1.16% 1.11% 1.20% 2.20%A
assets before expense reductions
18.Ratio of net investment income to
10.74%A 11.86% 12.98% 12.72% 12.20% 9.95% 8.09% 6.92% 5.92%A
average net assets
19.Portfolio turnover
166%A 135% 131% 90% 103% 100% 79% 118% 118%
</TABLE>
STRATEGIC INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
20.Selected Per-Share Data and Ratios Class A Class B
21.Year ended December 31 1994C 1994C
22.Net asset value, beginning of period $ 10.000 $ 10.000
23.Income from Investment Operations
24. Net investment income .064H .072H
25. Net realized and unrealized gain (loss) on investments (.046) (.078)
26. Total from investment operations .018 (.006)
27.Less Distributions
28. From net investment income (.098) (.084)
29.Net asset value, end of period $ 9.920 $ 9.910
30.Total return, .17% (.06)%
31.Net assets, end of period (000 omitted) $ 10,687 $ 9,379
32.Ratio of expenses to average net assets 1.35%A 2.10%
33.Ratio of expenses to average net assets before expense reductions 2.50%A,D 2.50%A,D
34.Ratio of net investment income to average net assets 5.80%A 5.06%A
35.Portfolio turnover 104%A 104%A
</TABLE>
A ANNUALIZED.
B JANUARY 5, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C OCTOBER 31, 1994 (COMMENCEMENT OF SALES OF CLASS A & CLASS B SHARES) TO
DECEMBER 31, 1994.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
H NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
I THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
GOVERNMENT INVESTMENT
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
36.Selected Per-Share Data and Class A Class B
Ratios
37.Years ended October 31
1987B 1988 1989 1990 1991 1992 1993 1994 1994D
38.Net asset value, beginning of
$ 10.000 $ 9.200 $ 9.260 $ 9.310 $ 9.150 $ 9.590 $ 9.730 $ 10.140 $ 9.100
period
39.Income from Investment
Operations
40. Net investment income
.614 .769 .773 .735 .700 .666 .567 .515 .144
41. Net realized and unrealized gain
(.800) .060 .050 (.160) .419 .125 .601 (1.031) (.137)
(loss) on investments
42. Total from investment
(.186) .829 .823 .575 1.119 .791 1.168 (.516) .007
operations
43.Less Distributions
44. From net investment income
(.614) (.769) (.773 (.735) (.679) (.651) (.558) (.504)H (.157)H
45. From net realized gain
- -- -- -- -- -- -- (.200) (.130)H --
46. In excess of net realized gain on
- -- -- -- -- -- -- -- (.030) --
investments
47. Total distributions
(.614) (.769) (.773) (.735) (.679) (.651) (.758) (.664) (.157)
48.Net asset value, end of period
$ 9.200 $ 9.260 $ 9.310 $ 9.150 $ 9.590 $ 9.730 $ 10.140 $ 8.960 $ 8.950
49.Total returnE,F
(1.84)% 9.34% 9.37% 6.48% 12.65% 8.49% 12.53% (5.27)% 0.10%
50.Net assets, end of period (000
$ 4,584 $ 6,590 $ 8,203 $ 9,822 $ 13,058 $ 23,281 $ 69,876 $ 114,453 $ 2,062
omitted)
51.Ratio of expenses to average net
1.29%A 1.10% 1.10% 1.10% 1.10% 1.10% .68% .74% 1.70%A
assets
52.Ratio of expenses to average net
2.36%A 2.25% 2.75% 2.74% 2.46% 1.79% 1.32% 1.47% 2.62%A
assets before expense reductions
53.Ratio of net investment income to
8.12%A 8.30% 8.45% 8.04% 7.47% 6.98% 6.11% 6.18% 5.22%A
average net assets
54.Portfolio turnover
32%A 44% 42% 31% 54% 315% 333% 313% 313%
</TABLE>
LIMITED TERM BOND
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55.Sele Institutional Class A Class B
cted
Per-Shar
e Data
and
Ratios
Years
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992C 1993 1994 1994D
ended
Novembe
r 30
56.Net
$ 9.960 $ 10.55 $ 11.24 $ 10.25 $ 10.18 $ 10.41 $ 10.14 $ 10.55 $ 10.64 $ 11.16 $ 10.96 $ 10.64 $ 11.14 $ 10.43
asset 0 0 0 0 0 0 0 0 0 0 0 0 0
value,
beginnin
g of
period
57.Inco
me from
Investm
ent
Operatio
ns
58. Net
1.053 1.026 .953 .944 .937 .901 .884 .840 .832 .602 .170 .785 .609 .204
investm
ent
income
59. Net
.590 .710 (.770 (.070) .230 (.270) .411 .102 .531 (.833) (.320) .511 (.876) (.178)
realized
and
unrealiz
ed gain
(loss)
on
investm
ents
60. Tot
1.643 1.736 .183 .874 1.167 .631 1.295 .942 1.363 (.231) (.150) 1.296 (.267) .026
al from
investm
ent
operatio
ns
61.Less
Distributi
ons
62. Fro
(1.053) 1.026 (.953) (.944) (.937) (.901) (.885) (.852) (.843) (.597) (.170) (.796) (.555) (.187)
m net
investm
ent
income
63. Fro
- -- -- -- -- -- -- -- -- -- (.062) -- -- (.058) (.019)
m
Return
of
Capital
64. Fro
- -- (.020) (.220) -- -- -- -- -- -- -- -- -- -- --
m net
realized
gain
65. Tot
(1.053) (1.046) (1.173) (.944) (.937) (.901) (.885) (.852) (.843) (.659) (.170) (.796) (.613) (.206)
al
distributi
ons
66.Net
$ 10.55 $ 11.24 $ 10.25 $ 10.18 $ 10.41 $ 10.14 $ 10.55 $ 10.64 $ 11.16 $ 10.27 $ 10.64 $ 11.14 $ 10.26 $ 10.25
asset
0 0 0 0 0 0 0 0 0 0 0 0 0 0
value,
end of
period
67.Total
17.40 17.04 1.78% 8.81% 12.03 6.46% 13.35 9.21% 13.17 (2.10) (1.37) 12.50 (2.44) .24%
returnE,F
% % % % % % % % %
68.Net
$ 253,9 $ 418,6 $ 407,2 $ 418,9 $ 426,8 $ 356,5 $ 327,7 $160,1 $ 183,7 $ 172,1 $ 2,583 $ 59,18 $ 141,8 $ 3,156
assets,
13 32 28 29 32 64 56 56 90 22 4 66
end of
period
(000
omitted)
69.Ratio
.65% .53% .53% .54% .54% .58% .57% .57% .64% .61% .82% 1.23% 1.02% 1.65%A
of
expense
s to
average
net
assets
70.Ratio
.65% .53% .53% .54% .54% .58% .57% .57% .64% .61% .82%A 1.23% 1.09% 2.41%A
of
expense
s to
average
net
assets
before
expense
reductio
ns
71.Ratio
10.29 9.22% 9.03% 9.16% 9.16% 8.90% 8.59% 7.96% 7.41% 6.45% 7.67%A 6.81% 6.04% 5.42%A
of net
%
investm
ent
income
to
average
net
assets
72.Portf
88%G 59% 92% 48% 87% 59% 60% 7% 59% 68% 7% 59% 68% 68%
olio
turnover
</TABLE>
A ANNUALIZED.
B JANUARY 7, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
D COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
E TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
G IN JULY 1985, THE SEC ADOPTED REVISIONS TO EXISTING RULES WITH RESPECT TO
THE CALCULATION OF THE PORTFOLIO TURNOVER RATE. THE REVISED RULES REQUIRE
THE INCLUSION IN THE CALCULATION OF LONG-TERM U.S. GOVERNMENT SECURITIES
WHICH, PRIOR TO THESE REVISIONS, WERE EXCLUDED FROM THE CALCULATION.
H THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES.
SHORT FIXED-INCOME
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
73.Selected Per-Share Data and Ratios Class A
74.Years ended October 31
1987B 1988 1989 1990 1991 1992 1993 1994
75.Net asset value, beginning of period
$ 10.000 $ 10.060 $ 9.940 $ 9.950 $ 9.620 $ 9.870 $ 9.950 $ 10.090
76.Income from Investment Operations
.101 .852 .832 .868 .848 .830 .732 .559
Net investment income
77. Net realized and unrealized gain (loss) on
.060 (.120) .010 (.330) .270 .071 .146 (.581)
investments
78. Total from investment operations
.161 .732 .842 .538 1.118 .901 .878 (.022)
79.Less Distributions
(.101) (.852) (.832) (.868) (.868) (.821) (.738) (.464)
From net investment income
80. In excess of net investment income
- -- -- -- -- -- -- -- (.044)
81. Return of Capital
- -- -- -- -- -- -- -- (.080)
82. Total Distributions
(.101) (.852) (.832) (.868) (.868) (.821) (.738) (.588)
83.Net asset value, end of period
$ 10.060 $ 9.940 $ 9.950 $ 9.620 $ 9.870 $ 9.950 $ 10.090 $ 9.480
84.Total returnD,E
1.61% 7.56% 8.89% 5.59% 12.19% 9.44% 9.13% (.22)%
85.Net assets, end of period (000 omitted)
$ 3,252 $ 13,433 $ 12,394 $ 13,062 $ 25,244 $ 170,55 $ 654,20 $ 787,92
8 2 6
86.Ratio of expenses to average net assets
.90%A .90% .90% .90% .90% .90% .95% .97%
87.Ratio of expenses to average net assets
2.15%A,F 1.84% 2.22% 1.90% 1.74% 1.03% .95% .97%
before expense reductions
88.Ratio of net investment income to average
7.65%A 8.39% 8.45% 8.86% 8.50% 7.59% 6.77% 5.91%
net assets
89.Portfolio turnover rate
119%A 178% 157% 144% 127% 57% 58% 108%
</TABLE>
HIGH INCOME MUNICIPAL
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
90.Selected Per-Share Data and Class A Class B
Ratios
91.Years ended October 31
1987B 1988 1989 1990 1991 1992 1993 1994 1994C
92.Net asset value, beginning of
$ 10.000 $ 9.850 $ 10.460 $ 10.820 $ 10.870 $ 11.410 $ 11.650 $ 12.720 $ 11.610
period
93.Income from Investment
Operations
94. Net investment income
.092 .750 .800 .811 .803 .774 .710 .689 .188
95. Net realized and unrealized gain
(.150) .610 .410 .150 .660 .250 1.100 (1.430) (.400)
(loss) on investments
96. Total from investment
(.058) 1.360 1.210 .961 1.463 1.024 1.810 (.741) (.212)
operations
97.Less Distributions
98. From net investment income
(.092) (.750) (.800) (.811) (.803) (.774) (.710) (.689) (.188)
99. From net realized gain
- -- -- (.050) (.100) (.120) (.010) (.030) (.060) --
100. In excess of net realized gain
- -- -- -- -- -- -- -- (.010) --
101. Total distributions
(.092) (.750) (.850) (.911) (.923) (.784) (.740) (.759) (.188)
102.Net asset value, end of period
$ 9.850 $ 10.460 $ 10.820 $ 10.870 $ 11.410 $ 11.650 $ 12.720 $ 11.220 $ 11.210
103.Total return,
(.58)% 14.22% 12.05% 9.28% 14.02% 9.21% 15.95% (6.03)% (1.86)%
104.Net assets, end of period (000
$ 1,275 $ 3,290 $ 6,669 $ 22,702 $ 67,135 $ 156,65 $ 497,57 $ 544,422 $ 9,968
omitted) 9 5
105.Ratio of expenses to average
.80%A .89% .90% .90% .90% .90% .92% .89% 2.09%A
net assets
106.Ratio of expenses to average
2.25%A 2.25%F 2.75%F 2.09% 1.24% .96% .92% .89% 2.09%A
net assets before expense reductions
107.Ratio of net investment income
7.24%A 7.33% 7.60% 7.37% 7.08% 6.59% 5.59% 5.78% 4.58%A
to average net assets
108.Portfolio turnover
- -- 19% 27% 11% 10% 13% 27% 38% 38%
</TABLE>
A ANNUALIZED.
B SEPTEMBER 16, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
D TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
F EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
LIMITED TERM TAX-EXEMPT
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109.Sel Institutional Class A Class B
ected Class
Per-Sha
re Data
and
Ratios
Years
1985B 1986 1987 1988 1989 1990 1991 1992 1993 1994 1992D 1993 1994 1994E
ended
Novemb
er 30
110.Ne
$ 10.00 $ 10.28 $ 10.99 $ 10.38 $ 10.52 $ 10.61 $ 10.64 $ 10.80 $ 11.08 $ 10.460 $ 11.01 $ 11.08 $ 10.460 $ 9.890
t asset
0 0 0 0 0 0 0 0 0 0 0
value,
beginni
ng of
period
111.Inc
ome
from
Investm
ent
Operati
ons
112. Ne
.130 .671 .641 .650 .674 .689 .682 .666 .536 .481 .131 .508 .455 .155
t
investm
ent
income
113. Ne
.280 .760 (.540) .140 .090 .030 .160 .280 .260 (1.030) .070 .260 (1.040) (.490)
t
realized
and
unrealiz
ed
gain
(loss)
on
investm
ents
114. Tot
.410 1.431 .101 .790 .764 .719 .842 .946 .796 (.549) .201 .768 (.585) (.335)
al from
investm
ent
operatio
ns
115.Le
ss
Distribu
tions
116. Fr
(.130) (.671) (.641) (.650) (.674) (.689) (.682) (.666) (.536) (.481) (.131) (.508) (.455) (.155)
om net
investm
ent
income
117. Fr
- -- (.050) (.070) -- -- -- -- -- (.880) -- -- (.880) -- --
om net
realized
gain
118. In
- -- -- -- -- -- -- -- -- -- (.020) -- -- (.020) --
excess
of net
realized
gain
119. Tot
(.130) (.721) (.711) (.650) (.674) (.689) (.682) (.666) (1.416) (.501) (.131) (1.388) (.475) (.155)
al
distribut
ions
120.Ne
$ 10.28 $ 10.99 $ 10.38 $ 10.52 $ 10.61 $ 10.64 $ 10.80 $ 11.08 $ 10.46 $ 9.410 $ 11.08 $ 10.46 $ 9.400 $ 9.400
t asset
0 0 0 0 0 0 0 0 0 0 0
value,
end of
period
121.Tot
4.12% 14.39% .97% 7.77% 7.50% 7.04% 8.15% 9.01% 8.01% (5.43)% 1.37% 7.72% (5.78)% (3.44)
al
returnF,G
122.Ne
$ 94,39 $ 161,0 $ 162,8 $ 132,4 $ 121,4 $ 111,50 $ 100,2 $ 28,42 $ 15,07 $ 11,702 $ 1,752 $ 39,80 $ 57,382 $ 1,682
t 1 45 57 43 18 6 94 8 6 0
assets,
end of
period
(000
omitted)
123.Ra
.69%A .58% .59% .63% .65% .62% .61% .66% .65% .65% 1.04% .90% .90% 1.65%A
tio of
expens
es to
average
net
assets
124.Ra
.69%A .58% .59% .63% .65% .62% .61% .67% .83% .76% 1.06% 1.36% 1.04% 2.36%A
tio of
expens
es to
average
net
assets
before
expens
e
reductio
ns
125.Ra
6.33%A 6.29% 6.01% 6.20% 6.45% 6.53% 6.40% 6.05% 5.01% 4.75% 5.65%A 4.76% 4.49% 3.74%A
tio of
net
investm
ent
income
to
average
net
assets
126.Po
103%A 34% 43% 24% 31% 32% 20% 36% 46% 53% 36% 46% 53% 53%
rtfolio
turnove
r
</TABLE>
SHORT-INTERMEDIATE TAX-EXEMPT
<TABLE>
<CAPTION>
<S> <C>
127.Selected Per-Share Data and Ratios Class A
128.Year ended November 30 1994 C
129.Net asset value, beginning of period $ 10.000
130.Income from Investment Operations .259
Net interest income
131. Net realized and unrealized gain (loss) on investments (.230)
132. Total from investment operations .029
133.Less Distributions (.259)
From net interest income
134.Net asset value, end of period $ 9.770
135.Total returnF,G .27%
136.Net assets, end of period (000 omitted) $ 16,563
137.Ratio of expenses to average net assets .75%A,H
138.Ratio of expenses to average net assets before expense reductions 1.54%A,H
139.Ratio of net interest income to average net assets 3.74%A
140.Portfolio turnover rate 111%A
</TABLE>
A ANNUALIZED.
B SEPTEMBER 19, 1985 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1985.
C MARCH 16, 1994 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1994.
D COMMENCEMENT OF SALE OF CLASS A SHARES SEPTEMBER 10, 1992.
E COMMENCEMENT OF SALE OF CLASS B SHARES JUNE 30, 1994.
F TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
G THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
H FMR VOLUNTARILY AGREED TO LIMIT THE EXPENSES (EXCLUDING INTEREST, TAXES
BROKERAGE COMMISSIONS AND EXTRAORDINARY EXPENSES) TO .75% OF AVERAGE NET
ASSETS.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and /or
YIELD.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders. This difference
may be significant for a fund whose investments are denominated in foreign
currencies.
In calculating yield a fund may from time to time use a security's
coupon rate instead of its yield to maturity in order to reflect the risk
premium on that security. This practice will have the effect of reducing a
fund's yield.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
Each class of a growth or growth and income fund may quote its adjusted NAV
including all distributions paid. This value may be averaged over specified
periods and may be used to calculate a moving average.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, please contact your
Investment Professional, or call 1-800-843-3001.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. Equity Portfolio Growth is a
diversified fund of Fidelity Advisor Series I, a Massachusetts business
trust organized on June 24, 1983. Growth Opportunities, Income & Growth,
High Yield, Government Investment and Short Fixed-Income are diversified
funds of Fidelity Advisor Series II, a Massachusetts business trust
organized on April 24, 1986. Equity Income is a diversified fund of
Fidelity Advisor Series III, a Massachusetts business trust organized on
May 17, 1982. Limited Term Bond is a diversified fund of Fidelity Advisor
Series IV, a Massachusetts business trust organized on May 6, 1983.
Global Resources and High Income Municipal are diversified funds of
Fidelity Advisor Series V, a Massachusetts business trust organized on
April 24, 1986. Limited Term Tax-Exempt is a diversified fund and
Short-Intermediate Tax-Exempt is a non-diversified fund of Fidelity
Advisor Series VI, a Massachusetts business trust organized on June 1,
1983. Overseas is a diversified fund of Fidelity Advisor Series VII, a
Massachusetts business trust organized on March 21, 1980. Emerging Markets
Income and Strategic Income are non-diversified funds and Strategic
Opportunities is a diversified fund of Fidelity Advisor Series VIII, a
Massachusetts business trust organized on September 23, 1983. Each trust is
an open-end management investment company. There is a remote possibility
that one fund might become liable for a misstatement in the prospectus
about another fund.
Overseas, Global Resources, Equity Income, Emerging Markets Income, High
Yield, Strategic Income, Government Investment, Limited Term Bond, High
Income Municipal and Limited Term Tax-Exempt are comprised of three classes
of shares: Class A, Class B and Institutional Class. Strategic
Opportunities is comprised of four classes of shares: Class A, Class B,
Institutional Class and Initial Class. Equity Portfolio Growth, Income &
Growth, Short Fixed-Income, Short-Intermediate Tax-Exempt and Growth
Opportunities are comprised of two classes of shares: Class A and
Institutional Class. Each class shares a common investment objective and
investment portfolio. The classes may have different sales charges and
other expenses which may affect performance.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. For shareholders
of Overseas, Equity Portfolio Growth, Strategic Opportunities,
Emerging Markets Income and Strategic Income , you are entitled to one
vote for each share you own. For shareholders of Global Resources,
Growth Opportunities, Equity Income, Income & Growth, High Yield,
Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt, the number of votes you are entitled to is based upon the
dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust,
respectively , if a matter affects just that class of shares ,
fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which chooses each fund's investments
and handles its business affairs. FMR chooses the investments
for each fund (except Government Investment, High Income Municipal, Limited
Term Tax-Exempt and Short-Intermediate Tax-Exempt) with the assistance of
foreign affiliates.
As of May 31 ,1995, FMR advised funds having approximately __ million
shareholder accounts with a total value of more than $___ billion.
Affiliates assist FMR with foreign securities: Fidelity Management &
Research (U.K.) Inc. (FMR U.K.), in London, England; Fidelity Management &
Research Far East Inc. (FMR Far East), in Tokyo, Japan; Fidelity
International Investment Advisors (FIIA), in Pembroke, Bermuda; Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.), in Kent,
England; and Fidelity Investment Japan Ltd. (FIJ), in Tokyo, Japan.
Bettina E. Doulton has been manager of Advisor Equity Income since August
1993, and VIP Equity-Income since July 1993. Previously, she managed Select
Automotive Portfolio and assisted on Equity-Income Portfolio and
Magellan(registered trademark). Ms. Doulton also served as an analyst
following the domestic and European automotive and tire manufacturing
industry as well as the gaming and lodging industry. She joined Fidelity in
1986.
Margaret L. Eagle is vice president and manager of Advisor High Yield
which she has managed since it began in January 1987. Ms. Eagle also
manages several pension fund accounts. Previously, she managed Spartan High
Income and High Income (now Capital & Income). She also managed the bond
portion of Puritan(registered trademark). Ms. Eagle joined Fidelity in
1980.
Daniel R. Frank is vice president and manager of Advisor Strategic
Opportunities which he has managed since its inception in December 1983.
Previously he was an assistant to Peter Lynch on Magellan(registered
trademark). Mr. Frank joined Fidelity in 1979.
Michael S. Gray is vice president and manager of Advisor Limited Term Bond
which he has managed since September 1987. Mr. Gray also manages Investment
Grade Bond, Spartan Investment Grade Bond, and Intermediate Bond. Mr. Gray
joined Fidelity in 1982.
Robert E. Haber is vice president and manager of Advisor Income & Growth
which he has managed since January 1987. Mr. Haber also manages Balanced
and co-manages Global Balanced. Previously, he managed Convertible
Securities. Mr. Haber joined Fidelity in 1985.
John R. Hickling is manager of Advisor Overseas which he has managed since
February 1993. Mr. Hickling also manages Overseas and VIP: Overseas.
Previously he managed Emerging Markets, Europe, Pacific Basin, Japan, and
International Growth & Income. Mr. Hickling joined Fidelity in 1982.
Robert Ives is manager of Advisor Government Investment, which he has
managed since February 1995. Mr. Ives also manages Spartan Government
Income and Government Securities. Previously, he managed Ginnie Mae and
Spartan Ginnie Mae. Mr. Ives joined Fidelity in 1991, after receiving an
M.B.A. from the University of Chicago. Previously, Mr. Ives was a
consultant to the U.S. Air Force for MITRE Corp. and an engineer at Bell
Labs.
Jonathan Kelly is manager of Advisor Emerging Markets Income which he has
managed since January 1995. He also manges Global Bond, and New Markets
Income and Canada Emerging Markets Income. He joined Fidelity in 1991,
after receiving his M.B.A. from the Wharton School at the University of
Pennsylvania. Mr. Kelly worked in the money management field prior to
business school.
Malcolm W. MacNaught is vice president and manager of Advisor Global
Resources which he has managed since December 1987. Mr. MacNaught also
manages Select Precious Metals and Minerals and Select American Gold. Mr.
MacNaught joined Fidelity in 1968.
Charles Morrison is manager of Advisor Short Fixed-Income which he has
managed since February 1995. He also manages Spartan Short-Term Bond and
Short-Term Bond. Mr. Morrison is vice president of Fidelity Management
Trust Company. He joined Fidelity in 1987.
David Murphy is manager of Advisor Limited Term Tax-Exempt and Advisor
Short-Intermediate Tax-Exempt. Mr. Murphy also manages Limited Term
Municipal, Spartan Intermediate Municipal, Spartan New Jersey Municipal
High Yield, Spartan New York Intermediate Municipal, and Spartan
Short-Intermediate Municipal. Previously, he managed Spartan California
Intermediate Municipal. Mr. Murphy joined Fidelity in 1989.
Robert E. Stansky is vice president and manager of Advisor Equity Portfolio
Growth which he has managed since April 1987. Mr. Stansky also manages
Growth Company. Previously, he managed Emerging Growth and Select Defense
and Aerospace. Mr. Stansky joined Fidelity in 1983.
Donald G. Taylor is manager of Advisor Strategic Income which he has
managed since October 1994. Mr. Taylor also manages VIP II: Investment
Grade Bond. In addition, he manages Income Plus for Fidelity International.
Previously, he managed Short-Term Bond, Spartan Short-Term Bond, Advisor
Short Fixed-Income, Corporate Trust, Qualified Dividend, VIP: Zero Coupon
Bond, and Utilities Income. Mr. Taylor joined Fidelity in 1986.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp., Leader of the Growth Group, and joined Fidelity in 1971.
Guy E. Wickwire is a vice president and manager of Advisor High Income
Municipal which he has managed since July of 1994. Mr. Wickwire also
manages Massachusetts Tax-Free High Yield and Insured Tax-Free. Mr.
Wickwire joined Fidelity in 1981.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs transfer
agent servicing functions for the Institutional Class shares of the
funds..
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR
Far East. Through ownership of voting common stock, members of the Edward
C. Johnson 3d family form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or disability,
which would result in changes in each individual family member's holding of
stock. Such changes could result in one or more family members becoming
holders of over 25% of the stock. FMR Corp. has received an opinion of
counsel that changes in the composition of the Johnson family group under
these circumstances would not result in the termination of the funds'
management or distribution contracts and, accordingly, would not require a
shareholder vote to continue operation under those contracts.
Fidelity International Limited (FIL), is the parent company of FIIA,
FIJ, and FIIAL U.K. The Johnson family group also owns, directly or
indirectly, more than 25% of the voting common stock of FIL.
UMB Bank, n.a. (UMB) is the transfer agent for High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt although it employs FIIOC to perform these functions for
Institutional Class shares of each fund. UMB is located at 1010
Grand Avenue, Kansas City, Missouri 64106.
A broker-dealer may use a portion of the commissions paid by
Overseas , Equity Portfolio Growth, Global Resources ,
Growth Opportunities, Strategic Opportunities, Equity Income, and
Income & Growth to reduce the custodian or transfer agent fees
for those funds . FMR may use its broker-dealer affiliates and other
firms that sell fund shares to carry out a fund's transactions, provided
that the fund receives brokerage services and commission rates comparable
to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The value of each fund's domestic and foreign investments varies
based on many factors. Stock values fluctuate, sometimes
dramatically, in response to the activities of individual companies and
general market and economic conditions.
The value of bonds fluctuates based on changes in domestic or
foreign interest rates and the credit quality of the issuer .
In general, bond prices rise when interest rates fall, and vice versa.
This effect is usually more pronounced for longer-term securities.
The funds' focus on international investing involves increased or
additional risks from those above. International funds have increased
economic and political risks as they are exposed to events and factors in
the various world markets. This is especailly true for emerging markets.
Also, because many of the fund' investments are denominated in foreign
currencies, changes in the value of foreign currencies can significantly
affect a fund's share price. FMR may use a variety of investment
techniques to either increase or decrease a fund's investment exposure to
any currency.
FMR may use various investment techniques to hedge a fund's risks, but
there is not guarantee that these strategies will work as FMR intends.
When you sell your shares, they may be worth more or less than what you
paid for them.
If you are subject to the federal alternative minimum tax, you should note
that High Income Municipal may invest up to 100% of its assets and each of
Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt may invest up to
20% of its assets in municipal securities issued to finance private
activities. The interest from these investments is a tax-preference item
for purposes of the tax.
OVERSEAS FUND seeks growth of capital primarily through investments
in foreign securities.
The fund defines foreign securities as securities of issuers whose
principal activities are outside of the United States. The fund currently
intends to invest at least 65% of its total assets in securities of issuers
from at least three different countries outside of North America (the
United States, Canada, Mexico and Central America). There is no limit on
investments in any one region, country, or currency, although the fund
normally invests in at least three different countries. The fund expects to
invest most of its assets in securities of issuers located in developed
countries in these general geographic areas: the Americas (other than the
United States), the Far East and Pacific Basin, and Western Europe.
The fund may invest in many types of issuers, including companies and other
business organizations as well as governments and their agencies. The fund
expects that equity securities (including shares of closed-end investment
companies and depositary receipts) will account for the majority of its
investments. Although the majority of the fund's investments are expected
to be in equity securities, the fund may also purchase debt securities,
including lower-quality, higher yielding securities. FMR will not emphasize
income in choosing investments unless FMR believes the income will
contribute to the securities' growth potential. FMR may also invest a
portion of the fund's assets in high-quality, short-term debt securities,
bank deposits and money market instruments (including repurchase
agreements) denominated in U.S. dollars or foreign currencies.
FMR determines where an issuer is located by looking at such factors as
its country of organization, the primary trading market for its securities,
and the location of its assets, personnel, sales, and earnings. When
allocating the fund's investments among countries and regions, FMR
considers such factors as the potential for economic growth, expected
levels of inflation, governmental policies and the outlook for currency
relationships. Although the fund may invest significantly in the United
States, the fund currently intends to be as fully invested in non-U.S.
issuers as is practicable in light of the fund's cash flow and cash
needs.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by
investing primarily in common and preferred stock and securities
convertible into the common stock of companies with above-average growth
characteristics
The fund, under normal conditions, will invest at least 65% of its
total assets in common and preferred stock. The fund looks for domestic and
foreign companies with above-average growth characteristics compared to the
average of the companies included in the S&P 500. Growth may be measured by
factors such as earnings or gross sales. Companies with strong growth
potential often have new products, technologies, distribution channels, or
other opportunities. As a general rule, these companies may include
smaller, less well-known companies, and companies whose stocks have higher
than average price/earnings (P/E) ratios. The market prices of these stocks
may be particularly sensitive to economic, market, or company news. FMR may
also pursue growth in larger or revitalized companies or companies that
hold a strong position in the market. These growth characteristics may be
found in mature or declining industries.
GLOBAL RESOURCES FUND seeks long-term growth of capital and
protection of the purchasing power of shareholders' capital by investing
primarily in securities of foreign and domestic companies that own or
develop natural resources, or supply goods and services to such companies,
or in physical commodities.
The fund, under normal conditions, will invest at least 65% of its total
assets in securities of foreign and domestic companies that own or develop
natural resources, or supply goods and services to such companies, or in
physical commodities. FMR will seek securities that are priced relative to
the intrinsic value of the relevant natural resource or that are issued by
companies positioned to benefit from particular periods in the economic
cycle. Accordingly, the fund may shift its emphasis from one natural
resource industry to another depending upon prevailing trends or
developments. The fund may also invest in securities of companies in other
industries, and in corporate and governmental debt securities of all types.
The fund expects to invest a majority of its assets in the securities of
companies that have their principal business activities in at least three
different countries (including the United States).
A company will be deemed to have substantial ownership of, or activities in
natural resources if, at the time those company's securities are acquired,
at least 50% of the company's assets are involved, either directly or
through subsidiaries, in exploring, mining, refining, processing,
transporting, fabricating, dealing in, or owning natural resources. Natural
resources include precious metals (e.g., gold, platinum and silver),
ferrous and nonferrous metals (e.g., iron, aluminum and copper), strategic
metals (e.g., uranium and titanium), hydrocarbons (e.g., coal,oil and
natural gases), chemicals, forest products, real estate, food products and
other basic commodities. Although the fund is authorized to invest up to
50% of its assets in physical commodities, it currently intends to invest
no more than 25% of its total assets in them, and intends to limit its
physical commodity investments to readily marketable precious metals.
Precious metals, at times, have been subject to substantial price
fluctuations over short periods of time and may be affected by
unpredictable international monetary and political policies such as
currency devaluations or revaluations, economic and social conditions
within a country, trade imbalances, or trade or currency restrictions
between countries.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by
investing primarily in common stocks and securities convertible into common
stocks.
The fund, under normal conditions, will invest at least 65% of its total
assets in securities of companies that FMR believes have long-term growth
potential. Although the fund invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The fund may invest in foreign securities without
limitation.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation."
Under normal conditions, the fund will invest at least 65% of its total
assets in companies involving a special situation. The term "special
situation" refers to FMR's identification of an unusual, and possibly
non-repetitive, development taking place in a company or a group of
companies in an industry.
A special situation may involve one or more of the following
characteristics:
(small solid bullet) A technological advance or discovery, the offering of
a new or unique product or service, or changes in consumer demand or
consumption forecasts.
(small solid bullet) Changes in the competitive outlook or growth potential
of an industry or a company within an industry, including changes in the
scope or nature of foreign competition or the development of an emerging
industry.
(small solid bullet) New or changed management, or material changes in
management policies or corporate structure.
(small solid bullet) Significant economic or political occurrences abroad,
including changes in foreign or domestic import and tax laws or other
regulations.
(small solid bullet) Other events, including natural disasters, favorable
litigation settlements, or a major change in demographic patterns.
"Special situations" often involve breaks with past experience. They can be
relatively aggressive investments.In seeking capital appreciation, the fund
also may invest in securities of companies not involving a special
situation, but which are companies with valuable fixed assets and whose
securities are believed by FMR to be undervalued in relation to the
companies' assets, earnings, or growth potential. FMR intends to invest
primarily in common stocks and securities that are convertible into common
stocks; however, it also may invest in debt securities of all types and
quality if FMR believes that investing in these securities will result in
capital appreciation. The fund may invest up to 30% of its assets in
foreign investments.
EQUITY INCOME FUND seeks a yield from dividend and interest income
which exceeds the composite dividend yield on securities comprising the S&P
500. In addition, consistent with the primary objective of obtaining
dividend and interest income, the fund will consider the potential for
achieving capital appreciation.
The fund , under normal conditions, will invest at least 65% of its
total assets in income-producing equity securities. For purposes of this
policy, equity securities are defined as common and preferred stocks. The
balance of the fund's assets will tend to be invested in debt securities, a
high percentage of which are expected to be convertible into common stocks.
The fund does not intend to invest in securities of issuers without proven
earnings and/or credit histories. Because the fund invests for income, as
well as capital appreciation, investors should not expect capital
appreciation comparable with funds which seek only capital appreciation.
The yield on the fund's assets generally will increase or decrease from
year to year in accordance with market conditions and in relation to the
changes in yields of the stocks included in the S&P 500.
INCOME & GROWTH FUND seeks both income and growth of capital by
investing in a diversified portfolio of equity and fixed-income securities
with income, growth of income and capital appreciation potential.
The fund invests in equity securities, convertible securities, common and
preferred stocks, and fixed-income securities that provide income or
opportunities for capital growth. The fund may buy securities that are not
currently paying income but offer prospects for future income. The fund may
invest in securities of foreign issuers. In selecting investments for the
fund, FMR will consider such factors as the issuer's financial strength,
its outlook for increased dividend or interest payments, and the potential
for capital gains.
EMERGING MARKETS INCOME FUND seeks a high level of current income by
investing primarily in debt securities and other instruments of issuers in
emerging markets. As a secondary objective, the fund seeks capital
appreciation.
The fund, under normal conditions, will invest at least 65% of its total
assets in debt securities and other instruments of issuers in emerging
markets. Countries with emerging markets include countries (i) that have an
emerging stock market, as defined by the International Finance Corporation,
(ii) with low-to middle-income economies, according to the World Bank, or
(iii) that are listed in World Bank publications as "developing." The fund
emphasizes countries with relatively low gross national product per capita
compared to the world's major economies, and with the potential for rapid
economic growth. FMR expects that emerging market opportunities will be
found mainly in Latin America, Asia, Africa, and emerging European nations.
FMR determines where an issuer is located by looking at such factors as its
country of organization, the primary trading market for its securities, and
the location of its assets, personnel, sales, and earnings. There is no
limit on investments in any one region, country, or currency, although the
fund normally invests in at least three different countries.
The fund may also invest a portion of its assets in common and preferred
stocks of emerging markets issuers, debt securities of non-emerging market
foreign issuers, and lower-quality debt securities of U.S. issuers. FMR
does not currently anticipate that these investments will exceed
approximately 20% of the fund's total assets. In addition, for cash
management purposes, the fund will ordinarily invest a portion of its
assets in high-quality, short-term debt securities and money market
instruments, including repurchase agreements and bank deposits denominated
in U.S. or foreign currencies.
HIGH YIELD FUND seeks a combination of a high level of income and
the potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks.
The fund, under normal conditions, will invest at least 65% of its total
assets in income producing debt securities and preferred stocks, including
convertible and zero coupon securities. The fund may also invest in
securities issued or guaranteed by the U.S. Government, any state or any of
their respective subdivisions, agencies or instrumentalities, and
securities of foreign issuers, including securities of foreign governments.
The fund may invest up to 35% of its total assets in equity securities,
including common stocks, warrants and rights.
STRATEGIC INCOME FUND seeks a high level of current income by
investing primarily in debt securities. The fund may also seek capital
appreciation.
The fund invests primarily in fixed-income securities, allocated among
three broad categories: (1) U.S. government securities, including mortgage
securities and securities issued by government agencies; (2) corporate
securities, including lower-quality, high-yield securities as well as
investment-grade corporate bonds; and (3) foreign corporate and
governmental securities, including emerging market instruments and
securities of issuers in more developed markets. Although FMR expects that
the fund will normally have investments in each of the three asset
categories, there is no limit on the amount that the fund may invest in any
one type of fixed-income securities from time to time. Diversification,
when successful, can mean higher returns with decreased volatility. By
allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant investment risks
of each category through diversification. However, each category may
decline at the same time. FMR regularly reviews the fund's allocation and
makes changes gradually over time to favor investments that it believes
provide the most favorable outlook for achieving the fund's objective.
GOVERNMENT INVESTMENT FUND seeks a high level of current income by
investing primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
The fund, under normal circumstances, will invest at least 65% of its
total assets in government securities. The fund considers "government
securities" to include those which are subject to repurchase agreements.
The fund invests primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, including U.S.
Treasury bonds, notes and bills, Government National Mortgage Association
mortgage-backed pass-through certificates (Ginnie Maes) and mortgage-backed
securities issued by the Federal National Mortgage Association (Fannie
Maes) or the Federal Home Loan Mortgage Corporation (Freddie Macs). These
securities may or may not be fully backed by the U.S. Government. In
seeking current income, the fund also may consider the potential for
capital gain.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
The fund invests primarily in fixed-income obligations of all types.
The fund may invest in domestic and foreign investment grade
securities. When consistent with its primary objective, the fund may also
seek capital appreciation. Under normal conditions, the fund maintains a
dollar-weighted average maturity of 10 years or less, but individual
securities may be of any maturity. In determining a security's maturity for
purposes of calculating the fund's average maturity, estimates of the
expected time for its principal to be repaid may be used. This can be
substantially shorter than its stated final maturity.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current
income, consistent with the preservation of capital, by investing primarily
in a broad range of investment-grade fixed-income securities. Where
appropriate the fund will take advantage of opportunities to realize
capital appreciation.
Under normal conditions, at least 65% of the fund's total assets will be
invested in fixed-income securities of all types, which may include
convertible and zero coupon securities. The fund may invest a portion of
its assets in securities issued by foreign companies and foreign
governments. Under normal conditions, the fund maintains a dollar-weighted
average maturity of three years or less, but individual securities may be
of any maturity. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax.
The fund normally invests so that at least 80% of its net assets is
invested in municipal obligations whose interest is free from federal
income tax. The fund may invest in medium- and lower-quality municipal
obligations. The fund may invest more than 25% of its assets in securities
whose revenue sources are from similar types of projects (e.g., education,
electric utilities, health care, housing, transportation, or water, sewer
and gas utilities) or whose issuers share the same geographic location. The
fund may invest up to 100% of its assets in municipal obligations subject
to the federal alternative minimum tax. The fund may purchase long-term
municipals with maturities of 20 years or more, which generally produce
higher yields than short-term municipals. The fund also may purchase
short-term municipal obligations in order to provide for short-term capital
needs. The average maturity of the fund is currently expected to be greater
than 20 years, but individual securities may be of any maturity.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt
from federal income taxes that can be obtained consistent with the
preservation of capital.
The fund normally will invest so that 80% or more of its net assets will be
invested in securities whose interest is free from federal income tax.
The fund invests in municipal obligations rated investment grade or
higher. The fund may also invest 25% or more of its total assets in
securities whose revenue sources are from similar types of projects (e.g.,
education, electric utilities, health care, housing, transportation or
water, sewer, and gas utilities) or whose issuers share the same geographic
location. The fund may, under normal circumstances, invest up to 20% of
its net assets in obligations subject to the federal alternative minimum
tax. Under normal conditions, at least 80% of the fund's net assets will
be invested in obligations having remaining maturities of 15 years or less
. Under normal conditions, the fund maintains a dollar-weighted average
maturity of 10 years or less. In determining a security's maturity for
purposes of calculating the fund's average maturity, estimates of the
expected time for its principal to be repaid may be used. This can be
substantially shorter than its stated final maturity.
SHORT INTERMEDIATE TAX-EXEMPT FUND seeks as high a level of current
income, exempt from federal income tax, as is consistent with preservation
of capital.
The fund invests primarily in municipal securities. The fund normally will
invest so that 80% or more of its net assets will be invested in securities
whose interest is free from federal income tax. The fund may, under normal
circumstances, invest up to 20% of its net assets in municipal securities
subject to the federal alternative minimum tax. The fund may invest any
portion of its assets in industrial revenue bonds (IRBs) backed by private
issuers, and may invest up to 25% of its total assets in IRBs related to a
single industry. The fund may also invest 25% or more of its total assets
in securities whose revenue sources are from similar types of projects
(e.g., education, electric utilities, health care, housing, transportation,
or water, sewer and gas utilities) or whose issuers share the same
geographic location.
Under normal conditions, the fund maintains a dollar-weighted average
maturity of between two and four years, but individual securities may be of
any maturity. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity.
TEMPORARY DEFENSIVE INVESTMENT POLICIES. FMR normally invests each
fund's assets according to its investment strategy.
Overseas, Equity Portfolio Growth, Global Resources, Growth Opportunities,
Strategic Opportunities, Equity Income, and Income & Growth each reserve
the right to invest without limitation in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
High Yield reserves the right to invest in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
Emerging Markets Income, Strategic Income, Government Investment, Limited
Term Bond and Short Fixed-Income reserve the right to invest without
limitation in investment-grade money market or short-term debt instruments
for temporary, defensive purposes.
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each do not expect to invest in federally taxable obligations.
Each, however, reserves the right to invest without limitation in
short-term instruments, to hold a substantial amount of uninvested cash, or
to invest more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about each fund's investments
is contained in the fund s; SAI. Policies and limitations are
considered at the time of purchase; the sale of instruments is not required
in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help a fund
achieve its goal. Current holdings and recent investment strategies are
described in a fund's financial reports, which are sent to shareholders
twice a year. For a free SAI or financial report, call your Investment
Professional.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each of
Overseas, Global Resources, Growth Opportunities , Equity Income,
Income & Growth , High Yield, Government Investment , Limited
Term Bond, Short Fixed-Income, High Income Municipal and Limited Term
Tax-Exempt may not purchase more than 10% of the outstanding voting
securities of a single issuer.
With respect to 100% of its assets each of Equity Portfolio Growth and
Strategic Opportunities may not purchase more than 10% of the
outstanding voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities, loans, and other direct debt have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds") are,
and tax-exempt lower-quality debt securities may be, considered to be
speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general economic difficulty.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the funds' portfolios.
These figures are dollar-weighted averages of month-end portfolio holdings
during fiscal 1994, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
DEBT TABLE WILL BE FILED BY SUBSEQUENT AMENDMENT.
RESTRICTIONS: For all funds, other than Short-Intermediate
Tax-Exempt , purchase of a debt security is consistent with a
fund's debt quality policy if it is rated at or above the stated level
by Moody's or rated in the equivalent categories by S&P, or is unrated but
judged to be of equivalent quality by FMR.
Limited Term Bond currently intends to limit its investments in debt
securities to those of Baa-quality and above, and currently intends to
limit its investments in debt securities rated Baa to 5% of its assets.
Short Fixed-Income currently intends to limit its investments in lower
than Baa-quality debt securities to 35% of its assets and currently intends
to limit its investments in debt securities to B-quality and above.
Global Resources currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investments in debt securities to Caa-quality and above.
Each of Equity Portfolio Growth, Equity Income, Growth
Opportunities, Income & Growth, Overseas, and Strategic Opportunities
currently intends to limit its investments in lower than Baa-quality debt
securities to 35% of its assets.
Purchase of a debt security is consistent with Short-Intermediate
Tax-Exempt's debt quality policy if, with respect to 60% of its assets, it
is judged by FMR to be of equivalent quality to debt securities rated A or
better by Moody's or S&P. The fund currently intends to limit its
investments in debt securities rated below Baa by Moody's or BBB by S&P, or
unrated debt securities judged by FMR to be of equivalent quality, to 5% of
its assets. The fund currently intends to limit its investments in debt
securities to Ba-quality and above.
Limited Term Tax-Exempt currently intends to limit its investments in debt
securities to those of Baa- quality and above, and currently intends to
limit its investments in debt securities rated Baa to 25% of its
assets.
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. Government obligations, commercial paper
and other short-term corporate obligations, and certificates of deposit,
bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. G overnment. Not all U.S. G overnment securities are
backed by the full faith and credit of the United States. For example,
securities issued by the Federal Farm Credit Bank or by the Federal
National Mortgage Association are supported by the instrumentality's right
to borrow money from the U.S. Treasury under certain circumstances.
However, securities issued by the Financing Corporation are supported only
by the credit of the entity that issued them.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other entity. A fund may own a municipal security
directly or through a participation interest. The value of some or all
municipal securities may be affected by uncertainties in the municipal
market related to legislation or litigation involving the taxation of
municipal securities or the rights on municipal securities holders.
EXPOSURE TO FOREIGN MARKETS Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign operations
may involve additional risks and considerations. These include risks
relating to political or economic conditions in foreign countries,
fluctuations in foreign currencies, witholding or other taxes, operational
risks, increased regulatory burdens, and the potentially less stringent
investor protection and disclosure standards of foreign markets.
Additionally, governmental issuers of foreign securities may be unwilling
to repay principal and interest when due, and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in developing countries, more
volatile. .
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS (ADRS
AND EDRS) are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial
institution. Designed for use in U.S. and European securities markets,
respectively, ADRs and EDRs are alternatives to the purchase of the
underlying securities in their national markets and currencies.
ASSET-BACKED SECURITIES may include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or residential
mortgages, and may include complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities. Mortgage
securities may be issued by the U.S. G overnment or by private
entities. For example, Ginnie Maes are interests in pools of mortgage loans
insured or guaranteed by a U.S. G overnment agency. Because mortgage
securities pay both interest and principal as their underlying mortgages
are paid off, they are subject to prepayment risk. This is especially true
for stripped securities. Also, the value of a mortgage security may be
significantly affected by changes in interest rates. Some mortgage
securities may have a structure that makes their reaction to interest rates
and other factors difficult to predict, making their value highly volatile.
VARIABLE AND FLOATING RATE SECURITIES may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt security. Their risks are similar to those of other debt
securities, although they may be more volatile and the value of
certain types of stripped securities may move in the same direction
as interest rates.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S.
repurchase agreements, and may be denominated in foreign currencies. They
also may involve greater risk of loss if the counterparty defaults. Some
counterparties in these transactions may be less creditworthy than those in
U.S. markets.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund temporarily transfers possession of a portfolio instrument to another
party in return for cash. This could increase the risk of fluctuation in
the fund's yield or in the market value of its assets.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, a fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may
be subject to legal restrictions. Difficulty in selling securities may
result in a loss or may be costly to a fund.
RESTRICTIONS. Each of Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
Government Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
may not purchase a security if, as a result, more than 10% of its net
assets would be invested in illiquid securities.
Each of Overseas, Emerging Markets Income, High Yield, and Strategic
Income may not purchase a security if, as a result, more than 15% of its
net assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield.
WARRANTS are instruments which entitle the holder to buy
underlying equity securities at a specific price for a specific period of
time. A warrant tends to be more volatile than its underlying securities
and ceases to have value if it is not exercised prior to its expiration
date. In addition, changes in the value of a warrant do not necessarily
correspond to changes in the value of its underlying securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all
securities of a similar type. A fund that is not diversified may be
more sensitive to changes in the market value of a single issuer or
industry.
RESTRICTIONS: With respect to 100% of its assets, each of Equity Portfolio
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in the securities of a single
issuer.
With respect to 75% of its total assets, each of Overseas, Global
Resources, Growth Opportunities, Equity I ncome, Income &
Growth, High Yield, Government Investment , Limited Term Bond, Short
Fixed-Income, High Income Municipal , and Limited Term Tax-Exempt may
not purchase a security if, as a result, more than 5% would be invested in
the securities of a single issuer.
Emerging Markets Income, Strategic Income and Short-Intermediate
Tax-Exempt are considered non-diversified. Generally, to meet federal tax
requirements at the close of each quarter, each fund does not invest more
than 25% of its total assets in any issuer and, with respect to 50% of
total assets, does not invest more than 5% of its total assets in any
issuer.
These limitations do not apply to U.S. government securities.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
LENDING securities to broker-dealers and institutions, including FBSI, an
affiliate of FMR, is a means of earning income. This practice could result
in a loss or a delay in recovering a fund's securities. A fund may also
lend money to other funds advised by FMR and to issuers in connection with
certain direct debt transactions.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of each fund's
total assets; however Limited Term Tax-Exempt, High Income Municipal and
Short-Intermediate Tax-Exempt do not currently intend to make loans.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
OVERSEAS FUND seeks growth of capital primarily through
investments in foreign securities.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics.
GLOBAL RESOURCES FUND seeks long-term growth of capital and
protection of the purchasing power of shareholders' capital by investing
primarily in securities of foreign and domestic companies that own or
develop natural resources, or supply goods and services to such companies,
or in physical commodities.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by
investing primarily in common stocks and securities convertible into common
stocks.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation." Under normal conditions, the fund will invest at least 65% of
its total assets in companies involving a special situation. FMR intends to
invest primarily in common stocks; however, it may also invest in debt
securities of all types and quality if FMR believes that investing in these
securities will result in capital appreciation. The fund may invest up to
30% of its assets in foreign investments.
EQUITY INCOME seeks a yield from dividend and interest income which exceeds
the composite dividend yield on securities comprising the S&P 500. In
addition, consistent with the primary objective of obtaining dividend and
interest income, the fund will consider the potential for achieving capital
appreciation.
INCOME & GROWTH FUND seeks both income and growth of capital by
investing in a diversified portfolio of equity and fixed-income securities
with income, growth of income and capital appreciation potential.
EMERGING MARKETS INCOME FUND seeks a high level of current income by
investing primarily in debt securities and other instruments of issuers in
emerging markets. As a secondary objective, the fund seeks capital
appreciation.
HIGH YIELD FUND seeks a combination of a high level of income and
the potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks.
STRATEGIC INCOME FUND seeks a high level of current income by
investing primarily in debt securities. The fund may also seek capital
appreciation.
GOVERNMENT INVESTMENT FUND seeks a high level of current income by
investing primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current
income, consistent with the preservation of capital, by investing primarily
in a broad range of investment-grade fixed-income securities. Where
appropriate the fund will take advantage of opportunities to realize
capital appreciation.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt from
federal income taxes that can be obtained consistent with the preservation
of capital.
SHORT INTERMEDIATE TAX-EXEMPT FUND seeks as high a level of
current income, exempt from federal income tax, as is consistent with
preservation of capital.
With respect to 75% of its total assets,each of Overseas, Global
Resources, Growth Opportunities, Equity Income, Income & Growth, High
Yield, Government Investment, Limited Term Bond, Short Fixed Income,
High Income Municipal and Limited Term Tax-Exempt may not purchase a
security if, as a result, more than 5% would be invested in the securities
of a single issuer. With respect to 100% of its assets, each of
Equity Portfolio Growth and Strategic Opportunities may not purchase
a security if, as a result, more than 5% would be invested in any one
issuer.
With respect to 75% of its total assets, each of Overseas, Global
Resources, Growth Opportunities , Equity Income, Income & Growth,
High Yield, Government Investment, Limited Term Bond, Short
Fixed-Income, High Income Municipal and Limited Term Tax-Exempt may not
purchase more than 10% of the outstanding voting securities of a single
issuer . With respect to 100% of its assets, each of Equity Portfolio
Growth and Strategic Opportunities, may not purchase more than 10%
of the outstanding voting securities of a single issuer.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33 1/3% of its total assets.
Loans, in the aggregate, may not exceed 33 1/3% of each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. For each fund, expenses paid out of Institutional
Class assets are reflected in its share price or dividends; they are
neither billed directly to shareholders nor deducted from shareholder
accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain of the funds. Each fund
also pays OTHER EXPENSES, which are explained on page __.
FMR may, from time to time, agree to reimburse a fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by each fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease each fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Equity Income
pays FMR a monthly management fee at a flat annual rate of 0.50% of its
average net assets. The fee for Equity Portfolio Growth, Global
Resources, Income & Growth, Emerging Markets Income, High Yield, Strategic
Income, Government Investment , Limited Term Bond, Short
Fixed-Income, High Income Municipal , Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt is calculated by adding a group fee rate
to an individual fee rate, and multiplying the result by each fund's
average net assets. The fee for Overseas, Growth Opportunities and
Strategic Opportunities is determined by taking a basic fee and then
applying a performance adjustment . The performance adjustment either
increases or decreases the management fee, depending on how well each fund
has performed relative to the Morgan Stanley Capital International Europe
Australia, Far East Index for Overseas or the S&P 500 for each of Growth
Opportunities and Strategic Opportunities.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. For Overseas , Equity Portfolio Growth,
Global Resources, Growth Opportunities, Strategic Opportunities, and
Income & Growth (the Equity Funds) , this rate cannot rise above 0.52%,
and it drops as total assets under management increase. For
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income
Municipa l, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
(the Fixed-Income Funds) this rate cannot rise above 0.37%, and it
drops as total assets under management increase. The basic fee rate
(calculated monthly) is calculated by adding a group fee rate to an
individual fund fee rate, and multiplying the result by each fund's average
net assets.
The performance adjustment rate is calculated monthly by comparing the
performance of Overseas, Growth Opportunities and Strategic Opportunities
to that of the respective indices over the most recent 36-month period. The
difference is translated into a dollar amount that is added to or
subtracted from the basic fee. The maximum annualized performance
adjustment rate is +/- 0.20%.
Investment performance will be measured separately for each class of shares
offered by Strategic Opportunities, Growth Opportunities, and Overseas and
the least of the results obtained will be used in calculating the
performance adjustment.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Group
Individual
Total Fee
Fee Rate Fund Fee
Manageme
Rate nt
Overseas 0.32%[D] 0.45% 0.80%
Equity Portfolio Growth 0.32% 0.32%[A] 0.64%[A]
Global Resources 0.32% 0.45% 0.77%
Growth Opportunities 0.32%[D] 0.30% 0.69%
Strategic Opportunities 0.32%[D] 0.30% 0.67%[C]
Equity Income N/A N/A 0.50%
Income & Growth 0.32% 0.20% 0.52%
Emerging Markets Income 0.16% 0.55% 0.70%[C]
High Yield 0.15% 0.45% 0.60%
Strategic Income 0.16% 0.45% 0.60%[C]
Government Investment 0.16% 0.30% 0.46%
Limited Term Bond 0.16% 0.25%[B] 0.41%
Short Fixed-Income 0.16% 0.30% 0.46%
High Income Municipal 0.16% 0.25% 0.41%
Limited Term Tax-Exempt 0.16% 0.25% 0.41%
Short-Intermediate Tax-Exempt 0.16% 0.25% 0.41%[C]
</TABLE>
[A] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO REDUCE THE
FUND'S INDIVIDUAL FUND FEE RATE FROM 0.33% TO 0.30%. IF THIS REDUCTION WERE
NOT IN EFFECT, DURING FISCAL 1994, THE TOTAL FEE WOULD HAVE BEEN 0.65%.
[B] ON DECEMBER 14, 1994, SHAREHOLDERS OF THE FUND APPROVED AN INCREASE OF
THE INDIVIDUAL FUND FEE RATE FROM 0.25% TO 0.30% EFFECTIVE FEBRUARY 24,
1995.
[C] ANNUALIZED.
[D] THE BASIC FEE RATE FOR FISCAL 1994 WAS 0.77% FOR OVERSEAS, 0.62% FOR
GROWTH OPPORTUNITIES AND 0.62% FOR STRATEGIC OPPORTUNITIES.
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR
Far East, FIJ, and FIIA. FIIA in turn has a sub-advisory agreement with
FIIAL U.K. These sub-advisers are compensated for providing FMR with
investment research and advice on issuers based outside the United States.
FMR pays FMR U.K. and FMR Far East fees equal to 110% and 105%,
respectively, of the costs of providing these services. FMR pays FIJ and
FIIA a fee equal to 30% of its management fee rate associated with
investments for which the sub-adviser provided investment advice.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis. FIIA pays FIIAL U.K. a fee
equal to 110% of the cost of providing these services.
For fiscal 1994, FMR, on behalf of each fund with sub-advisory agreements,
paid FMR U.K., FMR Far East, F1J and FIIA fees amounting to less than 0.01%
of each fund's average net assets. Limited Term Bond, did not pay fees to
any of FMR U.K., FMR Far East, FIJ or FIIA for fiscal 1994.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for the Institutional Class shares of Overseas,
Equity Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Equity Income, Income & Growth, Emerging Markets Income,
High Yield, Strategic Income, Government Investment, Limited Term Bond and
Short Fixed-Income . Fidelity Service Co. (FSC) calculates the NAV and
dividends for the Institutional Class of the Taxable Funds ,
maintains the general accounting records and administers the securities
lending program for each of the Taxable Funds . In fiscal 1994,
fees paid by the Institutional Class to FIIOC amounted to: 0.11%
(Equity Portfolio Growth) , 0.12% (Equity Income) , and 0.11%
(Limited Term Bond) , of Institutional Class shares' average net
assets . For fiscal 1994, fees paid to FSC amounted to :
0.04% (Equity Portfolio Growth) , 0.06% (Equity Income) , and
0.04% (Limited Term Bond) , of each fund's average net assets .
UMB has entered into sub-arrangements pursuant to which FIIOC performs
certain transfer agency, dividend disbursing and shareholder services for
Institutional Class shares of each of High Income Municipal, Limited
Term Tax-Exempt and Short-Intermediate Tax-Exempt (the Tax-Exempt
Funds) . UMB has entered into sub-arrangements pursuant to which FSC
calculates the NAV and dividends for the Institutional Class shares of
the Tax-Exempt Funds , and maintains each Tax-Exempt F und's
general accounting records . All of the fees are paid to FIIOC
and FSC by UMB, which is reimbursed by the Institutional Class
shares or fund, as appropriate, for such payments.
In fiscal 1994, fees paid by UMB to FIIOC on behalf of the Institutional
Class shares of Limited Term Tax-Exempt amounted to 0.07% of its average
net assets, and fees paid by UMB to FSC on behalf of Limited Term
Tax-Exempt amounted to 0.07% of its average net assets.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN on behalf of
Institutional Class shares. Each plan recognizes that FMR may use its
resources, including management fees, to pay expenses associated with the
sale of Institutional Class shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the Institutional Class shares. The Board
of Trustees has not authorized such payments. The Institutional Class of
each fund does not pay FMR separate fees for this service.
Each fund also pays other expenses, such as legal, audit, and custodian
fee s; in some instances , proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees.
The portfolio turnover rate for fiscal 1994 was 34% (Overseas) , 137%
(Equity Portfolio Growth), 125% (Global Resources), 43% (Growth
Opportunities), 228% annualized (Strategic Opportunities), 140% (Equity
Income), 202% (Income & Growth), 354% annualized (Emerging Markets
Income), 118% (High Yield), 104% annualized (Strategic Income), 68%
(Limited Term Bond), 313% (Government Investment), 108% (Short Fixed
Income), 38% (High Income Municipal) , 53% (Limited Term Tax-Exempt),
and 111% annualized (Short-Intermediate Tax-Exempt) . These rates
vary from year to year. High turnover rates increase transaction costs and
may increase taxable capital gains. FMR considers these effects when
evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
TYPES OF ACCOUNTS
If you invest through an Investment Professional, read that Investment
Professional's program materials in conjunction with this prospectus for
additional service features or fees that may apply. Certain features of
the funds, such as minimum initial or subsequent investment amounts, may be
modified in these programs, and administrative charges may be imposed for
the services rendered.
The different ways to set up (register) your account with Fidelity are
listed below.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, tax-free funds are not available
for purchase in retirement accounts. If your employer offers a fund through
a retirement program, contact your employer for more information. Otherwise
call your Investment Professional directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT (THE FOLLOWING OPTIONS ARE AVAILABLE ONLY FOR TAXABLE FUNDS)
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
(solid bullet) MONEY PURCHASE/PROFIT SHARING PLANS (KEOGH PLANS) are tax
deferred pension accounts designated for employees of unincorporated
businesses or for persons who are self-employed.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your Investment Professional.
HOW TO BUY SHARES
INSTITUTIONAL CLASS'S SHARE PRICE, called NAV, is calculated every business
day. Each fund's Institutional Class shares are sold without a sales
charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted by the transfer agent . NAV is normally
calculated at 4:00 p.m. Eastern time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the transfer agent before 4:00 p.m. Eastern time.
The transfer agent must receive payment within five business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page ___. If there is no account
application accompanying this prospectus, call your Investment Professional
or 1-800-843-3001.
If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
Investment Professional for more information and a retirement account
application.
Share certificates are no longer available for Institutional Class
shares.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail a n account application with a
check,
(small solid bullet) Wire money into your account,
(small solid bullet) Open your account by exchanging from the
same class of another Fidelity Advisor fund of from another Fidelity fund
account with the same registration, including name, address, and taxpayer
ID number.
(small solid bullet)Contact your Investment Professional.
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE (small solid bullet) Exchange from
the same class of (small solid bullet) Exchange from the same class of
1-800-843-3001 OR YOUR INVESTMENT another Fidelity Advisor fund or from another Fidelity Advisor fund or from
PROFESSIONAL another Fidelity fund account with another Fidelity fund account with
the same registration, including the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the account (small solid bullet) Make your check payable to the
application. Make your check complete name of the fund of your
payable to the complete name of the choice and note the applicable
fund of your choice and note the class. Indicate your fund account
applicable class. Have your number on your check and have
Investment Professional m ail to the your Investment Professional mail
address indicated on the application. to the address printed on your
account statement.
(small solid bullet) Exchange by mail: call
1-800-843 - 3001 or your Investment
Professional for instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your account
application and (small solid bullet) Bring your check to your Investment
check to your Investment Professional.
Professional.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) Call 1-800-843-3001 to set up your (small solid bullet) Not available for retirement
account and to arrange a wire accounts.
transaction. Not available for (small solid bullet) Wire to:
retirement accounts. Banker's Trust Co.
(small solid bullet) Wire to: Routing # 021001033
Banker's Trust Co. Custody & Shareholder Services
Routing # 021001033 Fidelity Advisor DART System
Custody & Shareholder Services DDA#: (call 1-800-843-3001)
Fidelity Advisor DART System FBO: (account name)
DDA#: (call 1-800-843-3001) (account number)
FBO: (account name)
(account number) Specify the complete name of the
fund of your choice and note the
Specify the complete name of the applicable class and include your
fund of your choice and note the account number and your name.
applicable class and include your
new account number and your name.
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent . NAV is normally calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges into Institutional Class shares
of other Fidelity Advisor funds offered through this prospectus, or into
other Fidelity funds, which can be requested by phone or in writing .
TO SELL CERTIFICATE D SHARES, call 1-800-544-7777 for
instructions. The funds no longer issues certificate shares.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES,
leave at least $40,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within
the last 30 days,
(small solid bullet) The check is being mailed to a different
address than the one on your account (record address),
(small solid bullet) The check is being made payable to someone
other than the account owner, or
(small solid bullet)The redemption proceeds are being transferred to a
Fidelity Advisor account with a different registration, .
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, signed certificates (if applicable), and
(small solid bullet)Any other applicable requirements listed in the
following table.
Deliver your letter to your Investment Professional, or mail it to the
following address:
Fidelity Investments Institutional Operations Co.
82 Devonshire Street ZR5
Boston, MA 02109
Unless otherwise instructed, the transfer agent will send a check to the
record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE All account types except retirement Maximum check request: $100,000.
1-800-843-3001 OR YOUR
INVE S TMENT PROFESSIONAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(phone_graphic) All account types You may exchange into the same
class of another Fidelity Advisor
fund or into another Fidelity fund
account with the same registration,
including name, address, and
taxpayer ID number .
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant, The letter of instruction (with
Sole Proprietorship, signature guarantee) must be
signed by all persons required to
sign for transactions, exactly as
Retirement account their names appear on the account.
The account owner should complete
a retirement distribution form. Call
1-800-843-3001 or your Investment
Professional to request one.
Trust The trustee must sign the letter
indicating capacity as trustee. If the
trustee's name is not in the account
registration, provide a copy of the
trust document certified within the
last 60 days.
Business or Organization At least one person authorized by
corporate resolution to act on the
account must sign the letter (with
signature guarantee).
Executor, Administrator, Call 1-800-843-3001 or your
Conservator/Guardian Investment Professional for
instructions.
Wire (wire_graphic) All account types except retirement You must sign up for the wire feature
before using it. To verify that it is in
place, call 1-800-843-3001.
Minimum wire: $1,000.
Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every
transaction, except a reinvestment, that affects your account balance or
your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet)Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the fund. Call your Investment
Professional if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds offered through
this prospectus or shares of other Fidelity funds by telephone or in
writing.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page __.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital gains
to shareholders each year. Each fund pays capital gains, if any, in
December and may pay additional capital gains after the close of its fiscal
year. Normally, dividends for Equity Income and Income & Growth are
distributed in March, June, September and December; dividends for
Overseas , Equity Portfolio Growth, Global Resources, Growth
Opportunities and Strategic Opportunities are distributed in December;
dividends for Equity Portfolio Growth and Equity Income may also be
distributed in January; dividends for Emerging Markets Income,
Strategic Income, High Yield, Limited Term Bond, Government Investment,
Short Fixed-Income, High Income Municipal, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt are declared daily and paid monthly.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option.
You may change your distribution option at any time by notifying the
transfer agent in writing.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 1/2 years old, you can receive distributions in cash.
When each of Overseas , Equity Portfolio Growth, Global Resources,
Growth Opportunities, Strategic Opportunities, Equity Income and
Income & Growth deducts a distribution from its NAV, the
reinvestment price is the applicable fund's NAV at the close of business
that day.
Dividends from Emerging Markets Income, High Yield, Strategic Income,
Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt will be reinvested at the applicable fund's NAV on the last
day of the month. Capital gain distributions from these funds will
be reinvested at the NAV as of the date the applicable fund deducts the
distributions from its NAV. Distribution checks will be mailed within
seven days, or longer for a December ex-dividend date.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the fund's tax implications. If your
account is not a tax-deferred retirement account, be aware of these tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that High Income Municipal ,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt earn is
distributed to shareholders as income dividends. Interest that is federally
tax-free remains tax-free when it is distributed. Distributions from
Overseas , Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income ,Income &
Growth, Emerging Markets Income, High Yield, Strategic Income, Government
Investment , Limited Term Bond and Short Fixed-Income , however,
are subject to federal income tax and may also be subject to state or local
taxes. If you live outside the United States, your distributions from
these funds could also be taxed by the country in which you reside.
For federal tax purposes income and short-term capital gain
distributions , for each of Overseas , Equity Portfolio Growth,
Global Resources , Growth Opportunities, Strategic Opportunities,
Equity Income, Income & Growth, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond and Short
Fixed-Income are taxed as dividends; long-term capital gain
distributions are taxed as long-term capital gains.
Mutual fund dividends from U.S. Government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not qualify for the benefit. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on the
tax laws in your state.
However, for shareholders of High Income Municipal, Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt , gain on the sale of
tax-free bonds results in taxable distributions. Short-term capital gains
and a portion of the gain on bonds purchased at a discount are taxed as
dividends; long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them. However, distributions declared in December and paid in
January are taxable as if they were paid on December 31.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. High Income Municipal may invest up to 100% of its
assets and each of Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt may invest up to 20% of its assets in these securities .
Individuals who are subject to the tax must report this interest on their
tax returns.
A portion of the dividends from High Income Municipal, Limited Term
Tax-Exempt, and Short-Intermediate Tax-Exempt may be free from state
or local taxes. Income from investments in your state are often tax-free to
you. Each year, the transfer agent will send you a breakdown of income from
each state to help you calculate your taxes.
During fiscal 1994, 100% of the income dividends from High Income
Municipal , Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt were free from federal income tax. And during fiscal
1994, 5.63% of High Income Municipal's and 11.07% of Short-Intermediate
Tax-Exempt's income dividends were subject to the federal alternative
minimum tax.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges are subject
to capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of a fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a monthly transaction statement. However, it is up to
you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. BE SURE TO KEEP YOUR
REGULAR ACCOUNT STATEMENTS; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution or dividend distribution, as applicable, from its NAV,
you will pay the full price for the shares and then receive a portion of
the price back in the form of a taxable distribution.
CURRENCY CONSIDERATIONS. For funds that can invest in foreign
securities, if a fund's dividends exceed its taxable income in any
year, which is sometimes the result of currency-related losses, all or a
portion of the fund's dividends may be treated as a return of capital to
shareholders for tax purposes. To minimize the risk of a return of capital,
each of these funds may adjust its dividends to take currency
fluctuations into account, which may cause the dividends to vary. Any
return of capital will reduce the cost basis of your shares, which will
result in a higher reported capital gain or a lower reported capital loss
when you sell your shares. The statement you receive in January will
specify if any distributions included a return of capital.
Undistributed net gains from currency transactions, if any, will
generally be distributed as a separate dividend in December.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a fund
and its investments and these taxes generally will reduce the fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. NAV is normally calculated as of the close of business of the
NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value the applicable
fund's investments, cash, and other assets, subtracting that class' pro
rata share of the value of the applicable fund's liabilities, subtracting
the liabilities allocated to that class, and dividing by the number of
shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to
sell one share) of Institutional Class shares are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions.
Additional documentation may be required from corporations, associations
and certain fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV offering price calculated after your order is
received and accepted by the transfer agent. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) The funds do not accept cash.
(small solid bullet) When making a purchase with more than one
check, each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the
number of checks processed at one time.
(small solid bullet)If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or the
transfer agent has incurred.
(small solid bullet)Direct Purchases: You begin to earn dividends
as of the first business day following the day the fund receives payment.
(small solid bullet)Confirmed Purchases: You begin to earn
dividends as of the business day the fund receives payment.
(small solid bullet)Automated Purchase Orders : You begin to earn
dividends as of the business day your order is received and accepted.
CONFIRMED PURCHASES . Certain Financial Institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next
business day , the order will be canceled and the Financial Institution
will be liable for any losses.
AUTOMATED PURCHASE ORDERS. Institutional Class shares of each of the funds
can be purchased or sold through Investment Professionals utilizing an
automated order placement and settlement system that guarantees payment for
orders on a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order is received and accepted by the
transfer agent. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares of Emerging Markets Income, Strategic
Income, High Yield, Limited Term Bond, Government Investment, Short
Fixed-Income, High Income Municipal, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt will earn dividends through the date
of redemption; however, shares redeemed on a Friday or prior to a holiday
will continue to earn dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check have been
collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500. The fee, which is payable
to the transfer agent, is designed to offset in part the relatively higher
costs of servicing smaller accounts.
IF YOUR ACCOUNT BALANCE FALLS BELOW $40,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the transfer agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to Investment Professionals who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of Investment Professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to Investment Professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As an Institutional Class shareholder, you have the privilege of exchanging
your Institutional Class shares for Institutional Class shares of other
Fidelity Advisor funds or for shares of other Fidelity funds. However, you
should note the following:
(small solid bullet) The fund you are exchanging into must be
registered for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales
charge, you pay the difference between that fund's sales charge and any
sales charge you may have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to temporarily
or permanently terminate the exchange privilege of any investor who makes
more than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet)Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issued so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been filed
but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D
rating will also be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized. .
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.
<PAGE>
Fidelity Advisor Institutional Class
Cross Reference Sheet
<TABLE>
<CAPTION>
<S> <C>
Form N-1A
Item Number Statement of Additional Information Section
----------- -------------------------------------------
10, 11 .................... Cover Page; Table of Contents
........
12 .................... *
........
13 a - c .................... Investment Policies and Limitations
........
d .................... Portfolio Transactions
........
14 a - c .................... Trustees and Officers
........
15 a .................... *
........
b .................... Description of the Trusts
........
c .................... Trustees and Officers
........
16 a i .................... FMR
........
ii .................... Trustees and Officers
........
iii .................... Management Contracts; Contracts with FMR
........ Affiliates
b,c,d .................... Management Contracts; Contracts with FMR
........ Affiliates
e .................... *
........
f .................... Distribution and Service Plans
........
g .................... *
........
h .................... Description of the Trusts
........
i .................... Contracts with FMR Affiliates
........
17 a .................... Portfolio Transactions
........
b .................... Portfolio Transactions
........
c .................... Portfolio Transactions
........
<PAGE>
d, e .................... *
........
18 a .................... Description of the Trusts
........
b .................... *
........
19 a .................... Additional Purchase, Exchange and Redemption
........ Information
b .................... Additional Purchase, Exchange and Redemption
........ Information; Valuation
c .................... *
........
20 Distributions and Taxes
21 a, b .................... Distribution and Service Plans; Contracts with FMR
........ Affiliates
c .................... *
........
22 .................... Performance; Appendix
........
23 .................... Financial Statements
........
* Not Applicable
</TABLE>
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<PAGE>
FIDELITY ADVISOR FUNDS
INSTITUTIONAL CLASS
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1995
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus (dated
June 30, 1995) for Institutional Class shares. Please retain this document
for future reference. Each fund's financial statements and financial
highlights, included in their respective Annual Reports, for the most
recent fiscal period, are incorporated herein by reference. To obtain an
additional copy of this SAI, any Prospectus or any Annual Report, please
call Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts, 02109 or your Investment Professional.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Considerations Affecting Canada
Special Considerations Affecting Latin America
Special Considerations Affecting Japan, the Pacific Basin, and
Southeast Asia
Special Considerations Affecting Europe
Special Considerations Affecting Africa
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange, and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Contracts with FMR Affiliates
Distribution and Service Plans
Description of the Trusts
Financial Statements
Appendix
<PAGE>
<TABLE>
<CAPTION>
Fidelity Advisor Series I-VIII Service Providers
<S> <C>
Growth Funds
Fidelity Advisor Overseas Fund Investment Adviser
Fidelity Advisor Equity Portfolio Growth Fidelity Management & Research Company (FMR)
Fidelity Advisor Global Resources Fund Investment Sub-Advisers
Fidelity Advisor Growth Opportunities Fund Fidelity Management & Research (U.K.) Inc. (FMR
U.K.)
Fidelity Advisor Strategic Opportunities Fidelity Management & Research (Far East) Inc. (FMR
Fund Far East)
Growth and Income Funds Fidelity International Investment Advisors (FIIA)
Fidelity Advisor Equity Income Fund Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.)
Fidelity Advisor Income & Growth Fund Fidelity Investments Japan Limited (FIJ)
Taxable Income Funds Distributor
Fidelity Advisor Emerging Markets Income Fidelity Distributors Corporation (FDC)
Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund Transfer Agent
Fidelity Advisor Government Investment Fund Fidelity Investments Institutional Operations
Company (FIIOC) (Institutional Class - taxable
funds)
Fidelity Advisor Limited Term Bond Fund United Missouri Bank, N.A. (UMB)(Institutional Class
- tax-exempt funds)
Fidelity Advisor Short Fixed-Income Fund
Tax-Exempt/Municipal Funds
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt
Fund
Fidelity Advisor Short-Intermediate
Tax-Exempt Fund
</TABLE>
FACOM-ptb-695
- 2 -
<PAGE>
I NVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth
in the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with a fund's investment
policies and limitations.
A fund's fundamental investment policies and limitations cannot
be changed without approval of a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (the 1940
Act)) of the fund. However, except for the fundamental investment
limitations listed below and the policies restated in the "Fundamental
Policies" paragraph on page __, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
OVERSEAS FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than obligations issued or guaranteed
by the government of the United States, its agencies or instrumentalities)
if, as a result thereof: (i) more than 5% of the fund's total assets would
be invested in the securities of such issuer or (ii) the fund would hold
more than 10% of the outstanding voting securities of such issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (including
the amount borrowed), less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the fund's total assets by
reason of a decline in net assets will be reduced within three days
(exclusive of Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite any issue of securities, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States,
its agencies or instrumentalities) if, as a result thereof, more than 25%
of the fund's total assets (taken at current value) would be invested in
- 3 -
<PAGE>
the securities of issuers having their principal business activities in
the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the price at which they are valued.
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in interests in real estate limited partnerships that are not
- 4 -
<PAGE>
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 15% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements).
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 10% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal domestic
or foreign exchanges. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
EQUITY PORTFOLIO GROWTH
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) purchase the securities of any issuer (other than
obligations issued or guaranteed by the Government of the United States,
its agencies or instrumentalities) if, as a result (a) more than 5% of the
- 5 -
<PAGE>
fund's total assets (taken at current value) would be invested in the
securities of such issuer, or (b) the fund would hold more than 10% of the
voting securities of such issuer;
(2) make short sales of securities (unless it owns or by
virtue of its ownership of other securities has the right to obtain,
securities equivalent in kind and amount to the securities sold),
provided, however, that the fund may purchase or sell futures contracts;
(3) purchase any securities on margin, except for such
short-term credits as are necessary for the clearance of transactions,
provided, however, that the fund may make initial and variation margin
payments in connection with purchases or sales of futures contracts or of
options on futures contracts;
(4) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of the fund's total assets
(including the amount borrowed) less liabilities (not including
borrowings). Any borrowings that come to exceed 33 1/3% of the value of
the fund's total assets by reason of a decline in net assets will be
reduced within 3 days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(5) underwrite any issue of securities (to the extent that
the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(6) purchase the securities of any issuer (other than
obligations issued or guaranteed by the Government of the United States,
its agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the
same industry;
(7) purchase or sell real estate (but this shall not prevent
the fund from investing in marketable securities issued by companies such
as real estate investment trusts which deal in real estate or interests
therein and participation interests in pools of real estate mortgage
loans);
(8) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities);
(9) lend any security or make any other loan if, as a result,
more than 33 1/3% of the fund's total assets would be lent to other
parties, except (i) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities;
(10) purchase securities of other investment companies (except
in the open market where no commission other than the ordinary broker's
commission is paid, or as a part of a merger or consolidation, and in no
- 6 -
<PAGE>
event may investments in such securities exceed 10% of the total assets of
the fund);
(11) purchase the securities of any issuer if, as a result,
more than 5% of the fund's total assets (taken at current value) would be
invested in the securities of companies which, including predecessors,
have a record of less than three years of continuous operation; or
(12) invest in oil, gas, or other mineral exploration or
development programs.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (4)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iii) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(iv) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable, or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iii) would exceed 10% of the fund's net assets.
(v) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements).
- 7 -
<PAGE>
(vi) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(vii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(viii) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
GLOBAL RESOURCES FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than obligations issued or guaranteed
by the government of the United States, or any of its agencies or
instrumentalities) if, as a result thereof, (a) more than 5% of the fund's
total assets would be invested in the securities of such issuer, or (b)
the fund would hold more than 10% of the outstanding voting securities of
such issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed this amount will be reduced within three
days (not including Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the
extent that the fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
- 8 -
<PAGE>
(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.
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) 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 fund for which FMR or an affiliate serves
as investment adviser or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings
for purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(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 cannot
- 9 -
<PAGE>
be sold or disposed of in the ordinary course of business at approximately
the prices at which they are valued.
(v) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to invest in physical
commodities other than precious metals (i.e., gold, palladium, platinum
and silver) and it intends to limit such investments to not more than 25%
of the fund's total assets. The fund may receive no more than 10% of its
yearly income from gains resulting from selling metals or any other
physical commodity.
(vii) 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.)
(viii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange or as a result of a reorganization,
consolidation, or merger.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 10% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal domestic
- 10 -
<PAGE>
or foreign exchanges. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(xii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures contracts and options, see
the section entitled "Limitations on Futures and Options Transactions" on
page . For the fund's limitations on short sales, see the section
entitled " Short Sales" on page .
GROWTH OPPORTUNITIES FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933, in the disposition of restricted
securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
- 11 -
<PAGE>
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
- 12 -
<PAGE>
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the
fund's total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they cannot
be sold or disposed of in the ordinary course of business at approximately
the prices at which they are valued.
(v) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments, and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limit does not apply to purchases of debt securities or
to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower cost of the market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, may
- 13 -
<PAGE>
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page . For the fund's limitations on short sales, see the section
entitled "Short Sales" on page .
STRATEGIC OPPORTUNITIES FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States,
its agencies, or instrumentalities) if, as a result thereof, more than 5%
of the fund's total assets (taken at current value) would be invested in
the securities of such issuer;
(2) purchase the securities of any issuer, if such purchase,
at the time thereof, would cause more than 10% of the outstanding voting
securities of such issuer to be held in the fund's portfolio;
(3) issue senior securities (except to the extent that
issuance of one or more classes of shares of the fund in accordance with
an order issued by the Securities and Exchange Commission may be deemed
to constitute issuance of a senior security);
(4) make short sales of securities, (unless it owns, or by
virtue of its ownership of other securities has the right to obtain, at no
additional cost, securities equivalent in kind and amount to the
securities sold); provided, however, that the fund may enter into forward
foreign currency exchange transactions; and further provided that the fund
may purchase or sell futures contracts;
(5) purchase any securities or other property on margin,
(except for such short-term credits as are necessary for the clearance of
transactions); provided, however, that the fund may make initial and
variation margin payments in connection with purchases or sales of futures
contracts or options on futures contracts;
- 14 -
<PAGE>
(6) borrow money except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of the fund's total assets
(including the amount borrowed) less liabilities (not including
borrowings). Any borrowings that come to exceed 33 1/3% of the fund's
total assets by reason of a decline in net assets, will be reduced within
three days (exclusive of Sundays and holidays) to the extent necessary to
comply with the 33 1/3% limitation. The fund will not purchase
securities for investment while borrowings equaling 5% or more of its
total assets are outstanding;
(7) underwrite any issue of securities (except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of "restricted securities");
(8) purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States,
its agencies, or instrumentalities) if, as a result thereof, more than 25%
of the fund's total assets would be invested in the securities of one or
more issuers having their principal business activities in the same
industry;
(9) purchase or sell real estate (but this shall not prevent
the fund from investing in marketable securities issued by companies such
as real estate investment trusts which deal in real estate or interests
therein and participation interests in pools of real estate mortgage
loans);
(10) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities);
(11) lend any security or make any other loan if as a result,
more than 33 1/3% of the fund's total assets would be lent to other
parties except (i) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities;
(12) purchase securities of other investment companies (except
in the open market where no commission other than the ordinary broker's
commission is paid, or as part of a merger or consolidation, and in no
event may investments in such securities exceed 10% of the value of total
assets of the fund). The fund may not purchase or retain securities issued
by other open-end investment companies;
(13) invest more than 5% of the fund's total assets (taken at
market value) in the securities of companies which, including
predecessors, have a record of less than three years' continuous
operation; or
(14) invest in oil, gas, or other mineral exploration or
development programs.
- 15 -
<PAGE>
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund may borrow money only (a) from a bank or
from a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements are
treated as borrowings for purposes of fundamental investment limitation
(6)). The fund will not borrow from other funds advised by FMR or its
affiliates if total outstanding borrowings immediately after such
borrowing would exceed 15% of the fund's total assets.
(ii) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(iii) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (ii) would exceed 10% of the fund's net assets.
(iv) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(v) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(vi) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(vii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page . For the fund's limitations on short sales, see the section
entitled "Short Sales" on page .
- 16 -
<PAGE>
EQUITY INCOME FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
- 17 -
<PAGE>
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except (a) by lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser, or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation or merger.
- 18 -
<PAGE>
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(xi) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
INCOME & GROWTH FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) 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
- 19 -
<PAGE>
of the Securities Act of 1933, in the disposition of restricted
securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
- 20 -
<PAGE>
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to purchase interests
in real estate investment trusts that are not readily marketable or
interests in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a result,
the sum of such interests and other investments considered illiquid under
limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except 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.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
- 21 -
<PAGE>
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of its net assets.
Included in that amount, but not to exceed 2% of the fund's net assets,
may be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas,
other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
EMERGING MARKETS INCOME FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
- 22 -
<PAGE>
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) To meet federal tax requirements for
qualification as a " regulated investment company," the fund limits its
investments so that at the close of each quarter of its taxable year: (a)
with regard to at least 50% of total assets, no more than 5% of total
assets are invested in the securities of a single issuer, and (b) no more
than 25% of total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "government securities" as
defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(iii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (2)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
- 23 -
<PAGE>
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to invest in interests
in real estate investment trusts that are not readily marketable, or to
invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(vii) The fund does not currently intend to lend assets other
than securities to other parties, except (a) by lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser, or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation or merger.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 10% of the fund's net
assets. Included in that amount, but not to exceed 2% of net assets, are
warrants whose underlying securities are not traded on principal domestic
or foreign exchanges. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(xii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
- 24 -
<PAGE>
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
HIGH YIELD FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the value of the fund's total assets would
be invested in the securities of that issuer, or (b) it would hold more
than 10% of the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered 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
- 25 -
<PAGE>
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval:
(i) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 15% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
- 26 -
<PAGE>
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans , loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(viii) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(x) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page.
STRATEGIC INCOME FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
- 27 -
<PAGE>
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933, in the disposition of restricted
securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval:
(i) To meet federal tax requirements for
qualification as a " regulated investment company," the fund limits its
investments so that at the close of each quarter of its taxable year: (a)
with regard to at least 50% of total assets, no more than 5% of total
assets are invested in the securities of a single issuer, and (b) no more
than 25% of total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "government securities" as
defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
- 28 -
<PAGE>
(iii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (2)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any
security if, as a result, more than 15% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans and loan participations or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
loan commitments of the sellers. (This limitation does not apply to
purchases of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
- 29 -
<PAGE>
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas,
or other mineral explorations or development programs or leases.
(xi) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
GOVERNMENT INVESTMENT FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result,(a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940.
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of issuers having
their principal business activities in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other investments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies in the real estate business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
- 30 -
<PAGE>
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed 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.
- 31 -
<PAGE>
(v) The fund does not currently intend to invest in
interests in real estate investment trusts that are not readily marketable
or invest in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System if, as a result, the sum of such interests
and other investments considered illiquid under limitation (iv) would
exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other
than securities to other parties, except by (a) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser, or (b)
acquiring loans, loan participations or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange or as a result of a reorganization,
consolidation or merger.
(viii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than 3 years of continuous operation.
(ix) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
- 32 -
<PAGE>
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(xii) The fund does not currently intend to enter into any
futures contract or option on a futures contract if, as a result, the sum
of initial margin deposits on futures contracts and related options and
premiums paid for options on futures contracts the fund has purchased,
after taking into account unrealized profits and losses on such contracts
would exceed 5% of the fund's total assets.
(xiii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
LIMITED TERM BOND FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment), in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings.) Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
- 33 -
<PAGE>
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of the fund's total assets would be lent to other
parties (but this limitation does not apply to purchases of debt
securities or to repurchase agreements).
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund 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 fund for which FMR or an affiliate serves
as investment advisor or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings
for purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other
than securities to other parties, except by: (a) lending money (up to 7.5%
- 34 -
<PAGE>
of the fund's net assets) to a registered investment company or fund for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments,
and, in connection therewith, assuming any associated unfunded commitments
of the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vi) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(vii) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(viii) The fund does not currently intend to invest in interests
in real estate investment trusts that are not readily marketable or to
invest in interests in real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(ix) The fund currently does not intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to (a) purchase
securities of other investment companies except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(xi) The fund does nor currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
SHORT FIXED-INCOME FUND
- 35 -
<PAGE>
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
- 36 -
<PAGE>
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 limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other
than securities to other parties, except by (i) lending money (up to 7.5%
of the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (ii)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated unfunded
commitments of the sellers. (This limitation does not apply to purchases
of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange or as a result of a reorganization,
consolidation, or merger.
(vii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
- 37 -
<PAGE>
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(viii) The fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the fund's net
assets. Included in that amount, but not to exceed 2% of the fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(x) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page.
HIGH INCOME MUNICIPAL FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others (except to the
extent that the fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted
securities);
- 38 -
<PAGE>
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government, or a political subdivision of any of the foregoing) if, as a
result, more than 25% of the fund's total assets would be invested in
securities of companies whose principal business activities are in the
same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following investment limitations are not fundamental and may
be changed without shareholder approval.
(i) The fund does not currently intend to sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
- 39 -
<PAGE>
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger
(vi) The fund does not currently intend to invest in interests
of real estate investment trusts that are not readily marketable, or to
invest in interests of real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(vii) The fund does not currently intend to engage in
repurchase agreements or make loans (but this limitation does not apply to
purchases of debt securities).
(viii) The fund does not currently intend to invest more than
25% of its total assets in industrial revenue bonds related to a single
industry.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas
or other mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(xii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
- 40 -
<PAGE>
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
on page.
LIMITED TERM TAX-EXEMPT FUND
The following are the fund's fundamental investment limitations
and policies set forth in their entirety. The fund may not:
(1) with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of its total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(4) underwrite securities issued by others except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933, in the disposition of restricted
securities;
(5) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government, or a political subdivision of any of the foregoing) if, as a
result, more than 25% of the fund's total assets would be invested in the
securities of companies whose principal business activities are in the
same industry;
(6) purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business);
- 41 -
<PAGE>
(7) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(8) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties,
but this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
The following limitations are not fundamental and may be changed
without shareholder approval.
(i) The fund does not currently intend to sell
securities short unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (3)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
- 42 -
<PAGE>
(iv) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to engage in
repurchase agreements or make loans but this limitation does not apply to
purchases of debt securities.
(vi) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger. Any securities issued by other investment
companies would also have to meet the fund's credit and maturity
standards. In some cases, other investment companies may incur expenses
that are comparable to expenses paid by the fund, which would be taken
into account in considering investments in such securities.
(vii) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years of continuous operation.
(viii) The fund does not currently intend to invest in oil, gas,
other mineral exploration or development programs or leases.
(ix) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and Trustees of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(x) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Company or an affiliate
or successor with substantially the same fundamental investment objective,
policies, and limitations as the fund.
- 43 -
<PAGE>
For the fund's limitations on futures contracts and options, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
SHORT-INTERMEDIATE TAX-EXEMPT FUND
The following are the fund's fundamental investment limitations
set forth in their entirety. The fund may not:
(1) issue senior securities, except as permitted under the
Investment Company Act of 1940;
(2) borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation;
(3) underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local
government, or a political subdivision of any of the foregoing) if, as a
result, more than 25% of the fund's total assets would be invested in
securities of companies whose principal business activities are in the
same industry;
(5) purchase or sell real estate, unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business;
(6) purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities); or
(7) lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets would be lent to other parties (but
this limitation does not apply to purchases of debt securities or to
repurchase agreements);
(8) The fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
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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) To meet federal tax requirements for
qualification as a " regulated investment company," the fund limits its
investments so that at the close of each quarter of its taxable year: (a)
with regard to at least 50% of total assets, no more than 5% of total
assets are invested in the securities of a single issuer, and (b) no more
than 25% of total assets are invested in the securities of a single
issuer. Limitations (a) and (b) do not apply to "government securities" as
defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute
selling securities short.
(iii) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an affiliate
serves as investment adviser or (b) by engaging in reverse repurchase
agreements with any party (reverse repurchase agreements are treated as
borrowings for purposes of fundamental investment limitation (2)). The
fund will not purchase any security while borrowings representing more
than 5% of its total assets are outstanding. The fund will not borrow from
other funds advised by FMR or its affiliates if total outstanding
borrowings immediately after such borrowing would exceed 15% of the fund's
total assets.
(v) The fund does not currently intend to purchase any
security if, as a result, more than 10% of its net assets would be
invested in securities that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to engage in
repurchase agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) The fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where
no commission except the ordinary broker's commission is paid, or (b)
purchase or retain securities issued by other open-end investment
companies. Limitations (a) and (b) do not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
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(viii) The fund does not currently intend to purchase the
securities of any issuer if those officers and Trustees of the Trust and
those officers and directors of FMR who individually own more than 1/2 of
1% of the securities of such issuer together own more than 5% of such
issuer's securities.
(ix) The fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by
domestic or foreign governments or political subdivisions thereof) if, as
a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a
record of less than three years continuous operation.
(x) The fund may not purchase or sell physical commodities
unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the fund from purchasing or
selling options and futures contracts or from investing in securities or
other instruments backed by physical commodities.)
(xi) The fund does not currently intend to invest in interests
of real estate investment trusts that are not readily marketable, or to
invest in interests of real estate limited partnerships that are not
listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(xii) The fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.
(xiii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company managed by Fidelity Management & Research Company or an affiliate
or successor with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For the fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
For purposes of certain fundamental investment limitations, FMR
identifies the issuer of a security depending on its terms and conditions.
In identifying the issuer, FMR will consider the entity or entities
responsible for payment of interest and repayment of principal and the
source of such payments; the way in which assets and revenues of an
issuing political subdivision are separated from those of other political
entities; and whether a governmental body is guaranteeing the security.
Each fund's investments must be consistent with its investment
objective and policies. Accordingly, not all of the security types and
investment techniques discussed below are eligible investments for each of
the funds.
Affiliated Bank Transactions. A fund may engage in transactions
with financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the Investment Company Act of 1940
(1940 Act). These transactions may include repurchase agreements with
custodian banks; short-term obligations of, and repurchase agreements
with, the 50 largest U.S. banks (measured by deposits); municipal
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securities; U.S. government securities with affiliated financial
institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. In accordance with
exemptive orders issued by the Securities and Exchange Commission (SEC),
the Board of Trustees (the Trustees) has established and periodically
reviews procedures applicable to transactions involving affiliated
financial institutions.
Funds' Rights as Shareholders. The funds do not intend to direct
or administer the day-to-day operations of any company. A fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of a fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business
activities; seeking changes in a company's directors or management;
seeking changes in 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 the fund and the risk of actual liability if a fund is
involved in litigation. No guarantee can be made, however, that litigation
against the fund will not be undertaken or liabilities incurred.
Lower-Quality Debt Securities. While the market for high-yield
corporate debt securities has been in existence for many years and has
weathered previous economic downturns, the 1980s brought a dramatic
increase in the use of such securities to fund highly leveraged corporate
acquisitions and restructurings. Past experience may not provide an
accurate indication of the future performance of the high-yield bond
market, especially during periods of economic recession. In fact, from
1989 to 1991, the percentage of lower-quality debt securities that
defaulted rose significantly above prior levels, although the default rate
decreased from 1992 and 1993.
The market for lower-quality debt securities may be thinner and
less active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of Trustees,
including the use of outside pricing services. Judgment plays a greater
role in valuing high-yield corporate debt securities than is the case for
securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor
perceptions may affect the ability of outside pricing services to value
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lower-quality debt securities and a fund's ability to sell these
securities.
Since the risk of default is higher for lower-quality debt
securities, FMR's research and credit analysis are an especially important
part of managing securities of this type held by a fund. In considering
investments for a fund, FMR will attempt to identify those issuers of
high-yielding securities whose financial condition is adequate to meet
future obligations, has improved, or is expected to improve in the future.
FMR's analysis focuses on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.
Each fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise to exercise its rights as a
security holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
Lower-Quality Municipal Securities. High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt may invest a
portion of their assets in lower-quality municipal securities as
described in the Prospectus.
While the market for municipals is considered to be substantial,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by a fund to value its portfolio
securities, and a fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
Each fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise exercise its rights as a
security holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
Loans and Other Direct Debt Instruments. Direct debt instruments
are interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan participations),
to suppliers of goods or services (trade claims or other receivables), or
to other parties. Direct debt instruments are subject to each fund's
policies regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
principal and interest. Direct debt instruments may not be rated by any
nationally recognized rating service. If a fund does not receive scheduled
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interest or principal payments on such indebtedness, the fund's share
price and yield could be adversely affected. Loans that are fully secured
offer a fund more protections than an unsecured loan in the event of
non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor
involves substantially greater risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of developing countries also involves a risk that the
governmental entities responsible for the repayment of the debt may be
unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks to a fund. For example, if a loan is foreclosed, the fund could
become part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral. In
addition, it is conceivable that under emerging legal theories of lender
liability, the fund could be held liable as a co-lender. Direct debt
instruments may also involve a risk of insolvency of the lending bank or
other intermediary. Direct debt instruments that are not in the form of
securities may offer less legal protection to a fund in the event of fraud
or misrepresentation. In the absence of definitive regulatory guidance,
each fund relies on FMR's research in an attempt to avoid situations where
fraud or misrepresentation could adversely affect the fund.
A loan is often administered by a bank or other financial
institution that acts as agent for all holders. The agent administers the
terms of the loan, as specified in the loan agreement. Unless, under the
terms of the loan or other indebtedness, each fund has direct recourse
against the borrower, it may have to rely on the agent to apply
appropriate credit remedies against a borrower. If assets held by the
agent for the benefit of a fund were determined to be subject to the
claims of the agent's general creditors, the fund might incur certain
costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by a fund may include letters of
credit, revolving credit facilities, or other standby financing
commitments obligating the fund to pay additional cash on demand. These
commitments may have the effect of requiring the fund to increase its
investment in a borrower at a time when it would not otherwise have done
so, even if the borrower's condition makes it unlikely that the amount
will ever be repaid. A fund will set aside appropriate liquid assets in a
segregated custodial account to cover its potential obligations under
standby financing commitments.
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Each fund limits the amount of total assets that it will invest
in any one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations, a fund
generally will treat the borrower as the "issuer" of indebtedness held by
the fund. In the case of loan participations where a bank or other lending
institution serves as financial intermediary between the fund and the
borrower, if the participation does not shift to the fund the direct
debtor-creditor relationship with the borrower, SEC interpretations
require the fund, in appropriate circumstances, to treat both the lending
bank or other lending institution and the borrower as " issuers" for these
purposes. Treating a financial intermediary as an issuer of indebtedness
may restrict a fund's ability to invest in indebtedness related to a
single financial intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
Repurchase Agreements. In a repurchase agreement, a fund
purchases a security and simultaneously commits to sell that security back
to the original seller at an agreed-upon price. The resale price reflects
the purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. While
it does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well as delays
and costs to a fund in connection with bankruptcy proceedings), it is each
fund's (except Equity Portfolio Growth's) current policy to engage in
repurchase agreement transactions with parties whose creditworthiness has
been reviewed and found satisfactory by FMR. Equity Portfolio Growth will
engage in repurchase agreement transactions only with banks of the
Federal Reserve System and primary dealers in U.S. Government securities.
Foreign Repurchase Agreements. Foreign repurchase agreements may
include agreements to purchase and sell foreign securities in exchange for
fixed U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of the
security purchased by the fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of a
default by the counterparty, the fund may suffer a loss if the value of
the security purchased is less than the agreed-upon repurchase price, or
if the fund is unable to successfully assert a claim to the collateral
under foreign laws. As a result, foreign repurchase agreements may involve
higher credit risks than repurchase agreements in U.S. markets, as well as
risks associated with currency fluctuations. In addition, as with other
emerging market investments, repurchase agreements with counterparties
located in emerging markets or relating to emerging market securities may
involve issuers or counterparties with lower credit ratings than typical
U.S. repurchase agreements.
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Reverse Repurchase Agreements. In a reverse repurchase agreement,
a fund sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
A fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
Delayed-Delivery Transactions. A fund may buy and sell
securities on a delayed-delivery or when-issued basis. These transactions
involve a commitment by a fund to purchase or sell specific securities at
a predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security (and more
than seven days in the future). Typically, no interest accrues to the
purchaser until the security is delivered. A fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because a fund is not required to pay for securities
until the delivery date, these risks are in addition to the risks
associated with a fund's other investments. If a fund remains
substantially fully invested at a time when delayed-delivery purchases
are outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, a fund will
set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When a fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities, a
fund could miss a favorable price or yield opportunity, or could suffer a
loss.
A fund may renegotiate delayed-delivery transactions after they
are entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
Illiquid Investments are investments that cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued. Under the supervision of the Trustees, FMR
determines the liquidity of a fund's investments and, through reports from
FMR, the Board monitors investments in illiquid instruments. In
determining the liquidity of a fund's investments, FMR may consider
various factors including (1) the frequency of trades and quotations, (2)
the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security
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(including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the
fund's rights and obligations relating to the investment).
Investments currently considered by a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government-stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR may
determine some restricted securities, municipal lease obligations,
government-stripped fixed-rate mortgage-backed securities, loans and other
direct debt instruments, emerging market securities, and swap agreements
to be illiquid. However, with respect to over-the-counter options a fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option
before expiration.
In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If, through a change in values, net assets or
other circumstances, a fund were in a position where more than 10% or 15%
of its net assets (see each fund's non-fundamental investment limitations)
was invested in illiquid securities, it would seek to take appropriate
steps to protect liquidity.
Restricted Securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under
the Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration
of the security.
Securities Lending. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the
securities loaned and, at the same time, to earn additional income. Since
there may be delays in the recovery of loaned securities, or even a loss
of rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good standing.
Furthermore, they will only be made if, in FMR's judgment, the
consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that
a fund may engage in loan transactions only under the following
conditions: (1) a fund must receive 100% collateral in the form of cash or
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cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower;
(2) the borrower must increase the collateral whenever the market value of
the securities loaned (determined on a daily basis) rises above the value
of the collateral; (3) after giving notice, a fund must be able to
terminate the loan at any time; (4) a fund must receive reasonable
interest on the loan or a flat fee from the borrower, as well as amounts
equivalent to any dividends, interest, or other distributions on the
securities loaned and to any increase in market value; (5) a fund may pay
only reasonable custodian fees in connection with the loan; and (6) the
Board of Trustees must be able to vote proxies on the securities loaned,
either by terminating the loan or by entering into an alternative
arrangement with the borrower.
Cash received through loan transactions may be invested in any
security in which a fund is authorized to invest. Investing this cash
subjects that investment, as well as the security loaned, to market forces
(i.e., capital appreciation or depreciation).
Swap Agreements. Swap agreements can be individually negotiated
and structured to include exposure to a variety of investments or market
factors. Depending on their structure, swap agreements may increase or
decrease a fund's exposure to long- or short-term interest rates (in the
United States or abroad), foreign currency values, mortgage securities,
corporate borrowing rates, or other factors such as security prices or
inflation rates. Swap agreements can take many different forms and are
known by a variety of names. A fund is not limited to any particular form
of swap agreement if FMR determines it is consistent with a fund's
investment objective and policies.
In a typical cap or floor agreement, one party agrees to make
payments only under specified circumstances, usually in return for payment
of a fee by the other party. For example, the buyer of an interest rate
cap obtains the rights to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure
from one type of investment to another. For example, if a fund agreed to
exchange payments in dollars for payments in foreign currency, the swap
agreement would tend to decrease a fund's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements
is the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, a fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely
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to decline, potentially resulting in losses. A fund expects to be able to
reduce its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the
same party or a similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
If a fund enters into a swap agreement on a net basis, it will segregate
assets with a daily value at least equal to the excess, if any, of the
fund's accrued obligations under the swap agreement over the accrued
amount the fund is entitled to receive under the agreement. If a fund
enters into a swap agreement on other than a net basis, it will segregate
assets with a value equal to the full amount of a fund's accrued
obligations under the agreement.
Indexed Securities. A fund may purchase securities whose prices
are indexed to the prices of other securities, securities indices,
currencies, precious metals or other commodities, or other financial
indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic.
Gold-indexed securities, for example, typically provide for a maturity
value that depends on the price of gold, resulting in a security whose
price tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt securities
whose maturity values or interest rates are determined by reference to the
values of one or more specified foreign currencies, and may offer higher
yields than U.S. dollar-denominated securities of equivalent issuers.
Currency-indexed securities may be positively or negatively indexed; that
is, their maturity value may increase when the specified currency value
increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline when
foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent
on the performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes in
the U.S. and abroad. At the same time, indexed securities are subject to
the credit risks associated with the issuer of the security, and their
values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain U.S. government agencies. Indexed securities may
be more volatile than the underlying instruments.
Foreign Investments. Investing in securities issued by companies
or other issuers whose principal activities are outside the United States
may involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
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fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not
subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards
of practice comparable to those applicable to U.S. issuers. Further,
economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States.
Investing abroad also involves different political and economic
risks. Foreign investments may be affected by actions of foreign
governments adverse to the interests of U.S. investors, including the
possibility of expropriation or nationalization of assets, confiscatory
taxation, restrictions on U.S. investment or on the ability to repatriate
assets or convert currency into U.S. dollars, or other government
intervention. There may be a greater possibility of default by foreign
governments or foreign government-sponsored enterprises. Investments in
foreign countries also involve a risk of local political, economic, or
social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that FMR will be able to anticipate
these potential events or counter their effects. The considerations noted
above generally are intensified for investments in developing countries.
Developing countries may have relatively unstable governments, economies
based on only a few industries, and securities markets that trade a small
number of securities.
Foreign markets may offer less protection to investors than U.S.
markets. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter
markets located outside of the United States. Foreign stock markets, while
growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid
and more volatile than securities of comparable U.S. issuers. Foreign
security trading practices, including those involving securities
settlement where fund assets may be released prior to receipt of payment,
may expose a fund to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer, and may involve substantial
delays. In addition, the costs of foreign investing, including withholding
taxes, brokerage commissions and custodial costs, are generally higher
than for U.S. investing. In general, there is less overall governmental
supervision and regulation of securities exchanges, brokers, and listed
companies than in the United States. It may also be difficult to enforce
legal rights in foreign countries.
Each fund may invest in foreign securities that impose
restrictions on transfer within the United States or to U.S. persons.
Although securities subject to such transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the
same class that are not subject to such restrictions.
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A fund may invest in American Depository Receipts and European
Depository Receipts (ADRs and EDRs), which are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a bank or
similar financial institution. Designed for use in the U.S. and European
securities markets, respectively, ADRs and EDRs are alternatives to the
purchase of the underlying securities in their national markets and
currencies.
Sovereign Debt Obligations. A fund may purchase sovereign debt
instruments issued or guaranteed by foreign governments or their agencies,
including debt of Latin American nations or other developing countries.
Sovereign debt may be in the form of conventional securities or other
types of debt instruments such as loans or loan participations, sovereign
debt of developing countries may involve a high degree of risk, and may be
in default or present the risk of default. Governmental entities
responsible for repayment of the debt may be unable or unwilling to repay
principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and interest may depend on political as well as economic
factors.
Foreign Currency Transactions. A fund may conduct foreign
currency transactions on a spot (i.e., cash) basis or by entering into
forward contracts to purchase or sell foreign currencies at a future date
and price. A fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers generally do not charge a fee for
conversion, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to a fund at one rate, while
offering a lesser rate of exchange should a fund desire to resell that
currency to the dealer. Forward contracts are generally traded in an
interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. The parties to a forward
contract may agree to offset or terminate the contract before its
maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
A fund may use currency forward contracts for any purpose
consistent with its investment objective. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by a fund. A fund may also use swap
agreements, indexed securities, and options and futures contracts relating
to foreign currencies for the same purposes.
When a fund agrees to buy or sell a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. By entering into a forward contract for the purchase or sale,
for a fixed amount of U.S. dollars, of the amount of foreign currency
involved in the underlying security transaction, a fund will be able to
protect itself against an adverse change in foreign currency values
between the date the security is purchased or sold and the date on which
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payment is made or received. This technique is sometimes referred to as a
"settlement hedge" or "transaction hedge." A fund may also enter into
forward contracts to purchase or sell a foreign currency in anticipation
of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by
FMR.
A fund may also use forward contracts to hedge against a decline
in the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. A fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling - for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. For example, if a fund held
investments denominated in Deutschemarks, a fund could enter into forward
contracts to sell Deutschemarks and purchase Swiss Francs. This type of
strategy, sometimes known as a " cross-hedge," will tend to reduce or
eliminate exposure to the currency that is sold, and increase exposure to
the currency that is purchased much as if a fund had sold a security
denominated in one currency and purchased an equivalent security
denominated in another. Cross-hedges protect against losses resulting
from a decline in the hedged currency, but will cause a fund to assume the
risk of fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to
set aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, the fund
will segregate assets to cover currency forward contracts, if any, whose
purpose is essentially speculative. A fund will not segregate assets to
cover forward contracts entered into for hedging purposes, including
settlement hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on
FMR's skill in analyzing and predicting currency values. Currency
management strategies may substantially change a fund's investment
exposure to changes in currency exchange rates, and could result in losses
to a fund if currencies do not perform as FMR anticipates. For example, if
a currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would be unable to
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participate in the currency's appreciation. If FMR hedges currency
exposure through proxy hedges, a fund could realize currency losses from
the hedge and the security position at the same time if the two currencies
do not move in tandem. Similarly, if FMR increases a fund's exposure to a
foreign currency, and that currency's value declines, a fund will realize
a loss. There is no assurance that FMR's use of currency management
strategies will be advantageous to the fund or that it will hedge at an
appropriate time.
Refunding Contracts. A fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts require the issuer to sell
and a fund to buy refunded municipal obligations at a stated price and
yield on a settlement date that may be several months or several years in
the future. A fund generally will not be obligated to pay the full
purchase price if it fails to perform under a refunding contract. Instead,
refunding contracts generally provide for payment of liquidated damages to
the issuer (currently 15-20% of the purchase price). A fund may secure
its obligations under a refunding contract by depositing collateral or a
letter of credit equal to the liquidated damages provisions of the
refunding contract. When required by SEC guidelines, a fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
Inverse Floaters are instruments whose interest rates bear an
inverse relationship to the interest rate on another security or the value
of an index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate
paid on the short-term instrument. Depending on market availability, the
two portions may be recombined to form a fixed-rate municipal bond. The
market for inverse floaters is relatively new.
Variable or Floating Rate Obligations bear variable or floating
interest rates and carry rights that permit holders to demand payment of
the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate instruments have interest
rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic
adjustment in the interest rate. These formulas are designed to result in
a market value for the instrument that approximates its par value. In
many instances, bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
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thereof. A fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The Internal Revenue Service (IRS) has not ruled whether the
interest on Participating VRDOs is tax-exempt and, accordingly, a fund
intends to purchase these instruments based on opinions of bond counsel. A
fund may invest in fixed-rate bonds that are subject to third party puts
and in participation interests in such bonds held by a bank in trust or
otherwise.
Tender Option Bonds are created by coupling an intermediate - or
long-term, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for a fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
Zero Coupon Bonds do not make regular interest payments. Instead,
they are sold at a deep discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its dividends, a fund takes into account as income a portion
of the difference between a zero coupon bond's purchase price and its face
value.
Standby Commitments are puts that entitle holders to same-day
settlement at an exercise price equal to the amortized cost of the
underlying security plus accrued interest, if any, at the time of
exercise. A fund may acquire standby commitments to enhance the liquidity
of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a
third party, although it could sell the underlying municipal security to a
third party at any time. A fund may purchase standby commitments separate
from or in conjunction with the purchase of securities subject to such
commitments. In the latter case, a fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit
or other guarantees to support their ability to buy securities on demand.
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FMR may rely upon its evaluation of a bank's credit in determining whether
to purchase an instrument supported by a letter of credit. In evaluating
a foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be
subject to unfavorable political or economic developments, currency
controls, or other governmental restrictions that might affect the bank's
ability to honor its credit commitment.
Standby commitments are subject to certain risks, including the
ability of issuers of standby commitments to pay for securities at the
time the commitments are exercised; the fact that standby commitments are
not marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
Federally Taxable Obligations. High Income Municipal, Limited
Term Tax-Exempt, and Short-Intermediate Tax-Exempt each does not intend to
invest in securities whose interest is federally taxable; however, from
time to time, a tax-exempt fund may invest a portion of its assets on a
temporary basis in fixed-income obligations whose interest is subject to
federal income tax. For example, a fund may invest in obligations whose
interest is federally taxable pending the investment or reinvestment in
municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should High Income Municipal, Limited Term Tax-Exempt, or
Short-Intermediate Tax-Exempt invest in federally taxable obligations, it
would purchase securities that in FMR's judgment are of high quality.
These would include obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities; obligations of domestic
banks; and repurchase agreements. Each fund's standards for high-
quality, taxable obligations are essentially the same as those described
by Moody's Investor Services (Moody's) in rating corporate obligations
within its two highest ratings of Prime-1 and Prime-2, and those
described by Standard & Poor's Corporation (S&P) in rating corporate
obligations within its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax
exemption for interest on municipal obligations are introduced before
Congress from time to time. Proposals also may be introduced before state
legislatures that would affect the state tax treatment of the funds'
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the tax-exempt funds' holdings
would be affected and the Trustees would reevaluate the tax-exempt fund's
investment objectives and policies.
High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt each anticipates being as fully invested as
practicable in municipal securities; however, there may be occasions when,
as a result of maturities of portfolio securities, sales of fund shares,
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or in order to meet redemption requests, a fund may hold cash that is not
earning income. In addition, there may be occasions when, in order to
raise cash to meet redemptions, a fund may be required to sell securities
at a loss.
Municipal Lease Obligations. A fund may invest a portion of its
assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, a fund will not hold such obligations directly as a
lessor of the property, but will purchase a participation interest in a
municipal obligation from a bank or other third party. A participation
interest gives the fund a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
obligation.
Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. State constitutions
and statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the leased
asset to pass to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting
their constitutional and statutory requirements for the issuance of debt.
Many leases and contracts include " non-appropriation clauses" providing
that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purposes
by the appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance limitations.
Interfund Borrowing Program. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to,
and borrow money from, other funds advised by FMR or its affiliates. High
Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each will participate in the interfund borrowing program only
as a borrower. 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. Each fund (except High Income Municipal, Limited Term
Tax-Exempt, and Short-Intermediate Tax-Exempt) will lend through the
program only when the returns are higher than those available from other
short-term instruments (such as repurchase agreements). A fund will
borrow through the program only when the costs are equal to or lower than
the cost of bank loans. 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.
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Real Estate-Related Instruments include real estate investment
trusts, commercial and residential mortgage-backed securities, and real
estate financings. Real estate-related instruments are sensitive to
factors such as changes in real estate values and property taxes, interest
rates, cash flow of underlying real estate assets, overbuilding, and the
management skill and creditworthiness of the issuer. Real estate-related
instruments may also be affected by tax and regulatory requirements, such
as those relating to the environment.
Mortgage-Backed Securities. A fund may purchase
mortgage-backed securities issued by government and non-government
entities such as banks, mortgage lenders, or other financial institutions.
A mortgage-backed security may be an obligation of the issuer backed by
a mortgage or pool of mortgages or a direct interest in an underlying pool
of mortgages. Some mortgage-backed securities, such as collateralized
mortgage obligations (CMOs), make payments of both principal and interest
at a variety of intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties. Other
types of mortgage-backed securities will likely be developed in the
future, and a fund may invest in them if FMR determines they are
consistent with the fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts
in the market's perception of issuers. In addition, regulatory or tax
changes may adversely affect the mortgage securities market as a whole.
Non-government mortgage-backed securities may offer higher yields than
those issued by government entities, but also may be subject to greater
price changes than government issues. Mortgage-backed securities are
subject to prepayment risk. Prepayment, which occurs when unscheduled or
early payments are made on the underlying mortgages, may shorten the
effective maturities of these securities and may lower their total
returns.
Stripped Mortgage-Backed Securities are created when a U.S.
government agency or a financial institution separates the interest and
principal components of a mortgage-backed security and sells them as
individual securities. The holder of the " principal-only" security (PO)
receives the principal payments made by the underlying mortgage-backed
security, while the holder of the " interest-only" security (IO) receives
interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be
particularly affected by changes in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce prices of
IOs and increase prices of POs. Rising interest rates can have the
opposite effect.
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Short Sales. A fund may enter into short sales with respect to
stocks underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security a fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. A fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
If a fund enters into a short sale , it will be required to set
aside securities equivalent in kind and amount to the securities sold
short (or securities convertible or exchangeable into such securities) and
will be required to hold such securities while the short sale is
outstanding. A fund will incur transaction costs, including interest
expense, in connection with opening, maintaining, and closing short sales
.
Warrants are securities that give a fund the right to purchase
equity securities from the issuer at a specific price (the strike price)
for a limited period of time. The strike price of warrants typically is
much lower than the current market price of the underlying securities, yet
they are subject to similar price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities and may offer
greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in
the assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to expiration
date. These factors can make warrants more speculative than other types
of investments.
Physical Commodities. As a practical matter, investments in
physical commodities can present concerns such as delivery, storage and
maintenance, possible illiquidity and the unavailability of accurate
market valuations. FMR, in addressing these concerns, currently intends to
purchase only readily marketable precious metals and to deliver and store
them with a qualified U.S. bank. Investments in bullion earn no investment
income and may involve higher custody and transaction costs than
investments in securities. Global Resources may receive no more than 10%
of its yearly income from gains resulting from selling metals or any other
physical commodity. Therefore, the fund may be required either to hold its
metals or to sell them at a loss, or to sell its portfolio securities at a
gain,when it would not otherwise do so for investment reasons.
Limitations on Futures and Options Transactions. Each fund has
filed a notice of eligibility for exclusion from the definition of the
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term " commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. Each fund intends to comply with Rule 4.5
under the Commodity Exchange Act, which limits the extent to which the
fund can commit assets to initial margin deposits and option premiums.
In addition to the above limitations, a fund will not: (a) sell
futures contracts, purchase put options, or write call options if, as a
result, more than 25% of 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, a fund's total obligations
upon settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; or (c) purchase call options
if, as a result, the current value of option premiums for call options
purchased by a fund would exceed 5% of 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 a fund's investments in futures
contracts and options, and a fund's policies regarding futures contracts
and options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
Futures Contracts. When a fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When a fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when a fund enters into the
contract. Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on
indices of securities prices, such as the Standard & Poor's Composite
Index of 500 Stocks (S&P 500) or the Bond Buyer Municipal Bond Index.
Futures can be held until their delivery dates, or can be closed out
before then if a liquid secondary market is available.
The 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
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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.
Purchasing Put and Call Options. By purchasing a put option, a
fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right,
the fund pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures contracts.
A fund may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is
allowed to expire, the fund will lose the entire premium it paid. If the
fund exercises the option, it completes the sale of the underlying
instrument at the strike price. A fund may also terminate a put option
position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing
the option, a put buyer can expect to suffer a loss (limited to the amount
of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of
put options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
Writing Put and Call Options. When a fund writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract, a fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
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market is not liquid for a put option a fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the
premium received for writing the option should mitigate the effects of the
decline.
Writing a call option obligates a fund to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options are
similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the effects
of a price decline. At the same time, because a call writer must be
prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
Combined Positions. A fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, a fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a
futures contract. Another possible combined position would involve writing
a call option at one strike price and buying a call option at a lower
price, in order to reduce the risk of the written call option in the event
of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may
be more difficult to open and close out.
Correlation of Price Changes. Because there are a limited number
of types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's current
or anticipated investments exactly. A fund may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will
not track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by such
factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until
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expiration of the contract, which may not affect security prices the same
way. Imperfect correlation may also result from differing levels of demand
in the options and futures markets and the securities markets, from
structural differences in how options and futures and securities are
traded, or from imposition of daily price fluctuation limits or trading
halts. A fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not
be successful in all cases. If price changes in a fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that
are not offset by gains in other investments.
Liquidity of Options and Futures Contracts. There is no assurance
a liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading
volume and liquidity if their strike prices are not close to the
underlying instrument's current price. In addition, exchanges may
establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when
the price fluctuation limit is reached or a trading halt is imposed, it
may be impossible for a fund to enter into new positions or close out
existing positions. If the secondary market for a contract is not liquid
because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require a fund
to continue to hold a position until delivery or expiration regardless of
changes in its value. As a result, a fund's access to other assets held to
cover its options or futures positions could also be impaired.
OTC Options. Unlike exchange-traded options, which are
standardized with respect to the underlying instrument, expiration date,
contract size, and strike price, the terms of over-the-counter options
(OTC) (options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this type
of arrangement allows a fund greater flexibility to tailor an option to
its needs, OTC options generally involve greater credit risk than
exchange-traded options, which are guaranteed by the clearing organization
of the exchanges where they are traded.
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.
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The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above.
A fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of a fund's investments exactly over time.
Asset Coverage for Futures and Options Positions. A fund will
comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account
cannot be sold while the futures or option strategy is outstanding, unless
they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of a fund's assets
could impede portfolio management or the fund's ability to meet redemption
requests or other current obligations.
Electric Utilities Industry. The electric utilities industry has
been experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open
transmission access to any electricity supplier, although it is not
presently known to what extent competition will evolve. Other risks
include: (a) the availability and cost of fuel, (b) the availability and
cost of capital, (c) the effects of conservation on energy demand, (d) the
effects of rapidly changing environmental, safety, and licensing
requirements, and other federal, state, and local regulations, (e) timely
and sufficient rate increases, and (f) opposition to nuclear power.
Health Care Industry. The health care industry is subject to
regulatory action by a number of private and governmental agencies,
including federal, state, and local governmental agencies. A major source
of revenues for the health care industry is payments from the Medicare and
Medicaid programs. As a result, the industry is sensitive to legislative
changes and reductions in governmental spending for such programs.
Numerous other factors may affect the industry, such as general and local
economic conditions; demand for services; expenses (including malpractice
insurance premiums); and competition among health care providers. In the
future, the following elements may adversely affect health care facility
operations: adoption of legislation proposing a national health insurance
program; other state or local health care reform measures; medical and
technological advances which dramatically alter the need for health
services or the way in which such services are delivered; changes in
medical coverage which alter the traditional fee-for-service revenue
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stream; and efforts by employers, insurers, and governmental agencies to
reduce the costs of health insurance and health care services.
Housing. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They are
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current
laws and regulations.
Education. In general, there are two types of education-related
bonds; those issued to finance projects for public and private colleges
and universities, and those representing pooled interests in student
loans. Bonds issued to supply educational institutions with funds are
subject to the risk of unanticipated revenue decline, primarily the result
of decreasing student enrollment. Among the factors that may lead to
declining or insufficient revenues are restrictions on students' ability
to pay tuition, availability of state and federal funding, and general
economic conditions. Student loan revenue bonds are generally offered by
state (or substate) authorities or commissions and are backed by pools of
student loans. Underlying student loans may be guaranteed by state
guarantee agencies and may be subject to reimbursement by the United
States Department of Education through its guaranteed student loan
program. Others may be private, uninsured loans made to parents or
students which are supported by reserves or other forms of credit
enhancement. Recoveries of principal due to loan defaults may be applied
to redemption of bonds or may be used to re-lend, depending on program
latitude and demand for loans. Cash flows supporting student loan revenue
bonds are impacted by numerous factors, including the rate of student loan
defaults, seasoning of the loan portfolio, and student repayment deferral
during periods of forbearance. Other risks associated with student loan
revenue bonds include potential changes in federal legislation regarding
student loan revenue bonds, state guarantee agency reimbursement and
continued federal interest and other program subsidies currently in
effect.
Water and Sewer. Water and sewer revenue bonds are often
considered to have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults. Further,
costly environmental litigation and federal environmental mandates are
challenges faced by issuers of water and sewer bonds.
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Transportation. Transportation debt may be issued to finance the
construction of airports, toll roads, or highways. Airport bonds are
dependent on the general stability of the airline industry and on the
stability of a specific carrier that uses the airport as a hub. Air
traffic generally tracks broader economic trends and is also affected by
the price and availability of fuel. Toll road bonds are also affected by
the cost and availability of fuel as well as toll levels, the presence of
competing roads, and the general economic health of the area. Fuel costs
and availability also affect other transportation-related securities, as
does the presence of alternate forms of transportation, such as public
transportation.
The following paragraph restates fundamental policies previously
disclosed in the above descriptions of security types and investment
practices.
Equity Portfolio Growth: It is the policy of the fund to limit
repurchase transactions to those member banks of the Federal Reserve
System and primary dealers in U.S. government securities whose
creditworthiness has been reviewed and found satisfactory by FMR.
SPECIAL CONSIDERATIONS AFFECTING CANADA
Canada occupies the northern part of North America and is the
second largest country in the world (3.97 million square miles in area)
extending from the Atlantic Ocean to the Pacific Ocean. The companies in
which the funds may invest include those involved in the energy industry,
industrial materials (chemicals, base metals, timber and paper) and
agricultural materials (grain cereals). The economy of Canada is strongly
influenced by the activities of companies and industries involved in the
production and processing of natural resources. Canada is a major producer
of hydroelectricity, oil and gas. The business activities of companies in
the energy field may include the production, generation, transmission,
marketing, control or measurement of energy or energy fuels. The
securities of companies in the energy industry are subject to changes in
value and dividend yield which depend, to a large extent, on the price and
supply of energy fuels. Rapid price and supply fluctuations may be caused
by events relating to international politics, energy conservation and the
success of exploration products. Canada is one the world's leading
industrial countries and is rich in natural resources such as zinc,
uranium, nickel, gold, silver, aluminum, iron and copper. Forest covers
over 44% of land area, making Canada a leading world producer of
newsprint. Canada is also a major exporter of agricultural products.
Canada, the United States and Mexico began to implement the
North American Free Trade Agreement (NAFTA) in 1994, reducing trade
barriers affecting important sectors of each country's economy. This
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agreement is expected to lead to increased trade among the three
countries.
Many factors affect and could have an adverse impact on the
financial condition of Canada, including social, environmental and
economic conditions, factors which are not within the control of Canada.
Although the Canadian political system is generally more stable than that
of many other foreign countries, continued tension with respect to greater
independence for, or possible separation of, Quebec causes political
uncertainty. Moreover, while the Canadian dollar is generally less
volatile relative to the U.S. dollar than other foreign currencies, the
value of the Canadian dollar has decreased significantly in recent years.
Continued efforts to reduce the structural Canadian budget deficit will be
required. FMR is unable to predict what effect, if any, such factors would
have on instruments held in the fund's portfolio.
Securities of Canadian companies are not considered by FMR to
have the same level of risk as those of other non-U.S. companies.
Canadian and U.S. companies are generally subject to similar auditing and
accounting procedures, and similar government supervision and regulation.
Canadian markets are more liquid than many other foreign markets and share
similar characteristics with U.S. markets. A fund may elect to
participate in new equity issues or initial public offerings of Canadian
companies.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA
Latin America is a region rich in natural resources such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock, and
agriculture. The region has a large population (roughly 300 million)
representing a large number of markets. Economic growth was strong in the
1960s and 1970s, but slowed dramatically in the 1980s as a result of poor
economic policies, higher international interest rates and the denial of
access to new foreign capital. Capital flight has proven a persistent
problem and external debt has been forcibly rescheduled. High inflation
and low economic growth have begun to give way to stable, manageable
inflation rates and higher economic growth, although political turmoil
(including assassinations) continues in some countries . Changes in
political leadership and the implementation of market oriented economic
policies, such as privatization, trade reform, and fiscal and monetary
reform are among the recent steps taken to renew economic growth. External
debt is being restructured and flight capital (domestic capital that has
left the home country) has begun to return.
Various trade agreements have also been formed within the
region, including the Andean Pact, Mercosur, and NAFTA. NAFTA, which was
implemented on January 1, 1994, is the largest of these agreements.
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Latin American equity markets can be extremely volatile and in
the past have shown little correlation with the United States market.
Currencies have typically been weak, given high inflation rates, but have
stabilized more recently. Most currencies are not free floating, but wide
fluctuations in value over relatively short periods of time can still
occur due to changes in the market.
Mexico's economy is a mixture of state-owned industrial plants
(notably oil), private manufacturing and services, and both large-scale
and traditional agriculture. Mexico's economy has been transformed
significantly over the last six to seven years. Large budget deficits and
a high level of state ownership in many productive and service areas have
given way to balanced budgets and privatization. In the last few years,
the government has sold the telephone company, the major steel companies,
the banks, and many others. The major state ownership remaining is in the
oil sector and the electricity sector. Economic policy transformation has
led to much reduced inflation and more stable economic growth in the last
few years. The recently implemented NAFTA will further cement the economic
ties between Mexico, Canada, and the United States.
Continued political unrest, particularly in southern Mexico, and
uncertainty as to the effectiveness of reforms have recently had an
adverse impact on economic development. In December 1994, Mexico reversed
a long-held currency policy by devaluing the Mexican peso and allowing it
to float freely. The value of the peso against the U.S. dollar and other
currencies declined sharply. As a result, Mexican stocks plunged while
interest rates soared, and other Latin America securities markets were
also adversely affected. Extension and continuance of financial aid to
Mexico from the U.S., including loan guarantees, is uncertain at this
time.
Brazil is the sixth largest country in the world in population,
with about 155 million people, and represents a huge domestic market.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy
direction. Brazil's rate of consumer-price inflation continues to
accelerate while gross domestic product (GDP) remains depressed. A major
long-run strength is Brazil's natural resources. Iron ore, bauxite, tin,
gold, and forestry products make up some to Brazil's basic natural
resource base, which includes some of the largest mineral reserves in the
world. The private sector has remained efficient, mainly through export
promotion. The government has recently embarked on an ambitious reform
program that seeks to modernize and reinvigorate the economy by
stabilizing prices, deregulating the economy, and opening the economy to
increased foreign competition. Privatization of certain industries is
proceeding slowly.
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Chile, like Brazil, is endowed with considerable mineral
resources, particularly copper, which accounts for 40% of total exports.
Export production (especially in the forestry and mining sectors)
continues to be the main long-term engine of economic growth and
modernization. Economic reform has been ongoing in Chile for over 15
years, but political democracy has only recently returned to Chile.
Privatization of the public sector beginning in the early 1980s has
bolstered the equity market. A well-organized pension system has created
a long-term domestic investor base.
Argentina is strong in wheat production and other foodstuffs and
in livestock ranching. A well-educated and skilled population boasts one
of the highest literacy rates in the region. The country has been ravaged
by decades of extremely high inflation and political instability. Like
Mexico, however, Argentina has had a dramatic transformation in its
economy in the last several years. Extremely high inflation rates and
stagnant economic growth have been replaced by low inflation and strong
economic growth. Massive privatization has occurred and continues, which
should reduce the amount of external debt outstanding.
Venezuela has substantial oil reserves. External debt is being
renegotiated, and the government is implementing economic reform in order
to reduce the size of the public sector, although these reform attempts
have recently met with political opposition. Internal gasoline prices,
which are one-third those of international prices, are being increased in
order to reduce subsidies. Price controls did not prevent annual inflation
from reaching at least 75% in 1994, compared to 45.9% in 1993. The
official target of 25-30% inflation for 1995 is improbable, with a
continuation of higher levels more likely. The failure of major banks
adversely affected the Venezuelan economy in 1994 and could continue to
have a negative impact. Plans for privatization and exchange and interest
rate liberalization are examples of recently introduced reforms. It is
not clear when the economic situation in Venezuela will improve and the
country remains extremely dependent on oil.
SPECIAL CONSIDERATIONS AFFECTING JAPAN, THE PACIFIC BASIN, AND SOUTHEAST
ASIA
Many Asian countries may be subject to a greater degree of
social, political and economic instability than is the case in the United
States and Western European countries. Such instability may result from
(i) authoritarian governments or military involvement in political and
economic decision-making; (ii) popular unrest associated with demands for
improved political, economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries; and (v)
ethnic, religious and racial disaffection.
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The economies of most of the Asian countries are heavily
dependent upon international trade and are accordingly affected by
protective trade barriers and the economic conditions of their trading
partners, principally, the United States, Japan, China and the European
Community. The enactment by the United States or other principal trading
partners of protectionist trade legislation, reduction of foreign
investment in the local economies and general declines in the
international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.
Thailand has one of the fastest growing stock markets in the
world. The manufacturing sector is becoming increasingly sophisticated and
is benefiting from export-oriented investing. The manufacturing and
service sectors continue to account for the bulk of Thailand's economic
growth. The agricultural sector continues to become less important. The
government has followed fairly sound fiscal and monetary policies, aided
by increased tax receipts from a fast moving economy. The government also
continues to move ahead with new projects - especially telecommunications,
roads and port facilities - needed to refurbish the country's overtaxed
infrastructure. Nonetheless, political unrest has caused many
international businesses to question Thailand's political stability.
Hong Kong's economic growth which was vigorous in the 1980s has
not been positively affected by its impending return to Chinese dominion
in 1997. Although China has committed by treaty to preserve the economic
and social freedoms enjoyed in Hong Kong for 50 years after regaining
control of Hong Kong, the continuation of the current form of the economic
system in Hong Kong after the reversion will depend on the actions of the
government of China. Business confidence in Hong Kong, therefore, can be
significantly affected by developments, which in turn can affect markets
and business performance. In preparation for 1997, Hong Kong has continued
to develop trade with China, while also maintaining its long-standing
export relationship with the United States. Spending on infrastructure
improvements is a significant priority of the colonial government while
the private sector continues to diversify abroad based on its position as
an established international trade center in the Far East.
In terms of GDP, industrial standards and level of education,
South Korea is second only to Japan in Asia. It enjoys the benefits of a
diversified economy with well developed sectors in electronics,
automobiles, textiles and shoe manufacture, steel and shipbuilding among
others. The driving force behind the economy's dynamic growth has been the
planned development of an export-oriented economy in a vigorously
entrepreneurial society. Inflation rates, however, began to challenge
South Korea's strong economic performance in the early 1990s. Moreover,
the international situation between South Korea and North Korea continues
to be uncertain.
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Indonesia is a mixed economy with many socialist institutions and
central planning but with a recent emphasis on deregulation and private
enterprise. Like Thailand, Indonesia has extensive natural wealth, yet
with a large and rapidly increasingly population, it remains a poor
country. Indonesia's dependence on commodity exports makes it vulnerable
to a fall in world commodity prices. Malaysia has one of the fastest
growing economies in the Asian-Pacific region. Malaysia has become the
world's third-largest producer of semiconductor devices (after the United
States and Japan) and the world's largest exporter of semiconductor
devices. More remarkable is the country's ability to achieve rapid
economic growth with relative price stability as the government followed
prudent fiscal and monetary policies. Malaysia's high export dependence
level leaves it vulnerable to recession in the countries with which it
trades or to a fall in world commodity prices.
Singapore has an open entrepreneurial economy with strong service
and manufacturing sectors and excellent international trading links
derived from its history. During the 1970s and the early 1980s, the
economy expanded rapidly, achieving an average annual growth rate of 9%.
Per capita GDP is among the highest in Asia. Singapore holds a position as
a major oil refining and services center.
Japan currently has the second largest GDP in the world. The
Japanese economy has grown substantially over the last three decades. Its
growth rate averaged over 5% in the 1970s and 1980s. However, in the
1990s, the growth rate in Japan has slowed. Despite small rallies and
market gains, Japan has been plagued with economic sluggishness. Economic
conditions have weakened considerably in Japan since October 1992. The
boom in Japan's equity and property markets during the expansion of the
late 1980's supported high rates of investment and consumer spending on
durable goods, but both of these components of demand have now retreated
sharply following the decline in asset prices. Profits have fallen
sharply, the previously tight labor market conditions have eased
considerably, and consumer confidence has waned. The banking sector has
experienced a sharp rise in non-performing loans, and strains in the
financial system may continue. Continued political uncertainty has
resulted from numerous changes in government, shifting government
coalitions and the political and economic problems associated with a large
trade imbalance.
Although Japan's economic growth has declined significantly since
1990, many Japanese companies seem capable of rebounding due to increased
investments, smaller borrowings, increased product development and
continued government support. Growth recovered slightly in 1994. Japan's
economic growth in the early 1980's was due in part to government
borrowings. Japan is heavily dependent upon international trade and,
accordingly, has been and may continue to be adversely affected by trade
barriers, and other protectionist or retaliatory measures of, as well as
economic conditions in, the United States and other countries with which
it trades. Industry, the most important sector of the economy, is heavily
dependent on imported raw materials and fuels. Japan's major industries
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are in the engineering, electrical, textile, chemical, automobile,
fishing, and telecommunication fields. Japan imports iron ore, copper, and
many forest products. Only 19% of its land is suitable for cultivation.
Japan's agricultural economy is subsidized and protected. It is about 50%
self-sufficient in food production. Even though Japan produces a minute
rice surplus, it is dependent upon large imports of wheat, sorghum, and
soybeans from other countries. Japan's high volume of exports such as
automobiles, machine tools, and semiconductors have caused trade tensions
with other countries, particularly the United States. Attempts to approve
trading agreements between the countries may reduce the friction caused by
the current trade imbalance. In recent months, the Japanese markets have
also been adversely affected by the earthquake in Kobe, Japan, and the
bankruptcy of Barings Bank, Ltd., although the long-term effects of these
events are difficult to predict.
Australia has a prosperous Western-style capitalist economy,
with a per capita GDP comparable to levels in industrialized West European
countries. It is rich in natural resources and is the world's largest
exporter of beef and wool, second-largest exporter of mutton, and among
the top wheat exporters. Australia is also a major exporter of minerals,
metals and fossil fuels. Due to the nature of its exports, a downturn in
world commodity prices could have a significant negative impact on its
economy.
SPECIAL CONSIDERATIONS AFFECTING EUROPE
New developments surrounding the creation of a unified common
market in Europe have helped to reduce physical and economic barriers
promoting the free flow of goods and services throughout Western Europe.
These new developments could make this new unified market one of the
largest in the world.
The economic situation also remains difficult for Eastern
European countries in transition from central planning, following what has
already been a sizable decline in output. The contraction now appears to
be bottoming out in parts of central Europe, where some countries are
projected to register positive growth in 1995. But key aspects of the
reform and stabilization efforts have not yet been fully implemented, and
there remain risks of policy slippages. In the Russian Federation and
most other countries of the former Soviet Union, economic conditions are
of particular concern because of economic instability due to political
unrest and armed conflicts in many regions.
Notwithstanding the continued economic difficulties in many
countries, recent positive developments offer hope for a cooperative
growth strategy in the near term, which could also permit a strengthening
of global economic performance over the medium term. Many developing
countries are reaping the fruits of sustained reform and stabilization
efforts. Efforts to enhance assistance to countries affected by the
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transition to market-based trading systems occurring in central Europe and
the former Soviet Union, and to low-income countries to support
strengthened stabilization and restructuring efforts, are moving forward.
In Europe, exchange market tensions have eased, and interest rates have
been falling and should continue to do so as evidence accumulates of the
waning of inflationary pressures.
The European Community (EC) consists of Belgium, Denmark, France,
Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,
and the United Kingdom (the member states). In 1986, the member states of
the EC signed the "Single European Act," an agreement committing these
countries to the establishment of a market among themselves, unimpeded by
internal barriers or hindrances to the free movement of goods, persons,
services, or capital. To meet this goal, a series of directives have been
issued to the member states. Compliance with these directives is designed
to eliminate three principal categories of barriers: 1) physical
frontiers, such as customs posts and border controls; 2) technical
barriers (which include restrictions operating within national
territories) such as regulations and norms for goods and services (product
standards); discrimination against foreign bids (bids by other EC members)
on public purchases; or restrictions on foreign requests to establish
subsidiaries; and 3) fiscal frontiers, notably the need to levy
value-added taxes, tariffs, or excises on goods or services imported from
other EC states.
The ultimate goal of this project is to achieve a large unified
domestic European market in which available resources would be more
efficiently allocated through the elimination of the above-mentioned
barriers and the added costs associated with those barriers. Elimination
of these barriers would simplify product distribution networks, allow
economies of scale to be more readily achieved, and free the flow of
capital and other resources. The Maastricht Treaty on economic and
monetary union (EMU) attempts to provide its members with a stable
monetary framework consistent with the EC's broad economic goals. But
until the EMU takes effect, which is intended to occur between 1997 and
1999, the community will face the need to reinforce monetary cooperation
in order to reduce the risk of a recurrence of tensions between domestic
and external policy objectives.
The total European market, as represented by both EC and non-EC
countries, consists of over 328 million consumers, making it larger
currently than either the United States or Japanese markets. European
businesses compete nationally and internationally in a wide range of
industries including: telecommunications and information services, roads
and transportation, building materials, food and beverages, broadcast and
media, financial services, electronics, and textiles. Actual and
anticipated actions on the part of member states to conform to the unified
Europe directives has prompted interest and activity not only by European
firms, but also by foreign entities anxious to establish a presence in
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Europe that will result from these changes. Indications of the effect of
this response to a unified Europe can be seen in the areas of mergers and
acquisitions, corporate expansion and development, GDP growth, and
national stock market activity.
The early experience of the former centrally planned economies
has already demonstrated the crucially important link between structural
reforms, macroeconomic stabilization, and successful economic
transformation. Among the central European countries, the Czech Republic,
Hungary, and Poland have made the greatest progress in structural reform;
inflationary pressures there have abated following price liberalization,
and output has begun to recover. These achievements will be difficult to
sustain, however, in the absence of strong efforts to contain the large
fiscal deficits that have accompanied the considerable losses of output
and tax revenue since the start of the reform process.
In the Baltic countries there are encouraging signs that reforms
are taking hold and are being supported by strong stabilization efforts.
In most other countries of the former Soviet Union, in contrast,
inadequate stabilization efforts now threaten to lead to hyper-inflation,
which could derail the reform process. Inflation, which had abated
following the immediate impact of price liberalization in early 1992,
surged to extremely high levels. The main reason for this development has
been excessive credit expansion to the government and to state
enterprises. The transformation process is being seriously hampered by
the widespread subsidization of inefficient enterprises and the resulting
misallocation of resources. The lack of effective economic and monetary
cooperation among the countries of the former Soviet Union exacerbates
other problems by severely constraining trade flows and impeding inflation
control. Partly as a result of these difficulties, some countries have
decided that the introduction of separate currencies offers the best scope
for avoiding hyper-inflation and for improving economic conditions. This
development can facilitate the implementation of stronger stabilization
programs.
Economic conditions appear to have improved for some of the
transition economies of central Europe. Following three successive years
of output declines, there are preliminary indications of a turnaround in
the former Czech and Slovak Federal Republic, Hungary and Poland; growth
in private sector activity and strong exports, especially to Western
Europe, now appear to have contained the fall in output. Most central
European countries in transition, however, are expected to achieve
positive real growth in 1995 as market reforms deepen. The strength of
the projected output gains will depend crucially on the ability of the
reforming countries to contain fiscal deficits and inflation and on their
continued access to, and success in, export markets. Economic conditions
in the former Soviet Union have continued to deteriorate. Real GDP in
Russia is estimated to have fallen 19 percent in 1992, after a 9 percent
decline in 1991. In many other countries of the region, output losses
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have been even larger. These declines reflect the adjustment difficulties
during the early stages of the transition, high rates of inflation, the
compression of imports, disruption in trade among the countries of the
former Soviet Union, and uncertainties about the reform process itself.
Large-scale subsidies are delaying industrial restructuring and are
exacerbating the fiscal situation. A reversal of these adverse factors is
not anticipated in the near term, and output is expected to decline
further in most of these countries. A number of their governments,
including those of Hungary, and Poland, are currently implementing or
considering reforms directed at political and economic liberalization,
including efforts to foster multi-party political systems, decentralize
economic planning, and move toward free market economies. At present, no
Eastern European country has a developed stock market, but Poland, Hungary
and the Czech Republic have small securities markets in operation. Ethnic
and civil conflict currently rage throughout the former Yugoslavia. The
outcome is uncertain.
Both the EC and Japan, among others, have made overtures to
establish trading arrangements and assist in the economic development of
the Eastern European nations. There is also an urgent need for positive
steps to resist protectionist pressures, especially by bringing the
multilateral trade negotiations under the Uruguay Round of the General
Agreement on Trade and Tariffs (GATT) to a successful conclusion.
Determined action to alleviate short-term difficulties and to achieve key
medium-term objectives would unquestionably strengthen consumer and
business confidence. Interest rates generally have declined somewhat with
the easing of tensions in the Exchange Rate Mechanism (ERM), but for most
countries tight monetary conditions remain an obstacle to stronger growth
and a threat to exchange market stability. However, in the long-term,
reunification could prove to be an engine for domestic and international
growth .
The conditions that have given rise to these developments are
changeable, and there is no assurance that reforms will continue or that
their goals will be achieved.
Portugal is a genuinely emerging market which has experienced
rapid growth since the mid-1980s, except for a brief period of stagnation
over 1990-91. Portugal's government remains committed to privatization of
the financial system away from one dependent upon the banking system to a
more balanced structure appropriate for the requirements of a modern
economy.
Economic reforms launched in the 1980s continue to benefit Turkey
in the 1990s. Turkey's economy has grown since the 1980s. Agriculture
remains the most important economic sector, employing over half of the
labor force, and accounting for significant portions of GDP and exports.
Inflation and interest rates remain high, and a large budget deficit will
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<PAGE>
continue to cause difficulties in Turkey's substantial transformation from
a centrally controlled to a free market economy.
Like many other Western economies, Greece suffered severely from
the global oil price hikes of the 1970s, with annual GDP growth plunging
from 8% to 2% in the 1980s, and inflation, unemployment, and budget
deficits rising sharply. The fall of the socialist government in 1989 and
the inability of the conservative opposition to obtain a clear majority
led to business uncertainty and the prospect for continued flat economic
performance. Once Greece has sorted out its political situation, it will
have to face the challenges posed by the steadily increasing integration
of the EU, including the progressive lowering of trade and investment
barriers. Tourism continues as a major industry, providing a vital offset
to a sizable commodity trade deficit.
Real GDP Annual Rate of Growth
1993
Denmark 1.2
France -1.0
Germany -1.1
Italy -0.7
Netherlands -1.0
Spain -0.6
Switzerland 2.0
United Kingdom
Source: World Economic Outlook October 1994
(Figures are quoted based on each country's domestic currency.)
NATIONAL INDICES (WITHOUT DIVIDENDS) OCTOBER 1994
GROWTH IN U.S. DOLLARS
EUROPE
6 Months 12 Months 5 Years
Greece -10.22 5.56 2.71
Portugal .65 7.68 -5.53
Turkey 48.77 -45.261 -7.386
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<PAGE>
SPECIAL CONSIDERATIONS AFFECTING AFRICA
Africa is a continent of roughly 50 countries with a total
population of approximately 840 million people. Literacy rates (the
percentage of people who are over 15 years of age and who can read and
write) are relatively low, ranging from 20% to 60%. The primary industries
include crude oil, natural gas, manganese ore, phosphate, bauxite, copper,
iron, diamonds, cotton, coffee, cocoa, timber, tobacco, sugar, tourism,
and cattle. Many African countries are fraught with political instability.
However, there has been a trend over the past several years toward
democratization. Many countries are moving from a military style, Marxist,
or single party government to a multi-party system. Still, there remain
many countries that do not have a stable political process. Many countries
have been enmeshed in civil ethnic or border wars. Ethnic, religious,
cultural and linguistic differences divide the African peoples.
Economically, the Northern Rim countries (including Morocco, Egypt, and
Algeria) and Nigeria, Zimbabwe and South Africa are the wealthier
countries on the continent due to their strong ties with the European
nations. The market capitalization of these countries has been growing
recently as more international companies invest in Africa and as local
companies start to list on the exchanges. However, religious strife has
been a significant source of instability in the Northern Rim countries.
Although racial discord in South Africa may be reduced by constitutional
and political changes that are in progress, as well as increased foreign
investments, the long-term future of South Africa remains uncertain.
On the other end of the economic spectrum are countries, such as
Burkina-Faso, Madagascar, and Malawi, that are considered to be among the
poorest or least developed in the world. These countries are generally
landlocked or have poor natural resources. The economies of many African
countries are heavily dependent on international oil prices. Of all the
African industries, oil has been the most lucrative, accounting for 40% to
60% of many countries' GDP. However, the general decline in oil prices
has had an adverse impact on many economies.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are
placed on behalf of each fund by FMR pursuant to authority contained in
the management contract. If FMR grants investment management authority to
the sub-advisers (see the section entitled "Management Contracts"), the
sub-advisers are authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to: the
size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency,
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<PAGE>
settlement capability, and financial condition of the broker-dealer firm;
the broker-dealer's execution services rendered on a continuing basis;
the reasonableness of any commissions; and, for equity funds, arrangements
for payment of fund expenses. Generally, commissions for foreign
investments traded on foreign exchanges will be higher than for U.S.
investments and may not be subject to negotiation.
The funds may execute portfolio transactions with broker-dealers
who provide research and execution services to the funds or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; the
availability of securities or the purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and
settlement). Generally, FMR selects such broker-dealers (to the extent
possible consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by FMR's investment
staff (for equity funds), based upon the quality of research and execution
services provided.
The receipt of research from broker-dealers that execute
transactions on behalf of the funds may be useful to FMR in rendering
investment management services to the funds or its other clients, and
conversely, such research provided by broker-dealers who have executed
transaction orders on behalf of other FMR clients may be useful to FMR in
carrying out its obligations to the funds. The receipt of such research
has not reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if FMR
tried to develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are
in excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing
broker-dealers, viewed in terms of a particular transaction or FMR's
overall responsibilities to the funds and its other clients. In reaching
this determination, FMR will not attempt to place a specific dollar value
on the brokerage and research services provided, or to determine what
portion of the compensation should be related to those services.
FMR is authorized to use research services provided by, and to
place portfolio transactions with, brokerage firms that have provided
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<PAGE>
assistance in the distribution of shares of the funds or shares of other
Fidelity funds to the extent permitted by law. FMR may use research
services provided by and place agency transactions with FBSI and Fidelity
Brokerage Services, Ltd. (FBSL), subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. Prior to
September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members, and various trusts for the benefit of
the Johnson family own, directly or indirectly, more than 25% of the
voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who
have entered into arrangements with FMR under which the broker-dealer
allocates a portion of the commissions paid by Overseas, Equity Portfolio
Growth, Global Resources, Growth Opportunities, Strategic Opportunities,
Equity Income, and Income & Growth toward payment of that fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits
members of national securities exchanges from executing exchange
transactions for accounts which they or their affiliates manage, unless
certain requirements are satisfied. Pursuant to such requirements, the
Board of Trustees has authorized FBSI to execute portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The funds' Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of each fund and review the commissions paid by
each fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended 1993 and 1994, respectively, each
fund's portfolio turnover rates are shown in the chart below. Because a
high turnover rate increases transaction costs and may increase taxable
gains, FMR carefully weighs the anticipated benefits of short-term
investing against these consequences. An increased turnover rate is due to
a greater volume of shareholder purchase orders, short-term interest rate
volatility and other special market conditions.
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<PAGE>
Fund Fiscal Period 1993 1994
Ended
Overseas October 31 42% 34%
Equity Portfolio Growth November 30 160% 137%
Global Resources October 31 208% 125%
Growth Opportunities October 31 69% 43%
Strategic Opportunities September 30+ 183% 159%
Equity Income November 30 120% 140%
Income & Growth October 31 200% 202%
Emerging Markets Income December 31 n/a* 354%**
High Yield October 31 79% 118%
Strategic Income December 31 n/a* 104%**
Government Investment October 31 333% 313%
Limited Term Bond November 30 59% 68%
Short Fixed-Income October 31 58% 108%
High Income Municipal October 31 27% 38%
Limited Term
Tax-Exempt November 30 46% 53%
Short-Intermediate
Tax-Exempt November 30 n/a* 111%**
* Emerging Markets Income, Strategic Income, and
Short-Intermediate Tax-Exempt commenced operations on March 10, 1994,
October 10, 1994, and March 16, 1994, respectively.
** Annualized. Portfolio turnover rates shown are from commencement
of operations to the end of the fiscal period, as indicated.
+ On November 9, 1994, the Board of Trustees voted to change the
fiscal year end for Strategic Opportunities from September 30 to December
31.
The brokerage commissions paid by each fund, the percentage of
this amount paid to firms providing research, and the fees paid to FBSI
and FBSL for the past three fiscal years are listed in the following
table. The second table shows the percentage of brokerage commissions paid
to, and the amount of transactions effected through, FBSI and FBSL for
fiscal 1994. Each fund pays both commissions and spreads in connection
with the placement of portfolio transactions; FBSI and FBSL are paid on a
commission basis. The difference between the percentage of brokerage
commissions paid and the percentage of the dollar amount of transactions
effected through FBSI is a result of the low commission rates charged by
FBSI. The other funds paid no brokerage commissions for the fiscal years
1992 through 1994.
<TABLE>
<CAPTION>
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<PAGE>
<C> <C>
<C> % Paid to Firms <C> To
<S> Total Providing Research* To FBSI FBSL
----- --------- ------- ----
Overseas
11/30/94 $1,601,660 84.8% $ 685 0
11/30/93 500,186 87.0 800 0
11/30/92 119,400 89.0 30 1,179
Equity Portfolio Growth
11/30/94 2,086,370 58.7 729,903 0
11/30/93 915,767 55.0 362,158 0
11/30/92 424,364 55.0 148,571 0
Global Resources
10/31/94 630,752 63.7 195,272 0
10/31/93 147,017 66.3 41,286 0
10/31/92 58,180 73.0 13,864 0
Growth Opportunities
10/31/94 3,589,080 54.9 1,368.574 0
10/31/93 2,583,165 59.2 899,767 0
10/31/92 1,147,967 65.1 334,189 925
Strategic Opportunities
10/1/94 - 12/31/94 403,617 58.7 70,462 0
10/1/93 - 9/30/94 1,166,854 76.9 151,233 0
12/31/93 1,068,788 82.0 103,206 0
12/31/92 1,087,115 78.3 126,298 0
Equity Income
11/30/94 827,499 59.1 290,182 0
11/30/93 557,493 68.6 126,832 0
11/30/92 342,397 60.1 107,503 441
Income & Growth
10/31/94 7,338,038 76.1 1,104,577 0
10/31/93 2,998,137 64.9 796,821 0
10/31/92 767,720 63 143,974 0
</TABLE>
* The provision of research services was not necessarily a factor in the
placement of all this business with such firms.
- 85 -
<PAGE>
<TABLE>
<CAPTION>
% of
% of % of Transactions % of
Commissions Commissions Effected through Transactions
Paid to FBSI Paid to FBSL To FBSI Effected through FBSL
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Overseas * .04 0 17.46 0
Equity Portfolio 35.0 0 49.2 0
Growth **
Global Resources* 31.0 0 52.7 0
Growth 38.1 0 50.1 0
Opportunities *
Strategic 17.5 0 29.9 0
Opportunities ***
Equity Income ** 35.1 0 45.6 0
Income & Growth * 15.1 0 20.7 0
</TABLE>
From time to time, the Trustees will review whether the
recapture for the benefit of the funds of some portion of the brokerage
commissions or similar fees paid by the funds on portfolio transactions is
legally permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present
no other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine in the exercise of their
business judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially
the same as those of other funds managed by FMR, investment decisions for
each fund are made independently from those of other funds managed by FMR
or accounts managed by FMR affiliates. It sometimes happens that the same
security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several funds and
accounts are managed by the same investment adviser, particularly when the
same security is suitable for the investment objective of more than one
fund or account.
When two or more funds or accounts 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 and account. In some cases this system could have
a detrimental effect on the price or value of the security as far as each
fund is concerned. In other cases, however, the ability of the funds to
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<PAGE>
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to each fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
Valuation
Portfolio securities are valued by various methods depending on
the primary market or exchange on which they trade. Most equity
securities for which the primary market is the United States are valued at
last sale price or, if no sale has occurred, at the closing bid price.
Most equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale price
in the principal market in which they are traded. If the last sale price
(on the local exchange) is unavailable, the last evaluated quote or last
bid price normally is used. Fixed-income securities and other assets for
which market quotations are readily available may be valued at market
values determined by such securities' most recent bid prices (sales prices
if the principal market is an exchange) in the principal market in which
they normally are traded, as furnished by recognized dealers in such
securities or assets. Short-term securities are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. Short-term securities are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. Fixed-income and convertible securities may
also 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 Trustees, on the basis of an on-going
evaluation of these services, may use various pricing services or
discontinue the use of any pricing service.
Foreign securities are valued based on prices furnished by
independent brokers or quotation services which express the value of
securities in their local currency. Fidelity Service Company (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. If an
extraordinary event that is expected to materially affect the value of a
portfolio security occurs after the close of an exchange on which that
security is traded, then that security will be valued as determined in
good faith by a committee appointed by the Board of Trustees.
Futures contracts and options are valued on the basis of market
quotations, if available.
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<PAGE>
Securities and other assets for which there is no readily
available market are valued in good faith by a committee appointed by the
Board of Trustees. The procedures set forth above need not be used to
determine the value of the securities owned by a fund if, in the opinion
of a committee appointed by the Board of Trustees, some other method
(e.g., closing over-the-counter bid prices in the case of debt instruments
traded on an exchange) would more accurately reflect the fair market value
of such securities .
PERFORMANCE
Each class of shares may quote performance in various ways. All
performance information supplied by the funds in advertising is historical
and is not intended to indicate future returns. Share price, yield, and
total return fluctuate in response to market conditions and other factors,
and the value of shares when redeemed may be more or less than their
original cost.
Yield Calculations. Yields for a class are computed by dividing
the class's pro rata share of the applicable interest and dividend income,
if any, for a given 30-day or one-month period, net of expenses, by the
average number of shares of that class entitled to receive distributions
during the period, dividing this figure by the class's net asset value
(NAV) or offering price, as appropriate, at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. Dividends from equity investments are treated as if they
were accrued on a daily basis, solely for the purposes of yield
calculations. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. For a fund's investments denominated in foreign currencies, income
and expenses are calculated first in their respective currencies, and are
then converted to U.S. dollars, either when they are actually converted or
at the end of the 30-day or one month period, whichever is earlier.
Capital gains and losses generally are excluded from the calculation as
are gains and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a class's yield
differs from income as determined for other accounting purposes. Because
of the different accounting methods used, and because of the compounding
of income assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
In calculating a class's yield, a fund may from time to time use
a portfolio security's coupon rate instead of its yield to maturity in
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<PAGE>
order to reflect the risk premium on that security. This practice will
have the effect of reducing a class's yield.
Yield information may be useful in reviewing a class's
performance and in providing a basis for comparison with other investment
alternatives. However, each class's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the quality
and maturity of the portfolio securities of respective investment
companies they have chosen to consider.
Investors should recognize that in periods of declining interest
rates, a class's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the class's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its shares
will likely be invested in instruments producing lower yields than the
balance of the fund's holdings, thereby reducing the class's current
yield. In periods of rising interest rates, the opposite can be expected
to occur.
Tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment to equal a class's tax-free yield.
Tax-equivalent yields are calculated by dividing a class's yield by the
result of one minus a stated federal or combined federal and state tax
rate. If any portion of a class's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following table shows the effect of a shareholder's tax
status on effective yield under federal income tax laws for 1995. It shows
the approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 2.00% to 8.00%. Of course, no
assurance can be given that a class will achieve any specific tax-exempt
yield. While the tax-exempt funds invest principally in obligations whose
interest is exempt from federal income tax, other income received by the
funds may be taxable.
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<PAGE>
<TABLE>
<CAPTION>
1995 Tax Rates and Tax-Equivalent Yields
Federal
Income If individual tax-exempt yield is:
Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
Taxable Income*
Single Return Joint Return Bracket** Then Taxable equivalent yield is:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$23,351 - $56,500 $36,001 - $94,250 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$56,551 - $117,950 $94,251 - $143,600 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$117,951 - $256,500 $143,601 - $256,500 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$256,501 - $256,501 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An increase
in a shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A tax-exempt fund may invest a portion of its assets in
obligations that are subject to federal income tax. When the fund invests
in these obligations, its tax-equivalent yields will be lower. In the
table above, tax-equivalent yields are calculated assuming investments
are 100% federally tax-free.
Total Return Calculations. Total returns quoted in advertising
reflect all aspects of a class's return, including the effect of
reinvesting dividends and capital gain distributions, and any change in a
class's NAV over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over
the period. For example, a cumulative total return of 100% over ten years
would produce an average annual return of 7.18%, which is the steady
annual rate of return that would equal 100% growth on a compounded basis
in ten years. Average annual returns covering periods of less than one
year are calculated by determining the class's total return for the
period, extending that return for a full year (assuming that return
remains constant over the year), and quoting the result as an annual
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<PAGE>
return. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that performance is not
constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance.
In addition to average annual total returns, unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period may be quoted. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to
total return. Total returns may be quoted on a before-tax or after-tax
basis and may be quoted with or without taking the maximum sales charge
into account. Excluding a sales charge from a total return calculation
produces a higher total return figure. Total returns, yield, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration.
Net Asset Value. Charts and graphs using NAVs, adjusted NAVs,
and benchmark indices may be used to exhibit performance. An adjusted NAV
includes any distributions paid and reflects all elements of its return.
Unless otherwise indicated, adjusted NAVs are not adjusted for sales
charges, if any.
Moving Averages. A growth or growth and income fund may
illustrate performance using moving averages. A long-term moving average
is the average of each week's adjusted closing NAV for a specified period.
A short-term moving average is the average of each day's adjusted
closing NAV for a specified period. Moving Average Activity Indicators
combine adjusted closing NAVs from the last business day of each week with
moving averages for a specified period to produce indicators showing when
an NAV has crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown
below: *
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund As of 13-Week 39-Week
Overseas - Class A 10/28/94 $14.01 $13.88
Equity Portfolio Growth - Class A 11/25/94 28.83 28.55
Equity Portfolio Growth - Institutional 11/25/94 29.17 28.84
Global Resources - Class A 10/28/94 17.65 17.17
Growth Opportunities - Class A 10/28/94 26.30 25.87
Strategic Opportunities - Initial 12/30/94 18.92 19.18
Strategic Opportunities - Class A 12/30/94 18.79 19.08
Strategic Opportunities - Class B 12/30/94 18.65 18.96
Equity Income - Class A 11/25/94 16.24 15.65
Equity Income - Class B 11/25/94 16.23 15.64
Equity Income - Institutional 11/25/94 16.33 15.70
Income & Growth - Class A 10/28/94 14.77 14.84
</TABLE>
*Moving averages are shown for those classes that had commenced operations
prior to June 30, 1995 (the date of this Statement of Additional
Information).
Historical Bond Fund Results. The following tables show yields,
tax-equivalent yields (for tax-exempt funds), and total returns for 1994
fiscal periods ended as indicated . The tax-equivalent yield is based on a
31% federal income tax rate. Note that each fund may invest in securities
whose income is subject to the federal alternative minimum tax.
<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
Fiscal Period
Ended:
10/31 = *
11/30 = ** Tax-Equivalent One Five Ten Years/ One Five Ten Years/
12/31 = *** Yield Yield Year Years Life of Fund+ Year Years Life of Fund+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging 8.71% N/A n/a n/a n/a n/a n/a 2.47%
Markets
Income-Class
A***1
Emerging Markets 8.19% N/A n/a n/a n/a n/a n/a 1.96%
Income-Class
B***3
High Yield- 7.33% N/A -2.23% 15.75% 12.99% 2.64% 118.17% 173.14%
Class A*1
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<PAGE>
High Yield-Class 7.04% N/A -1 .60% 16.66% 13.63% 2.14% 117.09% 171.80%
B*3
Strategic 7.67% N/A n/a n/a n/a n/a n/a 0.17%
Income-
Class A*** 1
Strategic 6.81% N/A n/a n/a n/a n/a n/a 0.06%
Income-
Class B*** 3
Government 6.46% N/A -9.77% 5.73% 5.77% -5.27% 38.71% 62.83%
Investment-Class
A*1
Government 6.02% N/A -9.20% 6.53% 6.37% -5.66% 38.13% 62.15%
Investment-Class
B*3
Limited 5.98% N/A -7.07% 6.59% 8.90% -2.44% 44.42% 146.17%
Term Bond-Class
A**1
Limited 5.47% N/A -6.59% 7.38% 9.37% -2.91% 43.72% 144.98%
Term Bond-Class
B**3
Limited 6.53% N/A -2.10% 7.86% 9.55% -2.10% 46.01% 148 .89%
Term
Bond-Institution
al Class**
Short-Fixed 6.10% N/A -1.72% 6.82% 7.32% -0.22% 41.17% 68.00%
Income-Class
A*2
High Income 5.99% 8.68% -10.49% 7.15% 8.56% -6.03% 48.27% 88.65%
Municipal-Class
A*1
High Income 5.30% 7.68% -10.00% 7.95% 9.23% -6.47% 47.57% 87.76%
Municipal-Class
B*3
Limited Term 4.97% 7.20% -10.25% 4.05% 5.93% -5.78% 28.03% 78.39%
Tax-
Exempt-Class
A**1
Limited Term 4.35% 6.30% -9.74% 4.84% 6.44% -6.15% 27.53% 77.69%
Tax-
Exempt-Class
B**3
Limited Term 5.47% 7.93% -5.43% 5.21% 6.57% -5.43% 28.90% 79 .59%
Tax-
Exempt-Instituti
onal Class**
Short 4.83% 7.00% n/a n/a -1.74% n/a n/a 0.27%
Intermediate
Tax-Exempt-Class
A**2
- 93 -
<PAGE>
</TABLE>
+ Life of fund figures are from commencement of operations (March 10,
1994 for Emerging Markets Income; January 5, 1987 for High Yield; October
31, 1994 for Strategic Income; January 7, 1987 for Government Investment;
September 16, 1987 for Short Fixed-Income and High Income Municipal;
September 19, 1985 for Limited Term Tax-Exempt; and March 16, 1994 for
Short-Intermediate Tax-Exempt) through the 1994 fiscal year end.
1 Average annual total return figures include the effect of the class's
maximum 4.75% front-end sales charge in effect for the periods shown.
2 Average annual total return figures include the effect of the class's
1.50% front-end sales charge.
3 Average annual total return figures include the effect of the class's
maximum 4.0% contingent deferred sales charge.
Note: If FMR had not reimbursed certain fund expenses during
certain of these periods, the yields and total returns for those periods
for Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt would have
been lower. If the following funds had not been in reimbursement, their
yields and tax-equivalent yields (if applicable) would have been as
follows: Emerging Markets Income - Class A and Class B (8.06% and 7.84%);
Strategic Income - Class A and Class B (5.69% and 5.18%); Limited Term
Bond - Class A and Class B (5.91% and 4.71%); Government Investment -
Class A and Class B (5.73% and 5.10%); Limited Term Tax-Exempt - Class A,
Class B, and Institutional Class (4.83%/7.00%, 3.64%/5.28%, and
5.36%/7.77%); and Short-Intermediate Tax Exempt - Class A (4.04%/5.86%).
Historical Equity Fund Results. The following table shows the
total returns for 1994 fiscal periods ended as indicated .
<TABLE>
<CAPTION>
Fiscal Period
Ended:
10/31 - *
11/30 - **
12/31 - *** Average Annual Total Returns Cumulative Total Returns
- 94 -
<PAGE>
<C> <C> <C> <C> <C> <C>
One Five Ten Years/ One Five Ten Years/
Year Years Life of Fund+ Year Years Life of Fund+
<S> ---- ----- -------------- ---- ----- --------------
Overseas 3.74% n/a 7.50% 8.91% n/a 45.67%
Class-A*1
EPG-Class A** -3.24% 16.55% 19.14% 1.58% 125.75% 504.83%
EPG-Institu- 2.46% 18 .10% 19.93% 2.46% 129.70% 515.42%
tional Class
Global -0.97% 13.48% 14.86% 3.97% 97.54% 171.05%
Resources-
Class A**1
Growth 3.55% 15.15% 19.94% 8.71% 112.51% 272.05%
Opportunities-
Class A**1
Strategic -11.58% 6.55% 13.88% -7.17% 44.18% 285.19%
Opportunities-
Class A***1
Strategic -10.79% 7.44% 14.43% -7.22% 44.11% 285.00%
Opportunities-
Class B***2
Strategic -10.80% 7.20% 14.38% -6.35% 48.64% 302.39%
Opportunities-
Initial
Class ***
Equity 3.67% 9.10% 12.68% 8.84% 62.28% 246.39%
Income-Class
A**1
Equity 4.77% 10.02% 13.22% 8.77% 62.17% 246.17%
Income-Class
B**2
Equity 9.82% 10.56% 13.43% 9.82% 65.21% 252.65%
Income-Insti-
tutional
Class**
Income & -7.31% 9.99% 11.34% -2.69% 68.98% 143.26%
Growth-Class
A*1
</TABLE>
+ Life of fund figures are from commencement of operations (April
23, 1990 for Overseas; December 29, 1987 for Global Resources; November
18, 1987 for Growth Opportunities; and January 6, 1987 for Income &
Growth) through the 1994 fiscal year end.
1 Average annual total return figures include the effect of the class's
maximum 4.75% front-end sales charge in effect for the periods shown.
- 95 -
<PAGE>
2 Average annual total return figures include the effect of the class's
maximum 4.0% contingent deferred sales charge.
Note: If FMR had not reimbursed certain fund expenses during
certain of these periods, the total returns for those periods for
Overseas, Global Resources, Equity Income, and Growth Opportunities would
have been lower.
Domestic Fund Returns. The following tables show the income and
capital elements of the cumulative total return for each class of each
fund. The table compares each class's return to the record of the S&P
500, the Dow Jones Industrial Average (DJIA), and the cost of living
(measured by the Consumer Price Index (CPI) over the same period. The CPI
information is as of the month-end closest to the initial investment date
for each fund. The S&P 500 and DJIA comparisons are provided to show how
each class's total return compared to the record of a broad average of
common stock prices and a narrower set of stocks of major industrial
companies, respectively, over the same period. Of course, since bond funds
invest in fixed-income securities, common stocks represent a different
type of investment from those funds. Common stocks generally offer
greater growth potential than bonds, but generally experience greater
price volatility, which means greater potential for loss. In addition,
common stocks generally provide lower income than a fixed-income
investment such as the bond funds. Each fund has the ability to invest in
securities not included in either index, and its investment portfolio may
or may not be similar in composition to the indices. Figures for the S&P
500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the classes' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
The following charts show the growth of a hypothetical $10,000
investment in each class, assuming all distributions were reinvested. This
was a period of fluctuating interest rates, bond prices, and stock prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the class today. Tax consequences of different investments
have not been factored into the figures.
Institutional/Initial Class Charts. Institutional and Initial
Class shares are sold to eligible investors without a sales charge or a
12b-1 fee.
Class A Charts. Class A shares are sold to eligible investors
with a maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On September 10, 1992, a .65% (for equity
funds) or a .25% (for fixed-income funds, except Short Fixed-Income and
Short-Intermediate Tax-Exempt, which have a .15% 12b-1 fee) 12b-1 fee
for all Class A shares was imposed. The Class A 12b-1 fee is not
- 96 -
<PAGE>
reflected in figures prior to that date. The initial offering of Class A
shares for Equity Portfolio Growth, Equity Income, Limited Term
Tax-Exempt, and Limited Term Bond was September 10, 1992. Prior to that
date, the figures for these funds reflect Institutional Class (Initial
Class for Strategic Opportunities) data, i.e., no sales charge or 12b-1
fee.
Class B Charts. Class B shares are sold to eligible investors
with a 1.00% 12b-1 fee and may be subject to the contingent deferred
sales charge upon redemption (maximum 4.00%). The 1.00% 12b-1 fee is
reflected in figures for the period beginning on June 30, 1994, the
initial offering date of Class B shares. Prior to that date, the figures
for Class B shares reflect Class A and Institutional Class (Initial Class
for Strategic Opportunities) data, as applicable, for the particular fund,
as described above.
<TABLE>
<CAPTION>
EQUITY PORTFOLIO GROWTH - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
1985 $13,155 $0 $0 $13,155 $12,899 $12,966 $10,351
1986 15,634 28 459 16,121 16,469 17,477 10,484
1987 11,767 31 1,564 13,362 15,699 17,258 10,959
1988 14,258 52 3,029 17,339 19,361 20,628 11,425
1989 20,545 611 4,364 25,520 25,333 27,398 11,956
1990 18,445 674 7,102 26,221 24,451 26,939 12,707
1991 28,800 1,052 11,089 40,941 29,428 31,509 13,086
1992 31,232 1,199 17,090 49,521 34,872 37,054 13,485
1993 34,992 1,512 20,207 56,711 38,394 42,501 13,846
1994 33,830 1,462 22,318 57,610 38,795 44,332 14,236
* From month-end closest to initial investment date.
</TABLE>
EQUITY PORTFOLIO GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
- 97 -
<PAGE>
1985 $13,811 $0 $0 $13,811 $12,899 $12,966 $10,351
1986 16,413 29 482 16,924 16,469 17,477 10,484
1987 12,354 32 1,641 14,027 15,699 17,258 10,959
1988 14,969 55 3,180 18,204 19,361 20,628 11,425
1989 21,569 642 4,582 26,793 25,333 27,398 11,956
1990 19,365 707 7,456 27,528 24,451 26,939 12,707
1991 30,237 1,104 11,642 42,983 29,428 31,509 13,086
1992 32,839 1,261 17,970 52,070 34,872 37,054 13,485
1993 37,036 1,645 21,386 60,067 38,394 42,501 13,846
1994 35,990 1,822 23,731 61,543 38,795 44,332 14,236
* From month-end closest to initial investment date.
</TABLE>
- 98 -
<PAGE>
<TABLE>
<CAPTION>
GLOBAL RESOURCES - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
1988* $10,925 $0 $0 $10,925 $11,702 $11,395 $10,416
1989 12,002 0 1,068 13,070 14,791 14,557 10,884
1990 11,716 81 2,106 13,903 13,683 13,970 11,568
1991 13,440 93 3,081 16,614 18,268 18,172 11,906
1992 13,221 91 4,293 17,605 20,090 19,672 12,288
1993 16,754 116 7,961 24,831 23,093 23,104 12,626
1994 16,726 116 8,975 25,817 23,986 25,207 12,955
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
GROWTH OPPORTUNITIES - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
1988* $13,592 $0 $0 $13,592 $11,872 $11,566 $10,416
1989 15,745 35 896 16,676 15,006 14,775 10,884
1990 12,373 71 1,721 14,165 13,882 14,179 11,568
1991 19,602 371 2,727 22,700 18,534 18,444 11,906
1992 20,136 499 4,810 25,445 20,383 19,966 12,288
1993 24,184 790 7,623 32,597 23,430 23,449 12,626
1994 25,356 925 9,157 35,438 24,336 25,585 12,955
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
- 99 -
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC OPPORTUNITIES - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Dec. 31 Investment Distributions Distributions Value 500 DJIA Living*
1985 $11,799 $233 $1,079 $13,101 $13,175 $13,356 $10,380
1986 14,178 355 2,227 16,760 15,636 16,967 10,494
1987 11,388 535 3,776 15,699 16,459 17,889 10,959
1988 13,435 1,302 4,454 19,191 19,193 20,737 11,443
1989 17,327 2,375 5,745 25,447 25,274 27,323 11,975
1990 15,429 3,078 5,116 23,623 24,486 27,176 12,707
1991 16,172 4,106 8,796 29,074 31,951 33,791 13,096
1992 16,662 5,147 11,008 32,817 34,393 36,257 13,476
1993 18,193 6,361 14,969 39,523 37,859 42,418 13,846
1994 16,356 6,383 13,951 36,690 38,358 44,527 14,217
</TABLE>
* From month-end closest to initial investment date.
<TABLE>
<CAPTION>
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C>
Period Ended $10,000 Dividend Capital Gain Total S&P Cost of
Dec. 31 Investment Distributions Distributions Value 500 DJIA Living*
1985 $12,388 $ 234 $1,133 $13,755 $13,175 $13,356 $10,380
1986 14,885 372 2,338 17,595 15,636 16,967 10,494
1987 11,956 561 3,964 16,481 16,459 17,889 10,959
1988 14,105 1,367 4,677 20,149 19,193 20,737 11,443
1989 18,191 2,493 6,031 26,715 25,274 27,323 11,975
1990 16,198 3,231 5,371 24,800 24,486 27,176 12,707
1991 16,979 4,311 9,235 30,525 31,951 33,791 13,096
1992 17,493 5,403 11,557 34,453 34,393 36,257 13,476
1993 19,100 6,678 15,716 41,494 37,859 42,418 13,846
1994 17,052 6,899 14,549 38,500 38,358 44,527 14,217
</TABLE>
* From month-end closest to initial investment date.
- 100 -
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC OPPORTUNITIES - INITIAL CLASS INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Dec. 31 Investment Distributions Distributions Value 500 DJIA Living**
1985 $11,799 $223 $1,079 $13,101 $13,175 $13,356 $10,380
1986 14,178 355 2,227 16,760 15,636 16,967 10,494
1987 11,467 547 3,788 15,802 16,459 17,889 10,959
1988 13,548 1,366 4,476 19,390 19,193 20,737 11,443
1989 17,388 2,652 5,744 25,784 25,274 27,323 11,975
1990 15,499 3,465 5,120 24,084 24,486 27,176 12,707
1991 16,260 4,673 8,858 29,791 31,951 33,791 13,096
1992 16,741 5,959 11,104 33,804 34,393 36,257 13,476
1993 18,324 7,425 15,179 40,928 37,859 42,418 13,846
1994 16,496 7,660 14,172 38,328 38,358 44,527 14,217
</TABLE>
** From month-end closest to initial investment date.
<TABLE>
<CAPTION
EQUITY INCOME - CLASS A INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living**
1985 $11,116 $777 $0 $11,893 $12,899 $12,966 $10,351
1986 12,595 1,711 380 14,686 16,469 17,477 10,484
1987 10,167 2,077 1,373 13,617 15,699 17,258 10,959
1988 10,325 3,242 3,725 17,292 19,361 20,628 11,425
1989 11,413 4,801 4,118 20,332 25,333 27,398 11,956
1990 8,855 4,848 3,598 17,301 24,451 26,939 12,707
1991 10,306 6,782 4,188 21,276 29,428 31,509 13,086
1992 11,962 8,862 4,860 25,684 34,872 37,054 13,485
1993 13,822 10,876 5,616 30,314 38,394 42,501 13,846
1994 14,846 12,116 6,032 32,994 38,795 44,332 14,236
</TABLE>
- 101 -
<PAGE>
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
EQUITY INCOME - CLASS B INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C> <C> <C>
Period Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
1985 $11,670 $816 $0 $12,486 $12,899 $12,966 $10,351
1986 13,223 1,797 398 15,418 16,469 17,477 10,484
1987 10,674 2,180 1,441 14,295 15,699 17,258 10,959
1988 10,840 3,403 3,911 18,154 19,361 20,628 11,425
1989 11,982 5,040 4,323 21,345 25,333 27,398 11,956
1990 9,297 5,090 3,777 18,164 24,451 26,939 12,707
1991 10,820 7,120 4,396 22,336 29,428 31,509 13,086
1992 12,559 9,304 5,103 26,966 34,872 37,054 13,485
1993 14,512 11,418 5,896 31,826 38,394 42,501 13,846
1994 15,566 12,725 6,325 34,616 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
- 102 -
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<C> <C>
<S> Value of Value of <C>
Period Initial Reinvested Reinvested <C> <C> <C>
Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Nov. 30 Investment Distributions Distributions Value 500 DJIA Living*
1985 $11,670 $816 $0 $12,486 $12,899 $12,966 $10,351
1986 13,223 1,797 398 15,418 16,469 17,477 10,484
1987 10,674 2,180 1,441 14,295 15,699 17,258 10,959
1988 10,840 3,403 3,911 18,154 19,361 20,628 11,425
1989 11,982 5,040 4,323 21,345 25,333 27,398 11,956
1990 9,297 5,090 3,777 18,164 24,451 26,939 12,707
1991 10,820 7,120 4,396 22,336 29,428 31,509 13,086
1992 12,578 9,318 5,111 27,007 34,872 37,504 13,485
1993 14,580 11,608 5,924 32,112 38,394 42,501 13,846
1994 15,693 13,195 6,376 35,264 38,795 44,332 14,236
</TABLE>
* From month-end closest to initial investment date.
<TABLE>
<CAPTION>
INCOME & GROWTH - CLASS A INDICES
<C> <C>
<S> Value of Value of <C>
Period Initial Reinvested Reinvested <C> <C> <C>
Ended $10,000 Dividend Capital Gain Total S&P <C> Cost of
Oct. 31 Investment Distributions Distributions Value 500 DJIA Living**
1987 $8,992 $161 $0 $9,153 $10,232 $10,358 $10,434
1988 10,544 774 0 11,318 11,747 11,572 10,878
1989 12,163 1,549 0 13,712 14,849 14,782 11,367
1990 9,916 2,328 488 12,732 13,736 14,187 12,081
1991 13,459 3,924 663 18,046 18,339 18,454 12,434
1992 13,726 4,641 1,532 19,899 20,169 19,977 12,833
1993 15,154 6,002 2,653 23,809 23,183 23,462 13,186
1994 13,973 6,056 3,141 23,170 24,080 25,598 13,529
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
- 103 -
<PAGE>
<CAPTION>
HIGH YIELD - CLASS A INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Oct. 31 Investment Distributions Distributions Value Index+ Living**
1987* $8,658 $790 $0 $9,448 $9,917 $10,434
1988 9,392 2,148 0 11,540 11,054 10,878
1989 8,544 3,381 0 11,925 12,369 11,367
1990 7,763 4,589 0 12,352 13,150 12,081
1991 9,639 7,613 0 17,252 15,229 12,434
1992 10,544 10,496 0 21,040 16,727 12,833
1993 11,440 13,420 488 25,348 18,712 13,186
1994 10,687 14,350 980 26,017 18,025 13,529
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
HIGH YIELD - CLASS B INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Oct. 31 Investment Distributions Distributions Value Index+ Living**
1987* $9,090 $829 $0 $9,919 $9,917 $10,434
1988 9,860 2,256 0 12,116 11,054 10,878
1989 8,970 3,550 0 12,520 12,369 11,367
1990 8,150 4,818 0 12,968 13,150 12,081
1991 10,120 7,992 0 18,112 15,229 12,434
1992 11,070 11,020 0 22,090 16,727 12,833
1993 12,010 14,089 512 26,611 18,712 13,186
1994 11,210 14,942 1,028 27,180 18,025 13,529
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
- 104 -
<PAGE>
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
STRATEGIC INCOME - CLASS A INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index+ Living**
1994* $9,449 $93 $0 $9,542 $10,047 $10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
STRATEGIC INCOME - CLASS B INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index+ Living**
1994* $9,910 $84 $0 $9,994 $10,047 $10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 105 -
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT INVESTMENT - CLASS A INDICES
<C> <C>
<S> Value of Value of <C> <C>
Period Initial Reinvested Reinvested <C> Aggregate <C>
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index+ Living**
1987* $8,763 $587 $0 $9,350 $10,133 $10,434
1988 8,820 1,403 0 10,223 10,932 10,878
1989 8,868 2,313 0 11,181 12,520 11,367
1990 8,715 3,190 0 11,905 13,642 12,081
1991 9,134 4,277 0 13,411 15,825 12,434
1992 9,268 5,281 0 14,549 16,996 12,833
1993 9,658 6,395 318 16,371 18,653 13,186
1994 8,534 6,472 503 15,509 18,109 13,529
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
GOVERNMENT INVESTMENT - CLASS B INDICES
<C>
<C> Value of <C>
Value of Rein- Rein-
<S> Initial vested vested <C>
Period $10,000 Dividend Capital Gain <C> Aggre-gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,200 $616 $0 $9,816 $9,917 $10,434
1988 9,260 1,473 0 10,733 11,054 10,878
1989 9,310 2,429 0 11,739 12,369 11,367
1990 9,150 3,349 0 12,499 13,150 12,081
1991 9,590 4,490 0 14,080 15,229 12,434
1992 9,730 5,545 0 15,275 16,727 12,833
1993 10,140 6,714 334 17,189 18,712 13,186
1994 8,950 6,737 528 16,215 18,025 13,529
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 106 -
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM BOND - CLASS A INDICES
<C>
<C> Value of <C>
Value of Rein- Rein- <C>
<S> Initial vested vested Aggre-
Period $10,000 Dividend Capital Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living*
1985 $10,089 $1,093 $0 $11,182 $13,436 $10351
1986 10,749 2,315 22 13,086 15,900 10,484
1987 9,802 3,257 260 13,319 16,180 10,959
1988 9,735 4,499 258 14,492 17,674 11,425
1989 9,955 6,016 264 16,235 20,211 11,956
1990 9,697 7,330 257 17,284 21,741 12,707
1991 10,089 9,235 268 19,592 24,875 13,086
1992 10,175 10,919 270 21,364 27,079 13,485
1993 10,653 13,098 283 24,034 30,029 13,846
1994 9,812 13,376 260 23,448 29,110 14,236
</TABLE>
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM BOND - CLASS B INDICES
<C> <C>
Value of Value of <C>
<S> Initial Reinvested Reinvested <C>
Period $10,000 Dividend Capital Gain <C> Aggregate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living*
1985 $10,592 $1,147 $0 $11,739 $13,436 $10,351
1986 11,285 2,431 24 13,740 15,900 10,484
1987 10,291 3,419 273 13,983 16,180 10,959
1988 10,221 4,723 271 15,215 17,674 11,425
1989 10,452 6,316 277 17,045 20,211 11,956
1990 10,181 7,696 270 18,147 21,741 12,707
1991 10,592 9,695 281 20,568 24,875 13,086
1992 10,683 11,463 283 22,429 27,079 13,485
1993 11,185 13,751 297 25,233 30,029 13,846
- 107 -
<PAGE>
1994 10,291 13,934 273 24,498 29,110 14,236
</TABLE>
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM BOND - INSTITUTIONAL CLASS INDICES
<C> <C> <C>
Value of Value of Rein- <C>
<S> Initial Reinvested vested Aggre-
Period $10,000 Dividend Capital Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living*
1985 $10,592 $1,147 $0 $11,739 $13,436 $10,351
1986 11,285 2,431 24 13,710 15,900 10,484
1987 10,291 3,419 273 13,983 16,180 10,959
1988 10,221 4,723 271 15,215 17,674 11,425
1989 10,452 6,316 277 17,045 20,211 11,956
1990 10,181 7,696 270 18,147 21,741 12,707
1991 10,592 9,695 281 20,568 24,875 13,086
1992 10,683 11,498 283 22,464 27,079 13,485
1993 11,205 13,920 297 25,422 30,029 13,846
1994 10,311 14,304 273 24,888 29,110 14,236
</TABLE>
* From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
SHORT FIXED-INCOME - CLASS A INDICES
<C> <C> <C>
Value of Value of Reinvested <C>
<S> Initial Reinvested Capital Aggre-
Period $10,000 Dividend Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,909 $100 $0 $10,009 $10,356 $10,026
1988 9,791 974 0 10,765 11,543 10,452
1989 9,801 1,921 0 11,722 12,917 10,922
- 108 -
<PAGE>
1990 9,476 2,902 0 12,378 13,732 11,609
1991 9,722 4,165 0 13,887 15,903 11,948
1992 9,801 5,397 0 15,198 17,467 12,330
1993 9,939 6,645 0 16,584 19,540 12,670
1994 9,338 7,211 0 16,549 18,823 13,000
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
HIGH INCOME MUNICIPAL - CLASS A INDICES
<C>
<C> Value of
Value of Rein- <C>
<S> Initial vested Reinvested <C>
Period $10,000 Dividend Capital Gain <C> Aggregate <C.
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,382 $87 $0 $9,469 $10,356 $10,026
1988 9,963 852 0 10,815 11,543 10,452
1989 10,306 1,759 54 12,119 12,917 10,922
1990 10,354 2,722 168 13,244 13,732 11,609
1991 10,868 3,903 330 15,101 15,903 11,948
1992 11,097 5,044 351 16,492 17,467 12,330
1993 12,116 6,577 429 19,122 19,540 12,670
1994 10,687 6,808 473 17,968 18,823 13,000
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 109 -
<PAGE>
<TABLE>
<CAPTION>
HIGH INCOME MUNICIPAL - CLASS B INDICES
<C>
<C> Value of <C.
Value of Rein- Rein-
<S> Initial vested vested <C.
Period $10,000 Dividend Capital Gain <C. Aggregate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Oct. 31 ment butions butions Value Index+ Living**
1987* $9,850 $92 $0 $9,942 $10,356 $10,026
1988 10,460 895 0 11,355 11,543 10,452
1989 10,820 1,847 57 12,724 12,917 10,922
1990 10,870 2,858 176 13,904 13,732 11,609
1991 11,410 4,097 347 15,854 15,903 11,948
1992 11,650 5,296 368 17,314 17,467 12,330
1993 12,720 6,905 450 20,075 19,540 12,670
1994 11,210 7,069 496 18,775 18,823 13,000
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
- 110 -
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT - CLASS A INDICES
<C> <C>
<S> <C> Value of Rein-
Value of Rein- vested <C>
Period Initial vested Capital Aggre-
Ended $10,000 Dividend Gain <C> gate <C>
Nov. Invest- Distri- Distri- Total Bond Cost of
30 ment butions butions Value Index+ Living**
1985* $9,792 $126 $0 $9,918 $10,455 $10,065
1986 10,468 826 51 11,345 12,372 10,194
1987 9,887 1,451 117 11,455 12,590 10,656
1988 10,020 2,207 118 12,345 13,752 11,108
1989 10,106 3,046 119 13,271 15,726 11,625
1990 10,135 3,951 120 14,206 16,917 12,355
1991 10,287 4,955 122 15,364 19,356 12,724
1992 10,554 6,062 125 16,741 21,071 13,112
1993 9,963 6,581 1,489 18,033 23,366 13,463
1994 8,954 6,669 1,369 16,992 22,651 13,841
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT - CLASS B INDICES
<C> <C>
<C> Value of Rein-
Value of Rein- vested <C>
<S> Initial vested Capital Aggre-
Period $10,000 Dividend Gain <C> gate <C>
Ended Invest- Distri Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living**
1985* $10,280 $132 $0 $10,412 $10,455 $10,065
1986 10,990 867 53 11,910 12,372 10,194
1987 10,380 1,524 123 12,027 12,590 10,656
1988 10,520 2,317 124 12,961 13,752 11,108
1989 10,610 3,198 125 13,933 15,726 11,625
1990 10,640 4,148 126 14,914 16,917 12,355
1991 10,800 5,202 128 16,130 19,356 12,724
1992 11,080 6,365 131 17,576 21,071 13,112
1993 10,460 6,909 1,564 18,933 23,366 13,463
- 111 -
<PAGE>
1994 9,400 6,931 1,437 17,768 22,651 13,841
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT-INSTITUTIONAL CLASS INDICES
<C>
<C> Value of <C>
Value of Rein- Rein- <C>
<S> Initial vested vested Aggre-
Period $10,000 Dividend Capital Gain <C> gate <C>
Ended Invest- Distri- Distri- Total Bond Cost of
Nov. 30 ment butions butions Value Index+ Living**
1985* $10,280 $132 $0 $10,412 $10,455 $10,065
1986 10,990 867 53 11,910 12,372 10,194
1987 10,380 1,524 123 12,027 12,590 10,656
1988 10,520 2,317 124 12,961 13,752 11,108
1989 10,610 3,198 125 13,933 15,726 11,625
1990 10,640 4,148 126 14,914 16,917 12,355
1991 10,800 5,202 128 16,130 19,356 12,724
1992 11,080 6,371 131 17,582 21,071 13,112
1993 10,460 6,967 1,564 18,991 23,366 13,463
1994 9,410 7,110 1,440 17,960 22,651 13,841
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE TAX-EXEMPT - CLASS A INDICES
Value of Value of Aggregat
Period Initial Reinvested Reinvested e
Ended $10,000 Dividend Capital Gain Total Bond Cost of
Nov. 30 InvestmentDistributions Distributions Value Index+ Living**
<S> <C> <C> <C> <C> <C> <C>
1994 $9,623 $254 $0 $9,877 $9,926 $10,183
</TABLE>
- 112 -
<PAGE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
+ From month-end following initial investment date.
The yield for the S&P 500 for the year ended December 31, 1994 was
2.93%, calculated by dividing the dollar value of dividends paid by the
S&P 500 stocks during the period by the average value of the S&P 500 on
December 31, 1994. The S&P 500 yield is calculated differently from each
class's yield. For example, a class's yield calculation treats dividends
as accrued in anticipation of payment, rather than recording them when
paid.
International Fund Returns. The following tables show the income and
capital elements of the total return for each class of the Overseas and
Emerging Markets Income from the date each fund commenced operations
through the 1994 fiscal period, ended as indicated. The classes may
compare their total returns to the record of the following Morgan Stanley
Capital International indices: the World Index; EAFE Index; the Europe
Index; the Pacific Index, the Combined Far East ex-Japan Free Index; and
the Latin America Free Index. The EAFE Index combines the Europe and
Pacific indices. The addition of Canada, the United States, and South
African Gold Mines to the EAFE index compiles the World Index which
includes over 1400 companies. The Europe Index and Pacific Index are
subsets of the Morgan Stanley Capital International World Index, which is
also published by Morgan Stanley Capital International, S.A. The Europe
and Pacific Indices are weighted by the market value of each country's
stock exchange(s). The companies included in the indices change only in
the event of mergers, takeovers, failures and the like, and minor
adjustments may be made when Morgan Stanley Capital International, S.A.
reviews the companies covered as to suitability every three or four years.
<TABLE>
<CAPTION>
Fund Comparative Index Description of Index
<S> <C> <C>
Overseas Morgan Stanley Capital International An unmanaged index of 900 foreign common stocks
Europe, Australia, Far East Index
(EAFE)
Emerging Markets J.P. Morgan Emerging An unmanaged index of fixed income securities from
Income Market Bond Index developing nations
</TABLE>
Each table below compares the returns for each class of Overseas and
Emerging Markets Income to the record of the S&P 500, the DJIA, a foreign
stock market index as described above, and the cost of living (measured by
the Consumer Price Index, or CPI) over the same period. The CPI
information is as of the month-end closest to the initial investment date
for each fund. The S&P 500 and DJIA comparisons are provided to show how
- 113 -
<PAGE>
each class's total return compared to the record of a broad range of U.S.
common stocks and a narrower set of stocks of major U.S. industrial
companies, respectively, over the same period. The funds have the ability
to invest in securities not included in the indices, and their investment
portfolios may or may not be similar in composition to the indices. The
EAFE Index, Emerging Market Bond Index, S&P 500, and DJIA are based on
the prices of unmanaged groups of stocks and, unlike each class's returns,
their returns do not include the effect of paying brokerage commissions
and other costs of investing.
The following charts show the growth of a hypothetical $10,000
investment in each class, assuming all distributions were reinvested. This
was a period of fluctuating interest rates, bond prices, and stock prices
and the figures below should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the class today. Tax consequences of different investments
have not been factored into the figures.
Institutional Class Charts. Institutional and Initial Class shares are
sold to eligible investors without a sales charge or a 12b-1 fee
(Institutional Class for the International Funds will commence operations
as of June 30, 1995.)
Class A Charts. Class A shares are sold to eligible investors with a
maximum 4.75% front-end sales charge, which is reflected in the figures
set forth in the charts below. On September 10, 1992, a .65% (for equity
funds) or a .25% (for fixed-income funds, except Short Fixed-Income and
Short-Intermediate Tax-Exempt, which have a .15% 12b-1 fee) 12b-1 fee for
all Class A shares was imposed. The Class A 12b-1 fee is not reflected in
figures prior to that date.
Class B Charts. Class B shares are sold to eligible investors with a
1.00% 12b-1 fee and may be subject to the contingent deferred sales
charge (maximum 4.00%) applicable upon redemption. The 1.00% 12b-1 fee is
reflected in figures for the period beginning on June 30, 1994, the
initial offering date of Class B shares. Prior to that date, the figures
for Class B shares reflect Class A data for the particular fund, as
described above. (Class B shares for Overseas will commence operations as
of June 30, 1995.)
<TABLE>
<CAPTION>
OVERSEAS-CLASS A INDICES
Value of Value of
Period Initial Reinvested Reinvested
Ended $10,000 Dividend Capital Gain Total EAFE S&P Cost of
Oct. 31 Investment Distributions Distributions Value Index 500 DJIA Living**
- 114 -
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990* $9,096 $0 $0 $9,096 $9,968 $9,246 $9,246 $10,357
1991 9,315 77 0 9,392 10,661 12,344 12,027 10,659
1992 8,639 200 0 8,839 9,252 13,575 13,020 11,001
1993 12,316 424 0 12,740 12,717 15,604 15,291 11,303
1994 13,392 483 0 13,875 14,002 16,208 16,684 11,598
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME-CLASS A INDICES
Value of Value of J.P. Morgan
Period Initial Reinvested Reinvested Emerging
Ended $10,000 Dividend Capital Gain Total Market Bond Cost of
Dec. 31 Investment Distributions Distributions Value Index Living**
<S> <C> <C> <C> <C> <C> <C>
1994* $9,068 $457 $235 $9,760 $9,989 $10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
<TABLE>
<CAPTION>
EMERGING MARKETS INCOME-CLASS B INDICES
Value of Value of J.P. Morgan
Initial Reinvested Reinvested Emerging
Period $10,000 Dividend Capital Gain Total Market Bond S&P Cost of
Ended Dec. 31 Investment Distributions Distributions Value Index 500 DJIA Living**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994* $9,520 $430 $246 $10,196 $9,989 $20,674 $10,178 $10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
- 115 -
<PAGE>
The following table reflects the cost of the initial $10,000
investment in each of the classes, plus the aggregate cost of reinvested
dividends and capital gain distributions, if any, for the period covered.
If distributions had not been reinvested, the amount of distributions
earned from the applicable class over time would have been smaller and the
cash payments from these classes for the periods noted would have come to
the amounts shown in column (A) for capital gain distributions, and the
amounts shown in column (B) for income dividends. Tax consequences of
different investments (with the exception of foreign tax withholdings)
have not been factored into the figures below.
<TABLE>
<CAPTION>
(A) (B)
Capital Gain Income
Fund Cost Distributions Dividends
<S> <C> <C> <C>
Overseas-A $24,857 $10,557 $581
Equity Portfolio Growth-A 25,863 11,083 772
Equity Portfolio Growth-Institutional 16,456 5,229 76
Global Resources-A 16,797 5,296 514
Growth Opportunities-A 28,518 8,432 3,848
Strategic Opportunities-A 29,681 8,852 4,151
Strategic Opportunities-B 29,936 8,432 4,522
Strategic Opportunities-Initial 23,178 3,191 5,609
Equity Income-A 23,857 3,350 5,898
Equity Income-B 24,205 3,350 6,055
Equity Income-Institutional 18,033 2,105 4,086
Income & Growth-A 10,750 248 479
Emerging Markets Income-A 10,731 260 451
Emerging Markets Income-B 23,956 467 8,089
High Yield-A 25,541 490 8,447
High Yield-B 10,093 0 93
Strategic Income-A 10,084 0 84
Strategic Income-B 17,342 333 5,038
Government Investment-A 17,657 350 5,261
Government Investment-B 23,973 230 8,552
Limited Term Bond-A 24,573 241 8,938
Limited Term Bond-B 24,933 241 9,089
Limited Term Bond-Institutional 17,505 0 5,582
Short Fixed-Income-A 17,299 362 5,171
High Income Municipal-A 17,588 380 5,384
High Income Municipal-B 18,965 972 5,489
Limited Term Tax-Exempt-A 19,339 1,020 5,724
Limited Term Tax-Exempt-B 19,522 1,020 5,820
Limited Term Tax-Exempt-Institutional 10,258 0 255
Short-Intermediate Tax-Exempt-A 10,328 0 324
</TABLE>
- 116 -
<PAGE>
International Indices, Market Capitalization, and National Stock
Market Return. The following tables show the indexed market capitalization
of certain countries included in the Morgan Stanley Capital International
Indices (MSCI) database as of December 31, 1994 and the performance of
national stock markets as measured in U.S. dollars and in local currency
by the Morgan Stanley Capital International stock market indices for the
twelve months ended October 31, 1994. Of course, these results are not
indicative of future stock market performance or the classes' performance.
Market conditions during the periods measured fluctuated widely. Brokerage
commissions and other fees are not factored into the values of the
indices.
Market Capitalization. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization. According
to Morgan Stanley Capital International, the size of the markets as
measured in U.S. dollars grew from $2,011 billion in 1982 to $7,659
billion in 1994.The following table measures the indexed market
capitalization of certain countries according to the Morgan Stanley
Capital International Indices database. The value of the markets are
measured in billions of U.S. dollars as of December 31, 1994.
MSCI Index Market Capitalization
Australia $125.10 Japan $2,145.70
Austria 18.00 Netherlands 167.90
Belgium 49 .30 Norway 19.90
Canada 171.10 Singapore/Malaysia 175.00
Denmark 35.30 Spain 74.30
France 265.60 Sweden 76.10
Germany 300.10 Switzerland 215.00
Hong Kong 196.50 United Kingdom 731.00
Italy 102.90 United States 2,784.70
The following table measures the total market capitalization of
certain Latin American countries according to the MSCI Index database. The
value of the markets is measured in billions of U.S. dollars as of
December 31, 1994.
MSCI Index Market Capitalization - Latin America
Argentina $23,742
Brazil 95,841
Chile 38,160
Colombia 7,764
Mexico 70,281
Venezuela 3,328
Total Latin America $239,116
- 117 -
<PAGE>
National Stock Market Performance. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents the
performance of national stock markets as measured in U.S. dollars by the
Morgan Stanley Capital International stock market indices for the twelve
months ended October 31, 1994. The second table shows the same performance
as measured in local currency. Each table measures total return based on
the period's change in price, dividends paid on stocks in the index, and
the effect of reinvesting dividends net of any applicable foreign taxes.
These are unmanaged indices composed of a sampling of selected companies
representing an approximation of the market structure of the designated
country.
<TABLE>
<CAPTION>
Stock Market Performance (Cumulative Total Returns)
Measured in U.S. Dollars
<S> <C> <C> <C>
Australia 2.932% Japan 8.122%
Austria -5.91 Netherlands 14.089
Belgium 13.47 Norway 15.120
Canada 1.173 Singapore/Malaysia 33.750/7.946
Denmark 7.285 Spain -1 .426
France 2.592 Sweden 19.165
Germany 8.752 Switzerland 11.086
Hong Kong 2.047 United Kingdom 7.843
Italy 17.332 United States 1.679
Stock Market Performance (Cumulative Total Returns)
Measured in Local Currency
Australia -2.232% Japan -3.213%
Austria -15.340 Netherlands 2.517
Belgium -3 .057 Norway 3.208
Canada 3.599 Singapore/Malaysia 23.794/7.963
Denmark -6.058 Spain -7.860
France -9.690 Sweden 5.680
Germany -2.090 Switzerland 5.573
Hong Kong 2.034 United Kingdom -1.884
Italy 11.405 United States 1.679
</TABLE>
The following table shows the average annualized stock market returns as
of October 31, 1994.
Stock Market Performance Measured in U.S. Dollars
Five Years Ended Ten Years Ended
- 118 -
<PAGE>
Germany 11.01% 18.19%
Hong Kong 31.98 30.82
Japan -1.87 17.68
Spain 1.52 19.61
United Kingdom 12.81 18.64
United States 9.51 13 .60
Performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds.
These comparisons may be expressed as mutual fund rankings prepared by
Lipper Analytical Services, Inc. (Lipper), an independent service located
in Summit, New Jersey that monitors the performance of mutual funds.
Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank bond funds based on yield. In addition
to mutual fund rankings, performance may be compared to stock, bond, and
money market mutual fund performance indices prepared by Lipper or other
organizations. When comparing these indices, it is important to remember
the risk and return characteristics of each type of investment. For
example, while stock mutual funds may offer higher potential returns, they
also carry the highest degree of share price volatility. Likewise, money
market funds may offer greater stability of principal, but generally do
not offer the higher potential returns available from stock mutual funds.
From time to time, performance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, a class may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, a fund may offer greater liquidity or higher
potential returns than CDs, a fund does not guarantee your principal or
your return, and fund shares are not FDIC-insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to assess
- 119 -
<PAGE>
savings needs based on assumed rates of inflation and hypothetical rates
of return; and action plans offering investment alternatives. Materials
may also include discussions of Fidelity's asset allocation funds and
other Fidelity funds, products, and services.
Each fund may be advertised as part of certain asset allocation
programs involving other Fidelity mutual funds. These asset allocation
programs may advertise a model portfolio and its performance results.
Each fund may be advertised as part of a no transaction fee (NTF)
program in which Fidelity and non-Fidelity mutual funds are offered. The
Fidelity Spectrum Program, an NTF program offered to institutional
clients, may include the funds and may advertise performance results.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States, including
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the funds. Ibbotson calculates total returns in the same method
as the classes. Performance comparisons may also be made to other
compilations or indices that may be developed and made available in the
future.
Each class of a fixed-income fund may compare its performance or the
performance of securities in which that fixed-income fund may invest to
averages published by IBC USA (Publications), Inc. of Ashland,
Massachusetts. These averages assume reinvestment of distributions. The
BOND FUND REPORT AVERAGES /All Taxable (Strategic Income, Government
Investment, Limited Term Bond, High Yield, Short-Fixed Income) covers
over 488 taxable bond funds, The BOND FUND REPORT AVERAGES /Municipal
(Limited Term Tax-Exempt, High Income Municipal, Short-Intermediate
Tax-Exempt) covers over 433 tax-exempt bond funds. The averages are
reported in the BOND FUND REPORT . Each class of a fixed-income fund may
compare its performance or the performance of securities in which it may
invest to the IBC/Donohgue's MONEY FUND AVERAGES , reported in the MONEY
FUND REPORT , which monitor the performance of money market funds. When
evaluating comparisons to money market funds, investors should consider
the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price. A bond fund,
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however, invests in longer-term instruments and its share price changes
daily in response to a variety of factors.
A tax-exempt fund may compare and contrast in advertising the
relative advantages of investing in a mutual fund versus an individual
municipal bond. Unlike tax-exempt mutual funds, individual municipal
bonds offer a stated rate of interest and, if held to maturity, repayment
of principal. Although some individual municipal bonds might offer a
higher return, they do not offer the reduced risk of a mutual fund that
invests in many different securities. The initial investment requirements
and sales charges of many tax-exempt mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally issued in
$5,000 denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include: other Fidelity funds; retirement
investing; the effects of periodic investments plans and dollar cost
averaging; and saving for college or other goals. In addition, Fidelity
may quote or reprint financial or business publications or periodicals,
including descriptions of model portfolios or allocations, as they relate
to current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services and
products.
Each fund may present its fund number, Quotron number and CUSIP
number, and discuss or quote its current portfolio manager.
Volatility. Various measures of volatility and benchmark correlation
may be quoted in advertising. In addition, a fund may compare these
measures to those of other funds. Measures of volatility seek to compare a
class' historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
Momentum Indicators indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents the
class's percentage change in price movements over that period.
Examples of the effects of periodic investment plans, including the
principle of dollar cost averaging may be advertised. In such a program,
an investor invests a fixed dollar amount in a class at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at
the same intervals. In evaluating such a plan, investors should consider
their ability to continue purchasing shares during periods of low price
levels.
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A fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes,
which may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have an
after-tax value of $1,949 after ten years, assuming tax was deducted from
the return each year at a 31% rate. An equivalent tax-deferred investment
would have an after-tax value of $2,100 after ten years, assuming tax was
deducted at a 31% rate from the tax-deferred earnings at the end of the
ten-year period.
As of December 31, 1994, FMR advised over $25 billion in tax-free
fund assets, $55 billion in money market fund assets, $165 billion in
equity fund assets, and $19 billion in international fund assets. The
funds may reference the growth and variety of money market mutual funds
and the adviser's innovation and participation in the industry. The "
equity funds under management" figure represents the largest amount of
equity fund assets under management by a mutual fund investment adviser in
the United States, making FMR America's leading equity (stock) fund
manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, each class of each bond fund may
compare its total expense ratio to the average total expense ratio of
similar funds tracked by Lipper. A class's total expense ratio is a
significant factor in comparing bond and money market investments because
of its effect on yield.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
Class A Shares Only
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class A shares' maximum 4.75% (all funds except Short-Fixed Income
and Short-Intermediate Tax-Exempt) or 1.50% (Short-Fixed Income and
Short-Intermediate Tax-Exempt) front-end sales charge in connection with
the fund's merger with or acquisition of any investment company or trust.
In addition, FDC has chosen to waive Class A shares front-end sales
charge in certain instances because of efficiencies involved in those
sales of shares. The sales charge will not apply:
1. to shares purchased by a bank trust officer, registered
representative, or other employee (and their immediate families) of
Investment Professionals under special arrangements in connection with
FDC's sales activities;
2. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
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Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor
child of a Fidelity Trustee or employee;
3. to shares purchased by a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or
more;
4. to shares purchased for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code);
5. to shares purchased by a trust institution or bank trust department
which has executed a Participation Agreement with Fidelity Investments
Institutional Services Company (FIIS) specifying certain asset minimums,
and qualifications, marketing program and trading restrictions;
6. to shares purchased by a Wrap Program provider which has executed
a Participation Agreement with FIIS specifying certain asset minimums, and
qualifications, marketing program and trading restrictions ;
7. to shares purchased in connection with an employee benefit plan
(including the Fidelity-sponsored 403(b) and corporate IRA programs but
otherwise as defined in the Employee Retirement Income Security Act
(ERISA)) maintained by a U.S. employer and having more than 200 eligible
employees, or a minimum of $1,000,000 in plan assets invested in the
assets of which are held in a bona fide trust for the exclusive benefit of
employees participating therein;
8. to shares in a Fidelity IRA or Fidelity Advisor IRA account
purchased (including purchases by exchange) with the proceeds of a
distribution from an employee benefit plan having more than 200 eligible
employees or a minimum of $3,000,000 in plan assets invested in Fidelity
mutual funds or $1,000,000 invested in Fidelity Advisor mutual funds;
9. to shares purchased by an insurance company separate account used
to fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA)), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor funds;
10. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency; or
11. to shares purchased with redemption proceeds from other mutual
fund complexes on which the investor has paid a front-end or contingent
deferred sales charge;
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12. to shares purchased by a registered investment advisor which is
not part of an organization principally engaged in the brokerage business
and which has executed a Participation Agreement with FIIS specifying
certain asset minimums, and qualifications, marketing program and trading
restrictions.
Class B Shares Only
The contingent deferred sales charge (CDSC) on Class B shares may be
waived in the case of (1) disability or death, provided that the
redemption is made within one year following the death or initial
determination of disability, or (2) in connection with a total or partial
redemption made in connection with distributions from retirement plan
accounts at age 70 1/2, which are permitted without penalty pursuant tot
he Internal Revenue Code.
A sales load waiver form must accompany these transactions.
FDC compensates investment professionals with a fee of .25% on
purchases of $1 million or more, except for purchases made through a bank
or bank affiliated broker-dealer that qualify for a Class A Sales Charge
Waiver. All assets on which the .25% fee is paid must remain within the
Fidelity Advisor Funds (including shares exchanged into Daily Money Fund
and Daily Tax-Exempt Money Fund) for a period of one uninterrupted year or
the investment professional will be required to refund this fee to FDC.
Purchases by insurance company separate accounts will qualify for the .25%
fee only if an insurance company's client relationship underlying the
separate account exceeds $1 million. It is the responsibility of the
insurance company to maintain records of purchases by any such client
relationship. FDC may request records evidencing any fees payable through
this program.
Class A and Class B Shares Only
Quantity Discounts. To obtain a reduction of the front-end sales
charge on Class A shares, you or your Investment Professional must notify
the transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges
under the Combined Purchase, Rights of Accumulation or Letter of Intent
programs, the following may qualify as an individual or a "company" as
defined in Section 2(a)(8) of the 1940 Act: an individual, spouse, and
their children under age 21 purchasing for his, her, or their own account;
a trustee, administrator or other fiduciary purchasing for a single trust
estate or a single fiduciary account or for a single or a
parent-subsidiary group of "employee benefits plans" (as defined in
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Section 3(3) of ERISA); and tax-exempt organizations as defined under
Section 501(c)(3) of the Internal Revenue Code.
Rights of Accumulation permit reduced front-end sales charges on any
future purchases of Class A shares after you have reached a new breakpoint
in a fund's sales charge schedule. The value of currently held Fidelity
Advisor Fund Class A and Class B shares, Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio and shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund
acquired by exchange from any Fidelity Advisor fund, is determined at the
current day's NAV at the close of business, and is added to the amount of
your new purchase valued at the current offering price to determine your
reduced front-end sales charge.
Letter of Intent. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Short Fixed-Income or Short-Intermediate Tax-Exempt) had
been invested at one time. To ensure that the reduced front-end sales
charge will be received on future purchases, you or your Investment
Professional must inform the transfer agent that the Letter is in effect
each time Class A shares are purchased. Neither income nor capital gain
distributions taken in additional Class A or Class B shares will apply
toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you
plan to invest. Out of the initial purchase, 5% of the dollar amount
specified in the Letter will be registered in your name and held in
escrow. The Class A shares held in escrow cannot be redeemed or exchanged
until the Letter is satisfied or the additional sales charges have been
paid. You will earn income dividends and capital gain distributions on
escrowed Class A shares. The escrow will be released when your purchase of
the total amount has been completed. You are not obligated to complete the
Letter
If you purchase more than the amount specified in the Letter and
qualify for a future front-end sales charge reduction, the front-end
sales charge will be adjusted to reflect your total purchase at the end of
13 months. Surplus funds will be applied to the purchase of additional
Class A shares at the then current offering price applicable to total
purchase.
If you do not complete your purchase under the Letter within the
13-month period, 30 days' written notice will be provided for you to pay
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the increased front-end sales charges due. Otherwise, sufficient escrowed
Class A shares will be redeemed to pay such charges.
Fidelity Advisor Systematic Investment Program.
You can make regular investments in Class A or Class B shares of the
funds with the Systematic Investment Program by completing the appropriate
section of the account application and attaching a voided personal check
with your bank's magnetic ink coding number across the front. If your
bank account is jointly owned, be sure that all owners sign. Investments
may be made monthly by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at
any time. There is a $1,000 minimum initial investment requirement for
Systematic Investment Programs.
Your account will be drafted on or about the first business day of
every month. Class A or Class B shares will be purchased at the offering
price next determined following receipt of the order by the transfer
agent. You may cancel your participation in the Systematic Investment
Program at any time without payment of a cancellation fee. You will
receive a confirmation from the transfer agent for every transaction, and
a debit entry will appear on your bank statement.
Exchange Information
Fidelity Advisor Systematic Exchange Program. With the Systematic
Exchange Plan, you can exchange a specific dollar amount of Class A or
Class B shares of one fund into the same class of other Fidelity Advisor
funds on a monthly, quarterly or semiannual basis.
1. The account from which the exchanges are to be processed must have
a minimum value of $10,000 before you may elect to begin exchanging
systematically. The account into which the exchanges are to be
processed must be an existing account with a minimum balance of
$1,000.
2. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount to be exchanged
systematically is $100.
3. Systematic Exchanges will be processed at the NAV determined on the
transaction date, except that Systematic Exchanges into a Fidelity
Advisor fund from any eligible money market fund will be processed
at the offering price next determined on the transaction date,
unless the shares were acquired by exchanges from another Fidelity
Advisor fund.
Redemption Information
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Reinstatement Privilege. If you have sold all or part of your Class A
or Class B shares of a fund you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or any of
the other Fidelity Advisor funds, at the NAV next determined after receipt
of your investment order, provided that such reinvestment is made within
30 days of redemption. You must reinstate your shares into an account
with the same registration. This privilege may be exercised only once by
a shareholder with respect to a fund.
Fidelity Advisor Systematic Withdrawal Program. If you own Class A
shares worth $10,000 or more, you can have monthly, quarterly or
semiannual checks sent from your account to you, to a person named by you,
or to your bank checking account. You may obtain information about the
Systematic Withdrawal Program by contacting your investment professional.
Your Systematic Withdrawal Program payments are drawn from Class A share
redemptions. If Systematic Withdrawal Plan redemptions exceed income
dividends earned on your shares, your account eventually may be exhausted.
Since a front-end sales charge is applied on new shares you buy, it is to
your disadvantage to buy Class A shares while also making systematic
redemptions.
Class A, Class B, and Institutional Class Shares
Each fund is open for business and the NAV for each class is
calculated each day the New York Stock Exchange (NYSE) is open for
trading. The NYSE has designated the following holiday closings for 1995:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. Although FMR expects
the same holiday schedule to be observed in the future, the NYSE may
modify its holiday schedule at any time. Each class's NAV is calculated as
of the close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV
may be calculated earlier if trading on the NYSE is restricted or as
permitted by the SEC. To the extent that portfolio securities are traded
in other markets on days when the NYSE is closed, a class's NAV may be
affected on days when investors do not have access to the fund to purchase
or redeem shares. In addition, trading in some of a fund's portfolio
securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued
in computing a fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940
(1940 Act), each fund is required to give shareholders at least 60 days'
notice prior to terminating or modifying its exchange privilege. Under the
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Rule, the 60-day notification requirement may be waived if (i) the only
effect of a modification would be to reduce or eliminate an administrative
fee, redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of
its shares because it is unable to invest amounts effectively in
accordance with its investment objective and policies.
In the prospectuses, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
Distributions. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks
remain uncashed for six months, Fidelity may reinvest your distributions
at the then-current NAV. All subsequent distributions will then be
reinvested until you provide Fidelity with alternate instructions.
Dividends. A portion of each equity fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that a fund's income is derived from qualifying dividends. For
any fund that invests significantly in foreign securities, corporate
shareholders should not expect fund dividends to qualify for the
dividend-received deduction for those funds that may also earn other types
of income, such as interest, income from securities loans,
non-qualifying dividends and short-term capital gains, the percentage of
dividends from the equity funds that qualify for the deduction will
generally be less than 100%. A fund will notify corporate shareholders
annually of the percentage of fund dividends which qualify for the
dividends-received deduction. A portion of a fund's dividends derived from
certain U.S. Government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore will increase
(decrease) dividend distributions. As a consequence, FMR may adjust a
fund's income distributions to reflect the effect of currency
fluctuations. However, if foreign currency losses exceed a fund's net
investment income during a taxable year, all or a portion of the
distributions made in the same taxable year would be recharacterized as a
return of capital to shareholders, thereby reducing each shareholder's
cost basis in his or her fund. Short-term capital gains are distributed
as dividend income.
For those funds whose income is primarily derived from interest,
dividends will not qualify for the dividends-received deduction available
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to corporate shareholders. Mortgage security paydown gains (losses) are
generally taxable as ordinary income and, therefore, increase (decrease)
taxable dividend distributions. Gains (losses) attributable to foreign
currency fluctuations are generally taxable as ordinary income and
therefore will increase (decrease) dividend distributions.
To the extent that a fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income.
Each fund will send each of its shareholders a notice in January
describing the tax status of dividends and capital gain distributions, if
any, for the prior year.
Shareholders are required to report tax-exempt income on their federal
tax returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each purchases securities that are free of federal income tax
based on opinions of counsel regarding the tax status. These opinions
will generally be based on covenants by the issuers or other parties
regarding continuing compliance with federal tax requirements. If at any
time the covenants are not complied with, distribution to shareholders of
interest on a security could become federally taxable retroactive to the
date the security was issued. For certain types of structured securities,
opinions of counsel may also be based on the effect of the structure on
the federal tax treatment of the income municipal obligations based on
opinions of bond counsel regarding the federal income tax status of the
obligations. These opinions generally will be based on covenants by the
issuers regarding continuing compliance with federal tax requirements. If
the issuer of an obligation fails to comply with its covenants at any
time, interest on the obligation could become federally taxable
retroactive to the date the obligation was issued.
As a result of The Tax Reform Act of 1986, interest on certain "
private activity" securities (referred to as "qualified bonds" in the
Internal Revenue Code) is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of Limited Term Tax-Exempt's policy
of investing so that at least 80% of its income is free from federal
income tax and Short-Intermediate Tax-Exempt's and High Income Municipal's
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policies of investing so that 80% of each fund's net assets are invested
in securities whose interest is free from federal income tax. Interest
from private activity securities is a tax preference item for the purpose
of determining whether a taxpayer is subject to the AMT and the amount of
AMT tax to be paid, if any. Private activity securities issued after
August 7, 1986 to benefit a private or industrial user or to finance a
private facility are affected by this rule.
A portion of the gain on bonds purchased at a discount after April 30,
1993 and short-term capital gains distributed by a fund are federally
taxable to shareholders as dividends, not as capital gains. Distributions
from the short-term capital gains do not qualify for the
dividends-received deduction. Dividend distributions resulting from a
recharacterization of gain from the sale of bonds purchased at a discount
after April 30, 1993 are not considered income for the purposes of Limited
Term Tax-Exempt's policy of investing so that at least 80% of its income
is free from federal income tax and Short-Intermediate Tax-Exempt's and
High Income Municipal's policies of investing so that 80% of each fund's
net assets are invested in securities whose interest is free from federal
income tax.
Corporate investors should note that a tax preference item for
purposes of the corporate AMT is 75% of the amount by which adjusted
current earnings (which include tax-exempt interest) exceed the
alternative minimum taxable income of the corporation. If a shareholder
receives an exempt interest dividend and sells shares at a loss after
holding them for a period of six months or less, the loss will be
disallowed to the extent of the amount of the exempt-interest dividend.
Capital Gain Distributions. Long-term capital gains earned by a fund
on the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time that
shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of a fund, and such shares
are held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the long-term capital gain distribution will
be considered a long-term loss for tax purposes. Short-term capital
gains distributed by each fund are taxable to shareholders as dividends,
not as capital gains.
As of December 31, 1994, Strategic Opportunities had a capital loss
carryover, available to offset future capital gains, of approximately
$1,141,000, which will expire on December 31, 2002.
As of October 31, 1994, Income & Growth had a capital loss carryover,
available to offset future capital gains, of approximately $18,212,000,
which will expire on October 31, 2002.
As of October 31, 1994, High Yield had a capital loss carryover,
available to offset future capital gains, of approximately $9,447,000,
which will expire on October 31, 2002.
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As of October 31, 1994, Government Investment had a capital loss
carryover, available to offset future capital gains, of approximately
$4,569,000, which will expire on October 31, 2002.
As of November 30, 1994, Limited Term Bond had a capital loss
carryover, available to offset future capital gains, of approximately
$6,852,000, of which $5,673,000, $1,034,000, and $145,000 will expire on
November 30, 1998, 1999, and 2002, respectively.
As of October 31, 1994, Short Fixed-Income had a capital loss
carryover, available to offset future capital gains, of approximately
$18,238,000 of which $1,000, $19,000, $128,000, $63,000, $286,000,
$38,000, $336,000, and $17,367,000 will expire between October 31, 1995 to
October 31, 2002.
As of October 31, 1994, High Income Municipal had a capital loss
carryover, available to offset future capital gains, of approximately
$3,173,000, which will expire on October 31, 2002.
As of November 30, 1994, Limited Term Tax-Exempt had a capital loss
carryover, available to offset future capital gains, of approximately
$627,000, which will expire on November 30, 2002.
As of November 30, 1994, Short-Intermediate Tax-Exempt had a capital
loss carryover, available to offset future capital gains, of approximately
$8,000, which will expire on November 30, 2002.
State and Local Taxes. For mutual funds organized as business trusts,
state law provides for a pass-through of the state and local income tax
exemption afforded to direct owners of U.S. government securities. Some
states limit this pass-through to mutual funds that invest a certain
amount in U.S. government securities, and some types of securities, such
as repurchase agreements and some agency-backed securities, may not
qualify for this benefit. The tax treatment of your dividend distributions
from a fund will be the same as if you directly owned your proportionate
share of the U.S. government securities in each fund's portfolio. Because
the income earned on most U.S. government securities in which a fund
invests is exempt from state and local income taxes, the portion of your
dividends from the fund attributable to these securities will also be free
from income taxes. The exemption from state and local income taxation does
not preclude states from assessing other taxes on the ownership of U.S.
government securities. In a number of states, corporate franchise (income)
tax laws do not exempt interest earned on U.S. government securities,
whether such securities are held directly or through a fund.
Foreign Taxes. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of a fund's
total assets are invested in securities of foreign issuers, the fund may
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elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
Tax Status of the Funds. Each fund has qualified and intends to
continue to qualify as a "regulated investment company" for tax purposes,
so that it will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to qualify as a regulated investment
company and avoid being subject to federal income or excise taxes at the
fund level, each fund intends to distribute substantially all of its net
investment income and realized capital gains within each calendar year as
well as on a fiscal year basis. Each fund also intends to comply with
other tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held for less
than three months constitute less than 30% of the fund's gross income
for each fiscal year. Gains from some forward currency contracts, futures
contracts, and options are included in this 30% calculation, which may
limit a fund's investments in such instruments.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs in the Internal
Revenue Code), it may be subject to U.S. federal income tax on a portion
of any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains. Generally, a fund will
elect to mark to market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
Each fund is treated as a separate entity from the other funds in its
Trust, if any, for tax purposes.
Other Tax Information. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders of a fund
may be subject to state and local personal property taxes . Investors
should consult their tax advisers to determine whether a fund is suitable
for their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the
execution of a shareholders' voting agreement, Edward C. Johnson 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
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and shareholder servicing agent for certain of the funds advised by FMR;
FIIOC, which performs shareholder servicing functions for institutional
customers and funds sold through intermediaries; and Fidelity Investments
Retail Marketing Company, which provides marketing services to various
companies within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and
participation in initial public offerings is prohibited. In addition,
restrictions on the timing of personal investing in relation to trades by
Fidelity funds and on short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Trusts are listed
below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. All persons
named as Trustees and officers also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts
02109, which is also the address of FMR. Those Trustees who are
"interested persons" (as defined in the 1940 Act) by virtue of their
affiliation with either a fund or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (65), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director
of FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD (54), Trustee and Senior Vice President, is
President of FMR; and President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX (63), 200 Rivercrest Drive, Fort Worth, TX, Trustee
(1991), is a consultant to Western Mining Corporation (1994). Prior to
February 1994, he was President of Greenhill Petroleum Corporation
(petroleum exploration and production, 1990). Until March 1990, Mr. Cox
was President and Chief Operating Officer of Union Pacific Resources
Company (exploration and production). He is a Director of Sanifill
Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
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<PAGE>
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS (63), P.O. Box 264, Bridgehampton, NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN (71), 77 Fiske Hill, Sturbridge, MA, Trustee, is a
financial consultant. Prior to September 1986, Mr. Flynn was Vice
Chairman and a Director of the Norton Company (manufacturer of industrial
devices). He is currently a Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc.
E. BRADLEY JONES (67), 3881-2 Lander Road, Chagrin Falls, OH, Trustee
(1990). Prior to his retirement in 1984, Mr. Jones was Chairman and Chief
Executive Officer of LTV Steel Company. Prior to May 1990, he was
Director of National City Corporation (a bank holding company) and
National City Bank of Cleveland. He is a Director of TRW Inc. (original
equipment and replacement products), Cleveland-Cliffs Inc. (mining),
NACCO Industries, Inc. (mining and marketing), Consolidated Rail
Corporation, Birmingham Steel Corporation, Hyster-Yale Materials
Handling, Inc., and RPM, Inc. (manufacturer of chemical products, 1990).
In addition, he serves as a Trustee of First Union Real Estate
Investments, a Trustee and member of the Executive Committee of the
Cleveland Clinic Foundation, a Trustee and member of the Executive
Committee of University School (Cleveland), and a Trustee of Cleveland
Clinic Florida.
DONALD J. KIRK (62), One Harborside, 680 Steamboat Road, Greenwich,
CT, Trustee, is Executive-in-Residence (1995) at Columbia University
Graduate School of Business and a financial consultant. From 1987 to
January 1995, Mr. Kirk was a Professor at Columbia University Graduate
School of Business. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund, Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association, and as a Member
of the Public Oversight Board of the American Institute of Certified
Public Accountants' SEC Practice Section (1995).
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<PAGE>
*PETER S. LYNCH (52), Trustee (1990) is Vice Chairman and Director of
FMR (1992). Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals) and Morrison Knudsen Corporation (engineering
and construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield and Society for the
Preservation of New England Antiquities, and as an Overseer of the Museum
of Fine Arts of Boston (1990).
GERALD C. McDONOUGH (66), 135 Aspenwood Drive, Cleveland, OH, Trustee,
is Chairman of G.M. Management Group (strategic advisory services). Prior
to his retirement in July 1988, he was Chairman and Chief Executive
Officer of Leaseway Transportation Corp. (physical distribution services).
Mr. McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE (70), 5601 Turtle Bay Drive #2104, Naples, FL,
Trustee. Prior to his retirement in 1985, Mr. Malone was Chairman,
General Electric Investment Corporation and a Vice President of General
Electric Company. He is a Director of Allegheny Power Systems, Inc.
(electric utility), General Re Corporation (reinsurance) and Mattel Inc.
(toy manufacturer). In addition, he serves as a Trustee of Corporate
Property Investors, the EPS Foundation at Trinity College, the Naples
Philharmonic Center for the Arts, and Rensselaer Polytechnic Institute,
and he is a member of the Advisory Boards of Butler Capital Corporation
Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (62), 55 Railroad Avenue, Greenwich, CT, Trustee (1993)
is Chairman of the Board, President, and Chief Executive Officer of
Lexmark International, Inc. (office machines, 1991). Prior to 1991, he
held the positions of Vice President of International Business Machines
Corporation ("IBM") and President and General Manager of various IBM
divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company
(chemicals, 1993) and Infomart (marketing services, 1991), a Trammell Crow
Co. In addition, he serves as the Campaign Vice Chairman of the
Tri-State United Way (1993) and is a member of the University of Alabama
President's Cabinet (1990).
THOMAS R. WILLIAMS (66), 21st Floor, 191 Peachtree Street, N.E.,
Atlanta, GA, Trustee, is President of The Wales Group, Inc. (management
- 135 -
<PAGE>
and financial advisory services). Prior to retiring in 1987, Mr. Williams
served as Chairman of the Board of First Wachovia Corporation (bank
holding company), and Chairman and Chief Executive Officer of The First
National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company
(electric utility), Gerber Alley & Associates, Inc. (computer software),
National Life Insurance Company of Vermont, American Software, Inc., and
AppleSouth, Inc. (restaurants, 1992).
WILLIAM J. HAYES (61), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ROBERT H. MORRISON (55), Manager of Security Transactions of
Fidelity's equity funds, is Vice President of FMR.
ROBERT A. LAWRENCE (43), Vice President (1994), is Vice President of
Fidelity's high income funds and Senior Vice President of FMR (1993).
Prior to joining FMR, Mr. Lawrence was Managing Director of the High Yield
Department for Citicorp (1984-1991).
MARGARET L. EAGLE (45), is Vice President of High Yield and an
employee of FMR.
DANIEL R. FRANK (38), is Vice President of Strategic Opportunities
and an employee of FMR.
MICHAEL GRAY (38), is Vice President of Limited Term Bond (1989) and
an employee of FMR.
ROBERT HABER (37), is Vice President of Income & Growth (1989) and an
employee of FMR.
JOHN F. HALEY, JR. (41), is Vice President of Limited Term Tax-Exempt
and an employee of FMR.
ROBERT LAWRENCE ( ) is Vice President of Emerging Markets Income
(1995) and an employee of FMR.
- 136 -
<PAGE>
MALCOLM W. MacNAUGHT II (61), is Vice President of Global Resources
(1991) and an employee of FMR.
ROBERT STANSKY (39), is Vice President of Equity Portfolio Growth
(1991) and of other funds advised by FMR, and an employee of FMR.
GEORGE A. VANDERHEIDEN (49), is Vice President of Growth Opportunities
(1990) and an employee of FMR.
GUY E. WICKWIRE ( ), is Vice President of High Income Municipal
(1994) and an employee of FMR.
ARTHUR S. LORING (47), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
STEPHEN P. JONAS (42), Treasurer (1995) is Treasurer and Vice
President of FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc.
(1994), Fidelity Management & Research (U.K.) Inc. (1994), and Fidelity
Management & Research (Far East) Inc. (1994). Prior to becoming Treasurer
of FMR, Mr. Jonas was Senior Vice President, Finance - Fidelity Brokerage
Services, Inc. (1991-1992) and Senior Vice President, Strategic Business
Systems - Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO (48), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (49), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity funds,
Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993); and
Vice President, Assistant Controller, and Director of the Accounting
Department - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation
of each current Trustee of each fund for his or her services as trustee
for the 1994 fiscal year ended as indicated.
- 137 -
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
Aggregate Compensation
<S>
Fiscal
Period
Ended: <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31 - * <C> <C> Phyllis Richard E. Edward C. Donald Peter Gerald Edward Marvin Thomas
11/30 - ** J. Gary Ralph Burke J. Bradley Johnson J. S. C. H. L. R.
12/31 - *** Burkhead# F. Cox Davis Flynn Jones 3d# Kirk Lynch#McDonough Malone Mann Williams
Overseas* $0 $ 190 $187 $229 $185 $0 $187 $0 $191 $194 $287 $188
Equity
Portfolio 0 473 460 569 462 0 467 0 473 479 474 469
Growth**
Global Re- 0 49 48 59 47 0 48 0 49 50 48 48
sources*
Growth
Oppor- 0 1,467 1,446 1,766 1,432 0 1,448 0 1,480 1,501 1,447 1,453
tunities*
Strategic
Opportun- 0 183 179 227 181 0 181 0 183 188 183 185
ities***
Equity 0 126 123 152 123 0 125 0 126 128 127 125
Income**
Income &
Growth* 0 1,201 1,185 1,447 1,173 0 1,186 0 1,213 1,230 1,186 1,191
Emerging
Markets 0 11 8 11 9 0 9 0 9 9 10 9
Income***+
High Yield* 0 296 292 356 288 0 292 0 299 303 292 292
Strategic
Income***+ 0 3 2 3 3 0 2 0 2 3 2 3
Government
Investment* 0 43 42 52 42 0 42 0 43 44 42 42
Limited Term 0 139 136 168 136 0 138 0 139 141 139 138
Bond**
Short
Fixed- 0 400 395 481 391 0 396 0 405 410 395 396
Income*
- 138 -
<PAGE>
High Income
Municipal* 0 275 271 330 268 0 271 0 278 281 271 271
Limited Term 0 34 33 41 33 0 33 0 34 34 34 33
Tax-Exempt**
Short-Inter-
mediate Tax- 0 5 4 6 5 0 5 0 5 5 5 5
Exempt**+
</TABLE>
# Interested Trustees of each fund are compensated by FMR.
+ Estimated
- 139 -
<PAGE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Pension or
Retirement Benefits Estimated Annual Total
Accrued as Part of Benefits Upon Compensation from the
Fund Expenses from Retirement from the Fund
the Fund Complex* Fund Complex* Complex*
Ralph F. Cox $5,200 $52,000 $125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABlLE>
* Information is as December 31, 1994 for all 206 funds in the complex.
Under a retirement program that was adopted in July 1988 Trustees,
upon reaching age 72, become eligible to participate in a retirement
program under which they receive payments during their lifetime from a
fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served
on the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program .
On January 31, 1995 the trustees and officers owned in the aggregate
less than 1% of each fund's outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other
services. Under its management contract with each fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of each fund in accordance with its
investment objective, policies and limitations. FMR also provides each
fund with all necessary office facilities and personnel for servicing each
fund's investments, compensates all officers of each fund and all Trustees
who are "interested persons" of the Trust or of FMR, and all personnel of
each fund or FMR performing services relating to research, statistical,
and investment activities.
- 140 -
<PAGE>
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include providing
facilities for maintaining each fund's organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters
and other persons dealing with each fund; preparing all general
shareholder communications and conducting shareholder relations;
maintaining each fund's records and the registration of each fund's shares
under federal and state laws; developing management and shareholder
services for each fund; and furnishing reports, evaluations, and analyses
on a variety of subjects to the Trustees.
In addition to the management fee payable to FMR and the fees payable
to the transfer agent and the pricing and bookkeeping agent , each fund
pays all of its expenses, without limitation, that are not assumed by
those parties. Each fund pays for the typesetting, printing, and mailing
of its proxy materials to shareholders, legal expenses, and the fees of
the custodian, auditor and non-interested Trustees. Although each fund's
current management contract provides that each fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices and reports to shareholders, each Trust, on behalf
of each of its funds has entered into a revised transfer agent agreement,
pursuant to which the transfer agent bears the costs of providing these
services to existing shareholders. Other expenses paid by each fund
include interest, taxes, brokerage commissions, each fund's proportionate
share of insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal and state securities laws. Each
fund is also liable for such non-recurring expenses as may arise,
including costs of any litigation to which each fund may be a party, and
any obligation it may have to indemnify its officers and Trustees with
respect to litigation.
FMR is each fund's manager pursuant to management contracts approved
by shareholders on the dates shown in the table below.
Fund Date of Management Contract
Overseas 1/1/93 12/1/92
Equity Portfolio Growth 12/1/90 11/14/90
Global Resources 12/30/88 11/16/94
Growth Opportunities 1/1/95 12/14/94
Strategic Opportunities 11/29/90 12/19/90
Equity Income 8/1/86 7/23/86
Income & Growth 1/1/95 12/14/94
Emerging Markets Income 1/20/94 2/10/94
High Yield 1/1/95 12/14/94
Strategic Income 9/16/94 10/14/94
Government Investment 12/30/88 10/18/88
Limited Term Bond 1/1/95 12/14/94
Short Fixed Income 12/30/80 10/18/88
High Income Municipal 12/30/88 10/18/88
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<PAGE>
Limited Term Tax-Exempt 1/29/89 11/16/88
Short-Intermediate 1/21/94 2/10/94
Tax-Exempt
For the services of FMR under its contract, Equity Income pays FMR a
monthly management fee at the annual rate of .50% of its average net
assets throughout the month. For the fiscal years ended November 30, 1994,
1993, and 1992, FMR received $1,392,206, $933,830 and $736,344,
respectively.
For the services of FMR under each contract, Equity Portfolio Growth,
Global Resources, Income & Growth, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, Short
Fixed-Income, High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt each pay FMR a monthly management fee
composed of the sum of two elements: a group fee rate and an individual
fund fee rate.
For the services of FMR under each contract, Overseas, Growth
Opportunities, and Strategic Opportunities pay FMR a monthly management
fee composed of the sum of two elements: a basic fee and a performance
adjustment based on a comparison of Overseas, Growth Opportunities, and
Strategic Opportunities' performance to that of the S&P 500, EAFE, and the
S&P 500, respectively.
Computing the Basic Fee. The basic fee rate for Overseas, Equity
Portfolio Growth, Global Resources, Growth Opportunities, Strategic
Opportunities, Income & Growth, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Limited Term Bond, Short Fixed
Income, High Income Municipal, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt's basic fee rates are composed of two
elements: a group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown below on the left. The schedule below
on the right shows the effective annual group fee rate at various asset
levels, which is the result of cumulatively applying the annualized rates
on the left. For example, the effective annual fee rate at $273 billion of
group net assets - the approximate level for October 31, 1994 - was
0.3191% for equity funds and 0.1561% for fixed income funds, which is the
weighted average of the respective fee rates for each level of group net
assets up $273 billion. The effective annual fee rate at $274 billion of
group net assets - the approximate level for November 30, 1994 - was
0.3190% for equity funds and 0.1560% for fixed income funds. The effective
annual fee rate at $271 billion of group net assets - the approximate
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<PAGE>
level for December 31, 1994 - was 0.3193% for equity funds and 0.1563% for
fixed income funds.
FIXED-INCOME FUNDS
The following fee schedule is the current fee schedule for all
fixed-income funds.
</TABLE>
<TABLE>
<CAPTION>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
</TABLE>
Under the fund's current management contract with FMR, the group fee
rate is based on a schedule with breakpoints ending at .1400% for average
group assets in excess of $174 billion. Prior to ________________, the
group fee rate breakpoints shown above for average group assets in excess
- 143 -
<PAGE>
of $120 billion and under $228 billion were voluntarily adopted by FMR,
and went into effect on January 1, 1992. The additional breakpoints shown
above for average group assets in excess of $28 billion were voluntarily
adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule provides for lower management fee rates as FMR's assets
under management increase. The revised group fee rate schedule is
identical to the above schedule for average group assets under $156
billion.
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity
funds (except Equity Income, see above, p. __).
<TABLE>
<CAPTION>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
- 144 -
<PAGE>
</TABLE>
This fee schedule was approved by shareholders of all equity funds
except Overseas, Equity Portfolio Growth, Strategic Opportunities, and
Equity Income (see chart indicating date of management contract and date
of shareholder approval.)
Under the current management contracts for Overseas, Equity Portfolio
Growth, and Strategic Opportunities', the group fee rate is based on a
schedule with breakpoints ending at .3000% for average group net assets in
excess of $174 billion.
The following fee schedule is the fee schedule which was in effect
through August 1, 1994, and was either approved by shareholders or
voluntarily adopted by FMR.
Group fee rate breakpoints shown for average group net assets in
excess of $138 billion and under $228 billion were voluntarily adopted by
FMR, and went into effect on January 1, 1992. Additional breakpoints for
average group net assets in excess of $228 billion were voluntarily
adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
<TABLE>
<CAPTION>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
- 145 -
<PAGE>
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
</TABLE>
The individual fund fee rates for each fund (except Equity Income)
are set forth in the following chart. Based on the average group net
assets of the funds advised by FMR for December 1994, the annual basic fee
rate would be calculated as follows:
- 146 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
Overseas
.3193% + .45% = .7693%
Equity Portfolio Growth
.3193% + .30%* = .6193%
Global Resources
.3193% + .30% = .6193%
Growth Opportunities
.3193% + .30% = .6193%
Strategic Opportunities
.3193% + .30% = .6193%
Income & Growth
.3193% + .20% = .5193%
Emerging Markets Income
.1563% + .55% = .7063%
High Yield
.1563% + .45% = .6063%
Strategic Income
.1563% + .45% = .6063%
Government Investment
.1563% + .30% = .4563%
Limited Term Bond
.1563% + .30%** = .4563%
Short Fixed-Income
.1563% + .30% = .4563%
High Income Municipal
.1563% + .25% = .4063%
Limited Term Tax-Exempt
.1563% + .25% = .4063%
Short Intermediate Tax-Exempt
.1563% + .25% = .4063%
</TABLE>
* Effective August 1, 1994, FMR voluntarily agreed to reduce the
individual fund fee rate from 0.33% to 0.30%. If this reduction were not
in effect during fiscal 1994, the total management fee would have been
0.65%.
** On December 14, 1994, shareholders of the fund approved an increase
for the individual fund fee rate from 0.25% to 0.30% effective February
24, 1995. If this increase were in effect during fiscal 1994, the total
fee would have been 0.46%.
One-twelfth (1/12) of this annual basic fee or management fee, as
applicable, rate is applied to each fund's net assets averaged for the
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<PAGE>
most recent month, giving a dollar amount, which is the fee for that
month.
Computing the Performance Adjustment. The basic fee for Strategic
Opportunities, Overseas, and Growth Opportunities is subject to upward or
downward adjustment, depending upon whether, and to what extent, the
investment performance of Strategic Opportunities, Overseas, and Growth
Opportunities' investment performance for the performance period exceeds,
or is exceeded by, the record of the S&P 500, EAFE, and S&P 500,
respectively (the Indices) over the same period. Starting with the twelfth
month, the performance adjustment takes effect. Each month subsequent to
the twelfth month, a new month is added to the performance period until
the performance period equals 36 months. Thereafter, the performance
period consists of the most recent month plus the previous 35 months. Each
percentage point of difference, calculated to the nearest 1.0% (up to a
maximum difference of +/- 10.00 ) is multiplied by a performance
adjustment rate of .02%. Thus, the maximum annualized adjustment rate is
+/- .20%. Strategic Opportunities is comprised of four classes of
shares: Initial Class shares, Class A shares, Class B shares, and
Institutional Class shares. Overseas is comprised of three classes of
shares: Class A shares, Class B shares, and Institutional Class shares.
Growth Opportunities is comprised of two classes of shares: Class A shares
and Institutional Class shares. For each fund, investment performance
will be measured separately for each class . For Strategic Opportunities
the least of the results obtained will be used in calculating the
performance adjustment to the management fee paid by the fund. For Global
Resources and Overseas, investment performance for Class A shares will be
used in calculating the performance adjustment to the management fee paid
by each fund. This performance comparison is made at the end of each
month. One twelfth (1/12) of this rate is then applied to each fund's
average net assets for the entire performance period, giving a dollar
amount which will be added to (or subtracted from) the basic fee.
Each class's performance is calculated based on change in net asset
value. For purposes of calculating the performance adjustment, any
dividends or capital gain distributions paid by each class are treated as
if reinvested in that class's shares at the net asset value as of the
record date for payment. The record of the each Index is based on change
in value and is adjusted for any cash distributions from the companies
whose securities compose the Index.
Because the adjustment to the basic fee is based on each class's
performance compared to the investment record of the applicable Index, the
controlling factor is not whether each class's performance is up or down
per se, but whether it is up or down more or less than the record of the
Index. Moreover, the comparative performance of each class is based solely
on the relevant performance period without regard to the cumulative
performance over a longer or shorter period of time.
- 148 -
<PAGE>
The table below shows the management fees received by FMR for its
services as investment adviser to the funds as of the end of each fund's
three most recent fiscal years. The fees were equivalent to the percentage
of the average net assets of each fund, as indicated.
<TABLE>
<CAPTION>
<C>
<C> <C> Management Fee As a
Management Performance Percentage of
<S> Fee + Adjustment Average Net Assets
---------- ----------- --------------------
Overseas
10/31/94 $3,435,695 $133,032 (upward) .80%
10/31/93 503,110 3,885 (downward) .77
10/31/92 139,234 6,062 (downward) .75
Equity Portfolio Growth
11/30/94 6,567,305 N/A .64
11/30/93 2,646,631 N/A .66
11/30/92 860,709 N/A .67
Global Resources
10/31/94 890,892 N/A .77
10/31/93 111,465 N/A .77
10/31/92 49,323 N/A .79
Growth Opportunities
10/31/94 22,087,985 2,130,192 (upward) .69
10/31/93 8,250,306 709,376 (upward) .68
10/3192
2,747,645 240,501 (upward) .69
Strategic Opportunities +++
10/1/94 - 12/31/94 682,856 37,843 (upward) .67 (annualized)
10/1/93 - 9/30/94 2,582,584 359,674 (upward) .72
12/31/93 1,291,906 81,040 (upward) .54
12/31/92 1,087,250 268,871 (downward) .51
Equity Income
11/30/94 1,392,206 N/A .50
11/30/93 933,830 N/A .50
11/30/92 ++++ 736,344 N/A .50
Income & Growth
10/31/94 13,325,884 N/A .52
10/31/93 4,578,813 N/A .53
10/31/92 1,291,531 N/A .53
Emerging Markets Income
12/31/94 ++ 122,088 N/A .70
High Yield
11/30/94 3,737,959 N/A .60
11/30/93 1,539,682 N/A .51
11/30/92 397,638 N/A .52
Strategic Income
- 149 -
<PAGE>
<C>
<C> <C> Management Fee As a
Management Performance Percentage of
<S> Fee + Adjustment Average Net Assets
---------- ----------- --------------------
12/31/94 ++ 10,348 N/A .60
Government Investment
11/30/94 422,255 N/A .46
11/30/93 186,973 N/A .46
11/30/92 78,107 N/A .47
Limited Term Bond
11/30/94 1,180,785 N/A .41
11/30/93 818,426 N/A .42
11/30/92 963,611 N/A .42
Short Fixed-Income
10/31/94 $3,713,144 N/A .46%
10/31/93 1,674,841 N/A .47
10/31/92 368,993 N/A .47
High Income Municipal
11/30/94 2,257,113 N/A .41
11/30/93 1,314,060 N/A .42
11/30/92 439,804 N/A .42
Limited Term Tax-Exempt
11/30/94 286,027 N/A .41
11/30/93 156,087 N/A .42
11/30/92 268,825 N/A .42
Short-Intermediate Tax-Exempt
11/30/94++ 31,109 N/A .41
</TABLE>
+ Management fee includes performance adjustments for Overseas, Growth
Opportunities, and Strategic Opportunities.
++ Emerging Markets Income, Strategic Income, and Short Intermediate
Tax-Exempt commenced operations on March 10, 1994, October 31, 1994, and
March 16, 1994, respectively. Management fee percentages for these funds
are annualized.
+++ On November 9, 1994, the Board of Trustees voted to change Strategic
Opportunities' fiscal year end from September 30 to December 31.
++++ Management fee does not include a voluntary reimbursement of 0.10% of
average net assets for the period December 1, 1991 to September 10, 1992.
Expense Reimbursements. FMR may, from time to time, voluntarily
reimburse all or a portion of a fund's operating expenses (exclusive of
interest, taxes, brokerage commissions, and extraordinary expenses) above
a specified percentage of average net assets. FMR retains the ability to
- 150 -
<PAGE>
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year. Expense
reimbursements by FMR will increase each fund's total returns and yield
and reimbursement by each fund will lower its total returns and yield.
FMR has voluntarily agreed to reimburse Class A and Class B of
Emerging Markets Income, Strategic Income, Government Investment, Limited
Term Bond, Limited Term Tax-Exempt, and Class A of Short-Intermediate
Tax-Exempt to the extent that total operating expenses (as a percentage of
average net assets) of each of their respective average net assets exceeds
the following: for Emerging Markets Income 1.50% (Class A) and 2.25%
(Class B); for Strategic Income 1.35% (Class A) and 2.10% (Class B); for
Government Investment 0.95% (Class A) and 1.70% (Class B); for Limited
Term Bond .90% (Class A) and 1.65% (Class B); for Limited Term Tax-Exempt
0.90% (Class A) and 1.65% (Class B); and for Short-Intermediate Tax-Exempt
0.75% (Class A). If these agreements were not in effect, other expenses
and total operating expenses would have been:
Other Expenses Total Expenses
Class A Class B Class A Class B
Emerging Markets Income + 1.20% 0.90% 2.15% 2.60%
Strategic Income + 1.64% 0.89% 2.50%* 2.50%*
Government Investment 0.76% 1.16% 1.47% 2.62%+
Limited Term Bond 0.43% 1.00% 1.09% 2.41%+
Limited Term Tax-Exempt 0.38% 0.95% 1.04% 2.36%+
Short-Intermediate 0.98% n/a 1.54% n/a
Tax-Exempt +
* Reflects limitations that would have been in effect under a state
expense limitation.
+ Annualized
To comply with the California Code of Regulations, FMR will reimburse
each fund if and to the extent that each fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating each fund's expenses for purposes of this regulation,
each fund may exclude interest, taxes, brokerage commissions, and
extraordinary expenses, as well as a portion of its distribution plan
expenses and custodian fees attributable to investments in foreign
securities.
Sub-Advisers. On behalf of Strategic Opportunities, Global Resources,
Growth Opportunities, Income & Growth, High Yield, Equity Income, Limited
Term Bond, Equity Portfolio Growth, and Short Fixed-Income, FMR has
entered into sub-advisory agreements with FMR U.K. and FMR Far East. On
behalf of Overseas, FMR has entered into sub-advisory agreements with
- 151 -
<PAGE>
FMR U.K., FMR Far East, and FIIA. FIIA, in turn, has entered into a
sub-advisory agreement with FIIAL U.K. On behalf of Emerging Markets
Income and Strategic Income, FMR has entered into sub-advisory agreements
with FMR U.K., FMR Far East, FIJ, and FIIA. FIIA, in turn, has entered
into a sub-advisory agreement with FIIAL U.K. Pursuant to the
sub-advisory agreements, FMR may receive investment advice and research
services outside the United States from the sub-advisers.
On behalf of Global Resources, Growth Opportunities, Strategic Income,
Income & Growth, High Yield, Limited Term Bond, Emerging Markets Income,
and Short Fixed-Income, FMR may also grant FMR U.K. and FMR Far East
investment management authority as well as the authority to buy and sell
securities if FMR believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIAL U.K. each
focus on issuers in countries other than the United States such as those
in Europe, Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. FIJ and FIIA are wholly owned subsidiaries of
Fidelity International Limited (FIL), a Bermuda company formed in 1968
which primarily provides investment advisory services to non-U.S.
investment companies and institutional investors investing in securities
throughout the world. Edward C. Johnson 3d, Johnson family members, and
various trusts for the benefit of the Johnson family own, directly or
indirectly, more than 25% of the voting common stock of FIL. FIJ was
organized in Japan in 1986. FIIA was organized in Bermuda in 1983. FIIAL
U.K. was organized in the United Kingdom in 1984, and is a wholly owned
subsidiary of Fidelity International Management Holdings Limited, an
indirect wholly owned subsidiary of FIL.
Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR
Far East, FIJ, and FIIA. FIIA, in turn, pays the fees of FIIAL U.K. For
providing non-discretionary investment advice and research services the
sub-advisers are compensated as follows:
. FMR pays FMR U.K. and FMR Far East fees equal to 110% and 105%,
respectively, of FMR U.K.'s and FMR Far East's costs incurred in
connection with providing investment advice and research services.
. FMR pays FIIA and FIJ fees equal to 30% of FMR's monthly management
fee with respect to the average net assets held by the fund for which the
sub-adviser has provided FMR with investment advice and research services.
. FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing investment advice and research
services.
On behalf of Global Resources, Growth Opportunities, Income & Growth,
Emerging Markets Income, High Yield, Short Fixed-Income, and Limited Term
- 152 -
<PAGE>
Bond, for providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as follows:
. FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its monthly management fee (including any performance adjustment, if
applicable) with respect to the fund's average net assets managed by the
sub-adviser on a discretionary basis.
. FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing discretionary investment management
services.
The table below shows the fees paid by FMR to FMR U.K., FMR Far East,
FIIA, and FIJ, and by FIIA to FIIAL U.K. for providing investment advice
and research services with respect to certain of the funds for the fiscal
periods ended 1994, 1993, and 1992.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fund Fees Paid by FMR to FMR U.K. Fees Paid by FMR to FMR Far East
1994 1993 1992 1994 1993 1992
Overseas 153,288 14,363 13,189 174,129 22,357 16,736
Equity Portfolio
Growth 13,191 3,144 2,425 15,192 5,021 2,126
Global Resources 2,598 N/A N/A 2,932 N/A N/A
Growth Opportunities 67,818 N/A N/A 82,741 N/A N/A
Strategic
Opportunities
(10/1/93 - 9/30/94) 7,794 N/A N/A 7,712 N/A N/A
Strategic
Opportunities
(10/1/94 -
12/31/94) 7,352 4,560 88 7,701 11,267 117
Equity Income 12,197 4,669 5,237 13,970 7,199 6,544
Income & Growth 248,936 N/A N/A 299,094 N/A N/A
TOTAL
TOTAL
</TABLE>
CONTRACTS WITH FMR AFFILIATES
State Street is transfer and shareholders' servicing agent for Class A
shares of the taxable funds. FIIOC is transfer and shareholders' servicing
agent for Class B and Institutional Class shares of the taxable funds. UMB
is the transfer and shareholders' servicing agent for Class A, Class B and
- 153 -
<PAGE>
Institutional Class shares of the tax-exempt funds. On behalf of Class A
shares of the tax-exempt funds, UMB has entered into sub-arrangements with
State Street pursuant to which State Street performs as transfer and
shareholders' servicing agent. State Street has further delegated certain
transfer and shareholders' services for Class A shares of the tax-exempt
funds to FIIOC. On behalf of Class B shares of tax-exempt funds and
Institutional Class of Limited Term Tax-Exempt, UMB has entered into
sub-arrangements with FIIOC pursuant to which FIIOC performs as transfer
and shareholders' servicing agent. For every account, Class A, Class B and
Institutional Class of each fund pay an annual fee and an asset-based fee
based on account size. The asset-based fees of the equity and growth and
income funds are subject to adjustment if the year-to-date total return of
the Standard & Poor's Composite Index of 500 Stocks is greater than
positive or negative 15%.
For accounts that State Street maintains on behalf of UMB, State
Street receives all such fees. For accounts that FIIOC maintains on behalf
of UMB or State Street, FIIOC receives all such fees. For accounts for
which FIIOC provides limited services, FIIOC receives a portion of related
account fees and asset-based fees, less applicable charges and expenses of
State Street for account maintenance and transactions.
State Street and FIIOC, as applicable, pay out-of-pocket expenses
associated with providing transfer agent services. In addition, FIIOC
bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements.
FSC performs the calculations necessary to determine NAV and dividends
for Class A, Class B, and Institutional Class of each taxable fund,
maintains each taxable fund's accounting records and administers each
taxable fund's securities lending program. UMB has sub-arrangements with
FSC pursuant to which FSC performs the calculations necessary to determine
the NAV and dividends for the Class A, Class B, and Institutional Class of
each tax-exempt fund, and maintains the accounting records for each
tax-exempt fund. The fee rates for pricing and bookkeeping services are
based on each fund's average net assets, specifically, 0.06% for the first
$500 million of average net assets and 0.03% for average net assets in
excess of $500 million. The fee is limited to a minimum of $45,000 and a
maximum of $750,000 per year. Pricing and bookkeeping fees, including
related out-of-pocket expenses, paid by the funds for the past three
fiscal years were as follows:
- 154 -
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
Fund
<S> <C> <C> <C>
Overseas $251,241 $ 57,711 $ 48,617
Equity Portfolio Growth $461,039 $234,813 $ 79,601
Global Resources $ 73,164 $ 45,425 $ 46,390
Growth Opportunities $758,343 $513,950 $236,689
Strategic Opportunities (10/1/94 - 12/31/94) $ 61,356 $145,494 $129,183
Strategic Opportunities (10/1/93 - 9/30/94) $215,648 $ N/A $ N/A
Equity Income $168,364 $113,026 $ 91,899
Income & Growth $750,743 $410,561 $148,775
Emerging Markets Income $ 36,412* $ N/A $ N/A
High Yield $223,567 $121,204 $ 46,036
Strategic Income $ 7,500* $ N/A $ N/A
Government Investment $ 46,218 $ 46,457 $ 45,676
Limited Term Bond $118,125 $ 81,106 $ 97,683
Short Fixed-Income $264,455 $143,813 $ 47,624
High Income Municipal $220,222 $157,559 $ 65,541
Limited Term Tax-Exempt $ 48,062 $ 45,724 $ 59,094
Short-Intermediate Tax-Exempt $ 31,953* $ N/A $ N/A
</TABLE>
* Emerging Markets Income, Strategic Income, and Short Intermediate
Tax-Exempt commenced operations on March 10, 1994, October 31, 1994, and
March 16, 1994, respectively.
FSC also receives fees for administering Limited Term Bond's
securities lending program. Securities lending fees are based on the
number and duration of individual securities loans. For the fiscal years
ended 1994, 1993, and 1992, Limited Term Bond incurred securities lending
fees of $0, $0, and $25, respectively.
For the tax-exempt funds, the transfer agent fees and charges, and
pricing and bookkeeping fees described above are paid to FIIOC and FSC,
respectively, by UMB, which is entitled to reimbursement from the fund for
these expenses.
Each fund has a Distribution Agreement with FDC, a Massachusetts
corporation organized July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of a fund, which are continuously offered.
- 155 -
<PAGE>
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each class of shares of the funds (the Plans) pursuant to Rule 12b-1
under the 1940 Act (the Rule). The Rule provides in substance that a
mutual fund may not engage directly or indirectly in financing any
activity that is primarily intended to result in the sale of shares of a
fund except pursuant to a plan approved on behalf of the fund under the
Rule. The Plans, as approved by the Trustees, allow Class A, Class B, and
Institutional Class shares of each fund and FMR to incur certain expenses
that might be considered to constitute direct or indirect payment by the
funds of distribution expenses.
Pursuant to the Class A Plans, FDC is paid a distribution fee as a
percentage of Class A's average net assets at an annual rate of up to
0.75% for Equity Portfolio Growth and Strategic Opportunities; up to 0.40%
for each of Emerging Markets Income, High Yield, Strategic Income, Limited
Term Bond, High Income Municipal, and Limited Term Tax-Exempt; up to
0.65% for each of Overseas, Growth Opportunities, Global Resources,
Equity Income, and Income & Growth; and up to 0.15% for Short
Fixed-Income and Short-Intermediate Tax-Exempt. Pursuant to the Class B
Plans, FDC is paid a distribution fee as a percentage of Class B's
average net assets at an annual rate of 0.75% for each fund with Class B
shares. For the purpose of calculating the distribution fees, average net
assets are determined as of the close of business on each day throughout
the month, but excluding assets attributable to Class A shares of Equity
Portfolio Growth, Equity Income, Emerging Markets Income, Strategic
Income, Strategic Opportunities, Short-Intermediate Tax-Exempt, Limited
Term Tax-Exempt, and Overseas purchased more than 144 months prior to such
day. Currently, the Trustees have approved a distribution fee for Class A
of Equity Portfolio Growth and Strategic Opportunities at an annual rate
of 0.65%; and for Class A of Emerging Markets Income, Government
Investment, High Yield, High Income Municipal, Limited Term Bond,
Limited Term Tax-Exempt, and Strategic Income at an annual rate of 0.25%.
This fee may be increased only when, in the opinion of the Trustees, it is
in the best interests of the shareholders of Class A to do so. Class B of
each fund also pays Investment Professionals a service fee at an annual
rate of 0.25% of its average daily net assets determined as of the close
of business on each day throughout the month for personal service and/or
the maintenance of shareholder accounts.
The tables below show the distribution fees paid for Class A shares
for the fiscal years ended 1994, 1993, and 1992, and for Class B shares
for the fiscal periods ended 1994. (Class B shares commenced operations on
July 1, 1994.)
- 156 -
<PAGE>
<TABLE>
<CAPTION>
CLASS A DISTRIBUTION FEES
1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paid to Paid to Paid to
Invest- Retained Investment Retained Investment Retained
Fund ment by FDC Total Profes- by FDC Total Profes- by FDC Total
Profes- Fees sionals Fees sionals Fees
sionals
Overseas 93,132 27,492 120,624 325,181 97,554 422,735 2,139,864 641,9582,781,822
Equity Portfolio 9,477 2,843 12,320 258,713 883,141 3,312,525 999,9874,312,512
Growth 1,141,854
Global 31,323 9,198 50,521 69,457 23,643 93,100 577,607 173,281 750,888
Resources
Growth 2,004,271 559,131 2,563,402 5,996,7701,799,7707,795,80016,056,714 4,817,01620,873,73
Opportunities 0
Strategic 993,375 273,263 1,266,638 1,092,965 330,4911,423,456 470,225 141,067 611,292
Opportunities
Equity Income 614 136 750 94,623 28,435 123,058 441,208 132,362 573,570
Income & Growth 314,5061,252,622 1,567,128 1,299,0264,330,092 13,406,000 3,203,00016,609,00
5,629,118 0
Emerging Markets N/A N/A N/A N/A N/A N/A 31,604 8,331 39,935
Income
High Yield 190,342 0 190,342 745,985 0 745,985 1,526,214 01,526,214
Strategic Income N/A N/A N/A N/A N/A N/A 1,626 488 2,144
Government 41,048 0 41,048 101,981 0 101,981 227,532 0 227,532
Investment
Limited Term 549 0 549 56,220 0 56,220 264,949 0 264,949
Bond
Short 117,265 0 117,265 538,933 0 538,933 1,212,008 01,212,008
Fixed-Income
High Income 41,048 0 41,048 101,981 0 101,981 1,374,438 01,374,438
Municipal
Limited Term 576 0 576 38,552 0 38,552 138,512 0 138,512
Tax-Exempt
Short-Inter- N/A N/A N/A N/A N/A N/A 11,446 0 11,446
mediate
Tax-Exempt
</TABLE>
<TABLE>
CLASS B DISTRIBUTION FEES 1994
<C> <C> <C>
Fund Shareholder Retained Total Fees
Service Fee by FDC
- 157 -
<PAGE>
Strategic 7,964 23,892 31,856
Opportunities
Equity Income 16,215 54,580 70,795
Emerging 3,215 9,771 12,986
Markets
Income
High Yield 7,052 21,157 28,209
Strategic 2,155 6,465 8,620
Income
Government 817 2,449 3,266
Investment
Limited Term 1,689 5,070 6,759
Bond
High Income 3,238 9,713 12,951
Municipal
Limited Term 965 2,893 3,858
Tax-Exempt
</TABLE>
Under each Plan, if the payment of management fees by the funds to FMR
is deemed to be indirect financing by the funds of the distribution of
their shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of the applicable class of each fund. In
addition, each Plan provides that FMR may use its resources, including its
management fee revenues, to make payments to third parties that assist in
selling shares of the applicable class of each fund or to third parties,
including banks that render shareholder support services. No third party
payments were made by FMR in fiscal 1994, 1993, and 1992 under the
Institutional Class Plan on behalf of the funds, and the Trustees have not
authorized such payments to date for any funds except Limited Term Bond,
Equity Income, and Equity Portfolio Growth.
Prior to approving each Plan , the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan , and have
determined that there is a reasonable likelihood that the Plan will
benefit the applicable class and its shareholders. In particular, the
Trustees noted that the Institutional Class Plans do not authorize
payments by the Institutional Class of each fund other than those made to
FMR under its management contract with the fund. To the extent that each
Plan gives FMR and FDC greater flexibility in connection with the
distribution of shares of the applicable class of each fund, additional
sales of fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plans by local
entities with whom shareholders have other relationships.
- 158 -
<PAGE>
The Class A and Class B Plans do not provide for specific payments by
the applicable class of any of the expenses of FDC, or obligate FDC or
FMR to perform any specific type or level of distribution activities or
incur any specific level of expense in connection with distribution
activities. After payments by FDC for advertising, marketing and
distribution, and payments to third parties, the amounts remaining, if
any, may be used as FDC may elect.
The Plans were approved by the shareholders of each class on the dates
shown in the table below:
<TABLE>
<CAPTION>
Date of Shareholder Approval
<S> <C> <C> <C>
Class A Class B
Fund Institutional
Overseas 10/90 05/26/94 ---
Equity Portfolio Growth 9/25/86 05/26/94 09/25/86
Global Resources 12/01/94 --- ---
Growth Opportunities 1/1/95 N/A ---
Strategic Opportunities 8/25/87 05/26/94 ---
Equity Income 7/23/86 05/26/94 07/23/86
Income & Growth 1/1/95 1/1/95 ---
Emerging Markets Income 2/10/94 N/A ---
High Yield 1/1/95 1/1/95 ---
Strategic Income 10/14/94 10/14/94 ---
Government Investment 1/1/95 1/1/95 12/23/87
Limited Term Bond 1/1/95 1/1/95 12/23/87
Short Fixed Income 1/1/95 1/1/95 ---
High Income Municipal 12/1/94 12/1/94 ---
Limited Term Tax-Exempt 11/5/86 5/26/94 10/21/87
Short-Intermediate Tax-Exempt 11/26/86 11/26/86 ---
</TABLE>
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
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continue to provide efficient and effective shareholder services. In such
event, changes in the operation of the funds might occur, including
possible termination of any automatic investment or redemption or other
services then provided by the bank. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of
these occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks
and other financial institutions may be required to register as dealers
pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments under
the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
Trust Organization. Equity Portfolio Growth is a series of Fidelity
Advisor Series I, an open-end management investment company organized as
a Massachusetts business trust by a Declaration of Trust dated June 24,
1983, as amended and restated July 18, 1991, and as supplemented April 15,
1993. On July 18, 1991, the name was changed from Equity Portfolio Growth
to Fidelity Broad Street Trust. On April 15, 1993, its name was changed by
an amendment to the Declaration of Trust from Fidelity Broad Street Trust:
Equity Portfolio: Growth to Fidelity Advisor Series I: Equity Portfolio
Growth.
Short-Fixed Income Fund, Government Investment Fund, High Yield Fund,
Growth Opportunities Fund, and Income & Growth Fund are series of Fidelity
Advisor Series II, an open-end management investment company organized as
a Massachusetts business trust by a Declaration of Trust dated April 24,
1986. On April 7, 1993, the Board of Trustees voted to change the name of
the Trust from Fidelity Diversified Trust to Fidelity Advisor Series II.
Equity Income Fund is a series of Fidelity Advisor Series III, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated May 17, 1982. On January
29, 1986, the name was changed from Equity Portfolio: Income to Fidelity
Franklin Street Trust. On April 15, 1993 the Trust's name was again
changed to Fidelity Advisor Series III.
Limited Term Bond Fund is a series of Fidelity Advisor Series IV, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated May 6, 1983. On January 29,
1992 the name of the Trust was changed from Income Portfolios to Fidelity
Income Trust, and on April 15, 1993, the Board of Trustees voted to change
the Trust's name to Fidelity Advisor Series IV.
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<PAGE>
Global Resources Fund and High Income Municipal Fund are series of
Fidelity Advisor Series V, an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust
dated April 23, 1986, as amended and restated July 18, 1991, and as
supplemented April 15, 1993. On July 18, 1991, the Board of Trustees voted
to change the name of the Trust from Plymouth Investment Series to
Fidelity Investment Series, and on April 15, 1993, the Board voted to
change the Trust's name to Fidelity Advisor Series V. An amended and
restated Declaration of Trust dated March 16, 1995 was filed on
_______________.
Short-Intermediate Tax-Exempt Fund and Limited Term Tax-Exempt Fund
are series of Fidelity Advisor Series VI, an open-end management
investment company organized as a Massachusetts business trust by a
Declaration of Trust dated June 1, 1983, as amended and restated May 5,
1993. On January 29, 1992, the name of the Trust was changed from
Tax-Exempt Funds to Fidelity Oliver Street Trust and on April 15, 1993 the
Board of Trustees voted to change the name of the Trust to Fidelity
Advisor Series VI.
Overseas Fund is a series of Fidelity Advisor Series VII, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated March 21, 1980 as amended
and restated July 18, 1991 and as supplemented April 15, 1993. On July 18,
1991, the Board of Trustees voted to change the name of the Trust from
Plymouth Securities Trust from Plymouth Investment Series to Fidelity
Securities Trust, and on April 15, 1993 the Board of Trustees voted to
change the name of the Trust to Advisor Series VII.
Strategic Opportunities Fund, Strategic Income Fund, and Emerging
Markets Income Fund are series of Fidelity Advisor Series VIII, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated September 23, 1983, as
amended and restated October 1, 1986 and as supplemented November 29,
1990. On April 15, 1993 the name of the Trust was changed from Fidelity
Special Situations Fund to Fidelity Advisor Series VIII.
Each Declaration of Trust permits the Trustees to create additional
funds.
In the event that FMR ceases to be the investment adviser to a fund,
the right of the Trust or fund to use the identifying name "Fidelity" may
be withdrawn.
The assets of a Trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
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<PAGE>
the general expenses of the Trust. Expenses with respect to the Trust are
to be allocated in proportion to the asset value of the respective fund,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In
the event of the dissolution or liquidation of the Trust, shareholders of
each fund are entitled to receive as a class the underlying assets of
such fund available for distribution.
Shareholder and Trustee Liability. Each Trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the Trust shall not have any claim against
shareholders except for the payment of the purchase price of shares and
requires that each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees include a provision limiting the
obligations created thereby to the Trust and its assets. The Declaration
of Trust provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the fund itself would be
unable to meet its obligations. FMR believes that, in view of the above,
the risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties in the conduct of their office. Claims asserted against
one class of shares may subject the shareholders of any other class to
certain liabilities.
Voting Rights. A fund's capital consists of shares of beneficial
interest. The shares have no preemptive rights, and Class A and
Institutional Class shares have no conversion rights; the voting and
dividend rights, the conversion rights of Class B shares, the right of
redemption, and the privilege of exchange are described in the
Prospectuses. Shareholders of Global Resources, Growth Opportunities,
Equity Income, Income & Growth, High Yield, High Income Municipal,
Government Investment, Limited Term Bond, Limited Term Tax-Exempt, Short
Fixed-Income, and Short-Intermediate Tax-Exempt receive one vote for each
dollar of net asset value owned. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of a Trust, a fund, or class
of a fund may, as set forth in the Declaration of Trust, call meetings of
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the Trust, fund or class, as applicable, for any purpose, related to the
Trust, fund, or class, as the case may be, including the case of meeting
of the Trust, the purpose of voting on removal of one or more Trustees.
The Trust or any fund may be terminated upon the sale of its assets to
another open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the outstanding shares of the funds of Advisor Series I, III,
VI, VII, and VIII, or, as determined by the current value of each
shareholder's investment in the funds of Advisor Series II, IV, and V. If
not so terminated, the Trust and funds will continue indefinitely. Global
Resources, Strategic Opportunities, High Yield, Government Investment,
Limited Term Bond, Short Fixed-Income, and High Income Municipal may
invest all of their assets in another investment company.
As of _______ __, 1995, the following owned of record or beneficially
more than 5% of the outstanding shares of the classes of the following
Fidelity Advisor funds:
[To be provided by subsequent amendment]
Custodians. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of Global Resources, Growth
Opportunities, and Strategic Opportunities. The Chase Manhattan Bank,
N.A., 1211 Avenue of the Americas, New York, New York, is custodian of the
assets of Overseas, Equity Portfolio Growth, Equity Income, Income &
Growth, and Emerging Markets Income. The Bank of New York, 110 Washington
Street, New York, New York, is custodian of the assets of High Yield,
Strategic Income, Government Investment, Limited Term Bond, and Short
Fixed Income. United Missouri Bank, 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of High Income Municipal, Limited
Term Tax-Exempt, and Short-Intermediate Tax-Exempt. The custodian is
responsible for the safekeeping of the fund's assets and the appointment
of subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of the fund or in deciding which
securities are purchased or sold by a fund. A fund may, however, invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the
Trust's Trustees may from time to time have transactions with various
banks, including banks serving as custodians for certain of the funds
advised by FMR. The Boston branch of the custodian bank of Global
Resources, Growth Opportunities, and Strategic Opportunities leases its
office space from an affiliate of FMR at a lease payment which, when
entered into, was consistent with prevailing market rates. Transactions
that have occurred to date have included mortgages and personal and
general business loans. In the judgment of FMR, the terms and conditions
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<PAGE>
of those transactions were not influenced by existing or potential
custodial or other fund relationships.
Auditor. ________________________, serves as the independent
accountant for Equity Portfolio Growth, Global Resources, Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Limited Term Bond, Short Fixed-Income, High Income Municipal,
Limited Term Tax-Exempt, and Short-Intermediate Tax-Exempt.
____________________, serves as the independent accountant for Overseas.
The auditor examines financial statements for each fund and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal period ended October 31, November 30, or December 31, 1994, as
appropriate, are included in the Annual Reports, which are separate
reports supplied with this SAI. Each fund's financial statements and
financial highlights are incorporated herein by reference.
APPENDIX
Dollar-weighted average maturity is derived by multiplying the value
of each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of a fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call,
refunding, or redemption provision, the date on which the instrument will
probably be called, refunded, or redeemed may be considered to be its
maturity date. Also, the maturities of mortgage-backed securities and
some asset-backed securities, such as collateralized mortgage
obligations, are determined on a weighted average life basis, which is the
average time for principal to be repaid. For a mortgage security, this
average time is calculated by estimating the expected principal payments
during the life of the mortgage. The weighted average life of these
securities is likely to be substantially shorter than their stated final
maturity.
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<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (1) Financial Statements and Financial Highlights, included in the
Annual Report for Fidelity Advisor Limited Term Bond Fund for the fiscal
year ended November 30, 1994 are incorporated by reference into the fund's
Statement of Additional Information and were filed on January 18, 1995 for
Fidelity Advisor Series IV (No. 811-3737) pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporated herein by reference.
(b) Exhibits:
(1) (a) Amended and Restated Declaration of Trust, dated March 23, 1995
is electronically filed herein as Exhibit 1(a).
(2) By-Laws of the Trust were electronically filed and are included
herein by reference to Exhibit 2(a) to Union Street Trust's Post-Effective
Amendment No. 87.
(3) Not applicable.
(4) Not applicable.
(5) (a) Management Contract between Fixed-Income Portfolios: Short-Term
Government Series and Fidelity Management & Research Company dated July 29,
1986 is incorporated herein by reference to Exhibit 5(b) to Post-Effective
Amendment No. 7.
(b) Management Contract between Advisor Series IV: Fidelity Advisor
Limited Term Bond Fund and Fidelity Management & Research Company dated
January 1, 1995 was electronically filed and is incorporated herein by
reference as Exhibit 5(b) to Post-Effective Amendment No. 43.
(c) Sub-Advisory Agreement between Fidelity Management & Research Company,
on behalf of Fidelity Advisor Limited Term Bond Fund, and Fidelity
Management & Research (U.K.) Inc. was electronically filed and is
incorporated herein by reference as Exhibit 5(c) to Post-Effective
Amendment No. 43.
(d) Sub-Advisory Agreement between Fidelity Management & Research Company,
on behalf of Fidelity Advisor Limited Term Bond Fund, and Fidelity
Management & Research (Far East) Inc. was electronically filed and is
incorporated herein by reference as Exhibit 5(d) to Post-Effective
Amendment No. 43.
(e) Management Contract between Fidelity Real Estate High Income Fund and
Fidelity Managment & Research Company was electronically filed and is
incorporated herein by reference to Exhibit 5(e) to Post-Effective
Amendment No. 41.
(6) (a) General Distribution Agreement between Income Portfolios: Limited
Term Series and Fidelity Distributors Corporations dated April 1, 1987
(amending in its entirety the Distribution Agreement dated June 1, 1986) is
incorporated herein by reference to Exhibit 6(a) to Post-Effective
Amendment No. 13.
(b) General Distribution Agreement between Income Portfolios: Short
Government Series and Fidelity Distributors Corporations dated April 1,
1987 (amending in its entirety the Distribution Agreement dated July 29,
1986) is incorporated herein by reference to Exhibit 6(b) to Post-Effective
Amendment No. 13.
(c) General Distribution Agreement between Fidelity Real Estate High
Income Fund and Fidelity Distributors Corporation was electronically filed
and is incorporated herein by reference as Exhibit 6(c) to Post-Effective
Amendment No. 41.
(d) Form of Bank Agency Agreement (most recently revised May 1994) is
electronically filed herein as Exhibit 6(d).
(e) Form of Selling Dealer Agreement (most recently revised May 1994) is
electronically filed herein as Exhibit 6(e) .
(f) Form of Selling Dealer Agreement for Bank Related Transactions (most
recently revised June 1994) is electronically filed herein as Exhibit 6(f).
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, is incorporated herein by
reference to Exhibit 7 to Union Street Trust's Post-Effective Amendment No.
87.
(8) (a) Custodian Contract between Registrant and State Street Bank
and Trust Company, dated January 11, 1984, is incorporated herein by
reference to Exhibit 8 to Post-Effective Amendment No. 1.
(b) Custodian Contract between Registrant and The Bank of New York
dated December 1, 1994 is electronically filed herein as Exhibit 8(b).
(9) Not applicable.
(10) None.
(11) Not applicable.
(12) None.
(13) None.
(14) (a) Defined Contribution Retirement Plan and Trust Agreement is
incorporated herein by reference to Exhibit 14(b) to Post-Effective
Amendment No. 24.
(b) Defined Benefit Pension Plan and Trust is incorporated herein by
reference to Exhibit 14(c) to Post-Effective Amendment No. 24.
(c) IRA Custodial Agreement and Disclosure Statement (Group) is
incorporated herein by reference to Exhibit 14(d) to Post-Effective
Amendment No. 24.
(d) Master Plan for Savings and Investments is incorporated herein by
reference to Exhibit 14(e) to Post-Effective Amendment No. 24.
(e) 401(a) Prototype Plan for Tax-Exempt Employers is incorporated
herein by reference to Exhibit 14(f) to Post-Effective Amendment No. 24.
(f) Form for Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement Disclosure Statement in effect as of January 1,
1994 is incorporated by reference as Exhibit 14(f) to Post-Effective
Amendment No. 36.
(g) Form for Fidelity Institutional Individual Retirement Account
Custodial
Agreement in effect as of January 1, 1994 is incorporated herein by
reference as Exhibit 14(g).
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Short-Term Government Series is incorporated herein by reference to Exhibit
15(a) to Post-Effective Amendment No. 5.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Limited Term Bond Fund-Class A was electronically filed and is
incorporated herein by reference as Exhibit 15(b) to Post-Effective
Amendment No. 43.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Institutional
Short-Intermediate Government Portfolio II was electronically filed and is
incorporated herein by reference to Exhibit 15 (c) of Post-Effective
Amendment No. 35.
(d) Distribution and Service Plan for Fidelity Advisor Limited Term Bond
Fund-Class B was electronically filed and is incorporated herein by
reference as Exhibit 15(d) to Post-Effective Amendment No. 43.
(e) Distribution and Service Plan for Fidelity Real Estate High Income
Fund was electronically filed and is incorporated herein by reference as
Exhibit 15(e) to Post-Effective Amendment No. 41.
(16) A schedule for computation of performance quotations for each
Series/Portfolio is incorporated herein by reference to Exhibit 16 to
Post-Effective Amendment No. 15.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is the same as the Boards of other
Fidelity funds offered primarily to institutional investors, each of which
has Fidelity Management & Research Company as its investment adviser.
Nonetheless, Registrant takes the position that is not under common control
with these other funds since the power residing in the respective Boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
March 31, 1995
Title of Class Number of Record Holders
Fidelity Advisor Limited Term Bond Fund: Class A 4,640
Fidelity Advisor Limited Term Bond Fund: Class B 464
Fidelity Advisor Limited Term Bond Fund: Institutional Class 583
Fidelity Institutional Short-Intermediate Government Portfolio I 743
Fidelity Institutional Short-Intermediate Government Portfolio II 1
Fidelity Real Estate High Income Fund 1
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
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 Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
William Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen P. Jonas Treasurer and Vice President of FMR (1993) and Treasurer
of the funds advised by FMR (1995); Treasurer of FMR
Texas Inc. (1993), Fidelity Management & Research (U.K.)
Inc. (1993), and Fidelity Management & Research (Far
East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. MacNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
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.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management & Research
(Far East) Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen P. Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
Treasurer and Vice President of FMR (1993); and Treasurer of
the funds advised by FMR (1995).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
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.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen P. Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993);
and Treasurer of the funds advised by FMR (1995).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' respective
custodian: The Bank of New York, 110 Washington Street, New York, N.Y.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of Fidelity Advisor Limited Term Bond Fund and
Fidelity Institutional Short-Intermediate Government Portfolio, undertakes,
provided the information required by Item 5A is contained in the annual
report, to furnish each person to whom a prospectus has been delivered,
upon their request and without charge, a copy of the Registrant's latest
annual report to shareholders.
The Registrant undertakes for Fidelity Real Estate High Income Fund: (1)
to call a meeting of shareholders for the purpose of voting upon the
questions of removal of a trustee or trustees, when requested to do so by
record holders of not less than 10% of its outstanding shares; and (2) to
assist in communications with other shareholders pursuant to Section
16(c)(1) and (2), whenever shareholders meeting the qualifications set
forth in Section 16(c) seek the opportunity to communicate with other
shareholders with a view toward requesting a meeting.
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Real Estate High Income Fund, which need
not be certified, within six months of the fund's effectiveness, unless
permitted by the SEC to extend this period.
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. 45 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and MA, on the 12th day of April 1995.
Fidelity Advisor Series IV
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee April 12, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Stephen P. Jonas Treasurer April 12, 1995
Stephen P. Jonas
/s/J. Gary Burkhead Trustee April 12, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee April 12, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee April 12, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee April 12, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee April 12, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee April 12, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee April 12, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee April 12, 1995
Edward H. Malone
/s/Marvin L. Mann * Trustee April 12, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee April 12, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee April 12, 1995
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
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 Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Djinis, 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 Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, 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 deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
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 Advisor Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Exchange Fund Fund
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, 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 attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and 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.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994
Edward C. Johnson 3d
AMENDED AND RESTATED DECLARATION OF TRUST
DATED MARCH 16, 1995
AMENDED AND RESTATED DECLARATION OF TRUST, made March 16, 1995 by each of
the Trustees whose signature is affixed hereto (the "Trustees")
WHEREAS, the Trustees desire to amend and restate this Declaration of
Trust for the sole purpose of supplementing the Declaration to incorporate
amendments duly adopted; and
WHEREAS, this Trust was initially made on May 6, 1983 by by Edward C.
Johnson 3d, Caleb Loring, Jr., and Frank Nesvet in order to establish a
trust fund for the investment and reinvestment of funds contributed
thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in Trust
under this Amended and Restated Declaration of Trust as herein set forth
below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Fidelity Advisor Series IV".
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the context
or specifically provided:
(a) The Terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the
third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them
in the 1940 Act, as amended from time to time;
(b) The "Trust" refers to Fidelity Advisor Series IV and reference to the
Trust when applicable to one or more series of the Trust, shall refer to
any such series;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article X, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refer to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the
time being in office as such trustee or trustees;
(f) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of the Trust or each Series shall be
divided from time to time, including such class or classes of shares as the
Trustees may from time to time create and establish including fractions of
Shares as well as whole Shares consistent with the requirements of Federal
and/or state securities laws;
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time; and
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source of
managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series or classes
as the Trustees shall from time to time create and establish. The number of
Shares is unlimited and each Share shall be without par value and shall be
fully paid and nonassessable. The Trustees shall have full power and
authority, in their sole discretion and without obtaining any prior
authorization or vote of the Shareholders or any Series or class of
Shareholders of the Trust, to create and establish (and to change in any
manner) Shares or any Series or classes thereof with such preferences,
voting powers, rights and privileges as the Trustees may from time to time
determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued
Shares into one or more Series of Shares, to abolish any one or more Series
or classes of Shares, and to take such other action with respect to the
Shares as the Trustees may deem desirable.
ESTABLISHMENT OF SERIES
Section 2. The establishment of any Series shall be effective upon the
adoption of a resolution by a majority of the then Trustees setting forth
such establishment and designation and the relative rights and preferences
of the Shares of such Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated,
the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of the
Trust. The Trustees may make such rules as they consider appropriate for
the transfer of Shares and similar matters. The record books of the Trust
shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the
appropriate Series is authorized to invest, valued as provided in Article
X, Section 3. After the date of the initial contribution of capital, the
number of Shares to represent the initial contribution may in the Trustees'
discretion be considered as outstanding and the amount received by the
Trustees on the account of the contribution shall be treated as an asset of
the Trust. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge
upon investments in the Trust and (b) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in
such manner as they, in their sole discretion, deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders
of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall
be so recorded upon the books of the Trust, and shall be held by the
Trustees in trust for the benefit of the holders of Shares of that Series.
The assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees between or among any one or more of the Series in such manner as
the Trustees in their sole discretion deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Any creditor of any Series may look only to the
assets of that Series to satisfy such creditor's debt.
NO PREEMPTIVE RIGHTS
Section 6. The Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees.
LIMITATION OF PERSONAL LIABILITY
Section 7. The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust shall include a
recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility.
ELECTION: INITIAL TRUSTEES
Section 2. On a date fixed by the Trustees, the Shareholders shall elect
not less than three Trustees. A Trustee shall not be required to be a
Shareholder of the Trust. The initial Trustees shall be Edward C. Johnson
3d, Caleb Loring, Jr. and Frank Nesvet and such other individuals as the
Board of Trustees shall appoint pursuant to Section 4 of the Article IV.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that
any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may
be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests in
writing to be retired or who has become incapacitated by illness or injury
may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) a Trustee may be
removed at any Special Meeting of the Trust by a vote of two-thirds of the
outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, or in case a
vacancy shall, by reason of an increase in number, or for any other reason,
exist, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the Investment Company Act of 1940. Such appointment
shall be evidenced by a written instrument signed by a majority of the
Trustees in office or by recording in the records of the Trust, whereupon
the appointment shall take effect. An appointment of a Trustee may be made
by the Trustees then in office in anticipation of a vacancy to occur by
reason of retirement, resignation or increase in number of Trustees
effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this trust, the trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
The power of appointment is subject to the provisions of Section 16(a) of
the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more than
twelve (12), serving hereunder at any time shall be determined by the
Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from his
state of domicile, or is physically or mentally incapacitated by reason of
disease or otherwise, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy,
absence or incapacity, shall be conclusive, provided, however, that no
vacancy shall remain unfilled for a period longer than six calendar months.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of
the Trust shall at all times be considered as vested in the Trustees. No
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest
in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in the Declaration of
Trust or the Bylaws of the Trust, the Trustees shall have power and
authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by Trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ a bank or trust company as custodian of any assets of the
Trust subject to any conditions set forth in this Declaration of Trust or
in the Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, custodian or underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XII, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its
own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series or to apportion the same between or among two or more
Series, provided that any liabilities or expenses incurred by a particular
Series shall be payable solely out of the assets belonging to that Series
as provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes.
(q) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided for.
(r) To borrow money, and to pledge, mortgage or hypothecate the assets of
the Trust, subject to applicable limitations of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving notice
to such Shareholder.
(t) Notwithstanding any other provision hereof, to invest all of the
assets of any series in a single open-end investment company, including
investment by means of transfer of such assets in exchange for an interest
or interests in such investment company.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of Shares to the same extent as if he were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued
and sold Shares to and buy such Shares from any such person of any firm or
company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all
subject to any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone
consent provided a quorum of Trustees participate in any such telephonic
meeting, unless the 1940 Act requires that a particular action be taken
only at a meeting of the Trustees. At any meeting of the Trustees, a
majority of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the Trustees
or by any two other Trustees. Notice of the time, date and place of all
meetings of the Trustees shall be given by the party calling the meeting to
each Trustee by telephone or telegram sent to his home or business address
at least twenty-four hours in advance of the meeting or by written notice
mailed to his home or business address at least seventy-two hours in
advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a
written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to
any one of their number their authority to approve particular matters or
take particular actions on behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman of
the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by
the Trustees and the administration of the Trust, and may be the chief
executive, financial and accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the trust estate or the assets belonging
to the appropriate Series for their expenses and disbursements, including,
without limitation, fees and expenses of Trustees who are not Interested
Persons of the Trust, interest expense, taxes, fees and commissions of
every kind, expenses of pricing Trust portfolio securities, expenses of
issue, repurchase and redemption of shares including expenses attributable
to a program of periodic repurchases or redemptions, expenses of
registering and qualifying the Trust and its Shares under Federal and State
laws and regulations, charges of custodians, transfer agents, and
registrars, expenses of preparing and setting up in type prospectuses and
Statements of Additional Information, expenses of printing and distributing
prospectuses sent to existing Shareholders, auditing and legal expenses,
reports to Shareholders, expenses of meetings of Shareholders and proxy
solicitations therefor, insurance expense, association membership dues and
for such non-recurring items as may arise, including litigation to which
the Trust is a party, and for all losses and liabilities by them incurred
in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series prior to any rights or interests
of the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in
their discretion from time to time enter into an investment advisory or
management contract(s) with respect to the Trust or any Series thereof
whereby the other party(ies) to such contract(s) shall undertake to furnish
the Trustees such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and
all upon such terms and conditions, as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser(s) (subject to such general
or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities and other
investment instruments of the Trust on behalf of the Trustees or may
authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all
without further action by the Trustees). Any such purchases, sales and
exchanges shall be deemed to have been authorized by all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform
such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser
and sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter
into (a) contract(s) providing for the sale of the Shares, whereby the
Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In
either case, the contract shall be on such terms and conditions as may be
prescribed in the Bylaws, if any, and such further terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article VII, or of the Bylaws, if any; and such contract
may also provide for the repurchase or sale of Shares by such other party
as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service contract whereby the other
party shall undertake to furnish the Trustees with transfer agency and
Shareholder services. The contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Declaration of Trust or of the Bylaws, if any. Such
services may be provided by one or more entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and 3
of this Article VII or in Article IX hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more
of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no
such contract shall be invalidated or rendered voidable by reason of the
existence of any relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was reasonable and fair and not inconsistent
with the provisions of this Article VII or the Bylaws, if any. The same
person (including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to Sections 1, 2
and 3 above or Article IX, and any individual may be financially interested
or otherwise affiliated with persons who are parties to any or all of the
contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of this
Article VII shall be consistent with and subject to the requirements of
Section 15 of the 1940 Act (including any amendments thereof or other
applicable Act of Congress hereafter enacted) with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any
contract, entered into pursuant to Section 1 shall be effective unless
assented to by a Majority Shareholder Vote.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII,
Section 1, (iv) with respect to the amendment of this Declaration of Trust
as provided in Article XII, Section 7, (v) to the same extent as the
shareholders of a Massachusetts business corporation, as to whether or not
a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, provided, however, that a Shareholder of a particular Series
shall not be entitled to bring any derivative or class action on behalf of
any other Series of the Trust, and (vi) with respect to such additional
matters relating to the Trust as may be required or authorized by law, by
this Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any State, as the Trustees may consider desirable. On any
matter submitted to a vote of the Shareholders, all shares shall be voted
by individual Series, except (i) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series; and (ii) when
the Trustees have determined that the matter affects only the interests of
one or more Series, then only the Shareholders of such Series shall be
entitled to vote thereon. A Shareholder of each Series shall be entitled to
one vote for each dollar of net asset value (number of Shares owned times
net asset value per share) of such Series, on any matter on which such
Shareholder is entitled to vote and each fractional dollar amount shall be
entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by
proxy. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this
Declaration of Trust or any Bylaws of Trust to be taken by Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Shareholders
of any Series may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth
of the outstanding Shares entitled to vote. Whenever ten or more
Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view
to obtaining signatures on such a request for a meeting, the Trustees shall
comply with the provisions of said Section 16(c) with respect to providing
such Shareholders access to the list of the Shareholders of record of the
Trust or the mailing of such materials to such Shareholders of record.
Shareholders shall be entitled to at least fifteen days' notice of any
meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Declaration of
Trust permits or requires that holders of any Series shall vote as a
Series, then a majority of the aggregate number of Shares of that Series
entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that Series. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting,
without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the Bylaws, a
majority of the Shares voted in person or by proxy shall decide any
questions and a plurality shall elect a Trustee, provided that where any
provision of law or of this Declaration of Trust permits or requires that
the holders of any Series shall vote as a Series, then a majority of the
Shares of that Series voted on the matter shall decide that matter insofar
as that Series is concerned.
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank or trust company
having capital, surplus and undivided profits of at least two million
dollars ($2,000,000), or such other amount or such other entity as shall be
allowed by the Commission or by the 1940 Act, as custodian with authority
as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order, if confirmed in writing, or by such
electro-mechanical or electronic devices as are agreed to by the Trust and
the custodian, if such procedures have been authorized in writing by the
Trust;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset
Value of any Series in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by
it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital and surplus and undivided profits of at least
two million dollars ($2,000,000) or such other person as may be permitted
by the Commission, or otherwise in accordance with the 1940 Act as from
time to time amended.
CENTRAL CERTIFICATE SYSTEM
Section 2. Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the custodian to deposit all or any part
of the securities owned by the Trust in a system for the central handling
of securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act as from time to
time amended, pursuant to which system all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall
be subject to withdrawal only upon the order of the Trust.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends. The
amount of such dividends and the payment of them shall be wholly in the
discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by the
laws of Massachusetts, at any time to declare and cause to be paid
dividends on Shares of a particular Series, from the assets belonging to
that Series, which dividends, at the election of the Trustees, may be paid
daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, and may be
payable in Shares of that Series at the election of each Shareholder of
that Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute pro rata among the
Shareholders of a particular Series as of the record date of that Series
fixed as provided in Article XII, Section 3 hereof a "stock dividend".
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular Series
desires to dispose of his Shares, he may deposit at the office of the
transfer agent or other authorized agent of that Series a written request
or such other form of request as the Trustees may from time to time
authorize, requesting that the Series purchase the Shares in accordance
with this Section 2; and the Shareholder so requesting shall be entitled to
require the Series to purchase, and the Series or the principal underwriter
of the Series shall purchase his said Shares, but only at the Net Asset
Value thereof (as described in Section 3 hereof). The Series shall make
payment for any such Shares to be redeemed, as aforesaid, in cash from the
assets of that Series and payment for such Shares shall be made by the
Series or the principal underwriter of the Series to the Shareholder of
record within seven (7) days after the date upon which the request is
effective.
DETERMINATION OF NET ASSET VALUE
AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that amount
by which the assets of that Series, exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value per Share
shall be determined separately for each Series of Shares and shall be
determined on such days and at such times as the Trustees may determine.
Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees, provided, however, that
the Trustees, without Shareholder approval, may alter the method of
appraising portfolio securities insofar as permitted under the 1940 Act and
the rules, regulations and interpretations thereof promulgated or issued by
the Commission or insofar as permitted by any Order of the Commission
applicable to the Series. The Trustees may delegate any of its powers and
duties under this Section 3 with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the value par Share last
determined to be determined again in similar manner and may fix the time
when such redetermined value shall become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940 Act.
Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no
right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share existing after the
termination of the suspension.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of
the Trust, the Trustees shall not be responsible for or liable in any event
for neglect or wrongdoing of them or any officer, agent, employee or
investment adviser of the Trust, but nothing contained herein shall protect
any Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expense" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither interested
persons of the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees, or by
independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Trustees and officers, and other persons may be entitled by contract
or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 2 may be paid by the applicable Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the applicable Series if it is ultimately determined
that he is not entitled to indemnification under this Section 2; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of
the Trustees who are neither interested persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 2.
SHAREHOLDERS
Section 3. In case any Shareholder or former Shareholder of any Series of
the Trust shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Series shall, upon request by the
Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon.
ARTICLE XII
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to
bind personally either the Trust's officers or any Shareholder. All persons
extending credit to, contracting with or having any claim against the Trust
or the Trustees shall look only to the assets of the appropriate Series for
payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of their agents, whether past, present or future,
shall be personally liable therefor. Nothing in this Declaration of Trust
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to the
provisions of Section 1 of this Article XII and to Article XI, the Trustees
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice counsel or other experts with respect to the
meaning and operation this Declaration of Trust, and subject to the
provisions of Section 1 of this Article XII and to Article XI, shall be
under no liability for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust
for a period not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends, or
the date for the allotment of rights, or the date when any change or
conversion or exchange of Shares shall go into effect; or in lieu of
closing the stock transfer books as aforesaid, the Trustees may fix in
advance a date not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion
or exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote at,
any such meeting, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting, or to receive payment of such dividend, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell and convey the assets of the Trust or any affected Series to
another trust, partnership, association or corporation organized under the
laws of any state which is a diversified open-end management investment
company as defined in the 1940 Act, for adequate consideration which may
include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or any affected Series,
and which may include shares of beneficial interest or stock of such trust,
partnership, association or corporation; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making provision for the payment of all such liabilities in either
(i) or (ii), by such assumption or otherwise, the Trustees shall distribute
the remaining proceeds or assets (as the case may be) ratably among the
holders of the Shares of the Trust or any affected Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest
of all parties shall be cancelled and discharged.
FILING OF COPIES, REFERENCES, AND HEADINGS
Section 5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental declaration of trust shall be filed by
the Trustees with the Secretary of the Commonwealth of Massachusetts and
the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether
or not any such supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this instrument or of any
such supplemental declaration of trust. In this instrument or in any such
supplemental declaration of trust, references to this instrument and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to
refer to this instrument as amended or affected by any such supplemental
declaration of trust. Headings are placed herein for convenience of
reference only and in case of any conflict, the text of this instrument,
rather than the headings, shall control. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.
AMENDMENTS
Section 7. If authorized by votes of the Trustees and a Majority
Shareholder Vote, or by any larger vote which may be required by applicable
law or this Declaration of Trust in any particular case, the Trustees shall
amend or otherwise supplement this instrument, by making a declaration of
trust supplemental hereto, which thereafter shall form a part hereof,
except that an amendment which shall affect the Shareholders of one or more
Series but not the Shareholders of all outstanding Series shall be
authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote of each Series affected and no vote of Shareholders of a
Series not affected shall be required. Amendments having the purpose of
changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require authorization by
Shareholder vote. Copies of the supplemental declaration of trust shall be
filed as specified in Section 5 of this Article XII.
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date as
set forth in the Bylaws, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 9. Fidelity Management & Research Company ("FMR") has consented to
the use by any Series of the Trust of the identifying word "Fidelity" in
the name of any Series of the Trust at some future date. Such consent is
conditioned upon the employment of FMR as investment adviser of each Series
of the Trust. As between the Trust and itself, FMR controls the use of the
name of the Trust insofar as such name contains the identifying word
"Fidelity". FMR may from time to time use the identifying word "Fidelity"
in other connections and for other purposes, including, without limitation,
in the names of other investment companies, corporations or businesses
which it may manage, advise, sponsor or own or in which it may have a
financial interest. FMR may require the Trust or any Series thereof to
cease using the identifying word "Fidelity" in the name of the Trust or any
Series thereof if the Trust or any Series thereof ceases to employ FMR or a
subsidiary or affiliate thereof as investment adviser.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument this 16th day of March, 1995.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
/s/Phyllis Burke Davis /s/Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
_____________________________ _____________________________
/s/E. Bradley Jones /s/Thomas R. Williams
The business address of the
members of the Board of
Trustees is:
82 Devonshire Street
Boston, MA 02109
BANK AGENCY AGREEMENT
We (Fidelity Distributors Corporation) are distributors of the Fidelity
Advisor Funds and the Fidelity Funds (the "Portfolios"). You
(_____________________________________) are a division or affiliate of
(________________) ("Bank"), and desire to make Portfolio shares available
to your customers upon the following terms and conditions:
1. As used herein the following terms shall have the meaning hereinafter
set forth (unless a different meaning is plainly required by the context):
(a) "Fidelity Advisor Funds" shall mean the open-end investment companies,
series, or (in the case of companies or series offering multiple classes of
shares) classes of one or more of the foregoing, the shares of which from
time to time shall be offered by us as principal underwriter to you
hereunder and which are designated as such on Schedule A, as amended by us
from time to time upon notice to you. This Agreement shall apply only to
such companies, series, or classes so designated and only such companies,
series or classes shall be considered to be Fidelity Advisor Funds.
(b) "Fidelity Funds" shall mean the open-end investment companies, series
or (in the case of companies or series offering multiple classes of shares)
classes of one or more of the foregoing, the shares of which from time to
time shall be offered by us as principal underwriter to you hereunder and
which are designated as such on Schedule B, as amended by us from time to
time upon notice to you. This Agreement shall apply only to such
companies, series, or classes so designated and only such companies, series
or classes shall be considered to be Fidelity Funds.
(c) "Portfolio" shall mean any one of the Fidelity Advisor Funds or
Fidelity Funds.
(d) "Transfer Agent" shall mean (i) with respect to the Fidelity Advisor
Funds, the person designated on Schedule C and appointed by you pursuant to
paragraph 4 to provide the services described under such paragraph; and
(ii) with respect to the Fidelity Funds, the transfer agent of such
Fidelity Fund.
2. (a) In respect of all sales of Portfolio shares to your customers for
which you act as agent, (i) such shares shall be sold at the applicable
public offering price, giving effect, where applicable, to cumulative or
quantity discounts or other purchase programs, plans or services as
described in the then current prospectus of the Portfolio whose shares are
being sold and you shall transmit payment for such shares in accordance
with paragraph 3; (ii) your customer's transactions will be executed only
upon your authorization, and on all such transactions you shall be acting
solely as agent, upon the order and at the request of your customers,
without recourse to you, and such transactions shall be for the account of
your customers and not for your account; (iii) your compensation for acting
as agent with respect to sales shall be as set forth in the applicable
schedules issued by us and in effect at the time of the sale or as set
forth in the then current prospectus. Such compensation schedules are
subject to change or discontinuance by us from time to time as set forth in
paragraph 8 below.
(b) In the case of a Portfolio which has adopted a plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 (a "Plan"), we may elect
from time to time to make distribution payments or service payments to you
under such Plan. In the case of a Portfolio that has no currently
effective Plan, we or Fidelity Management & Research Company may elect to
make distribution payments or service payments to you from our own funds.
Any such distribution payments or service payments shall be made in the
amount and manner set forth in the applicable schedule of distribution
payments or service payments issued by us and then in effect or as set
forth in the then current prospectus. Such schedule of distribution
payments or service payments may be changed or discontinued by us from time
to time and shall be in effect with respect to a Portfolio which has a Plan
only so long as such Portfolio's Plan remains in effect.
3. The placing of orders with us shall be governed by instructions which we
shall issue from time to time. Payment for shares shall be made in New
York or Boston Clearing House funds in accordance with such instructions,
but in no event to be received by us later than five business days (as
defined in the Portfolio's current prospectus) after our acceptance of the
order.
4. (a) The Fidelity Advisor Funds offer you the option of transacting
business with such funds either through the fund's own transfer agent or
through a third party record keeper. You may designate your selection with
respect to the Fidelity Advisor Funds on Schedule C.
(b) You appoint the Transfer Agent for each Portfolio as your agent to
execute customers' purchase, sale, transfer, or redemption orders
("Transactions") in Portfolio shares in accordance with the terms and
provisions of any account, program, plan or service established or used by
your customers and to confirm each such Transaction to your customers on
your behalf on a fully disclosed basis, and at the time of the Transaction,
you guarantee the legal capacity of your customers and any co-owners of
such shares so transacting in such shares.
(c) You may instruct the Transfer Agent to register shares purchased in
your name and account as nominee for your customers, in which event all
prospectuses, proxy statements, periodic reports and other printed material
will be sent to you and all confirmations and other communications to
shareholders will be transmitted to you. You shall be responsible for
forwarding such printed material, confirmations and communications, or the
information contained therein, to all customers for whom you hold such
shares as nominee. However, we or the Transfer Agent on behalf of itself
or the Portfolios shall be responsible for the costs associated with your
forwarding such printed material, confirmations and communications and
shall reimburse you in full for such costs. You shall also be responsible
for complying with all reporting and tax withholding requirements with
respect to the customers for whose account you are holding any shares as
nominee. With respect to customers other than such customers, you shall
provide us with all information (including, without limitation,
certification of taxpayer identification numbers and back-up withholding
instructions) necessary or appropriate for us to comply with legal and
regulatory reporting requirements.
(d) You shall be responsible for determining, in accordance with the then
current Prospectus, whether, and the extent to which, a contingent deferred
sales charge is applicable to a purchase of shares from a customer for
whose account you are holding such shares as nominee; and you agree to
present immediately to us any contingent deferred sales charge to which
such purchase was subject. You hereby represent that if you hold shares
subject to such a charge, you have the capability to track and account for
such charge; and we reserve the right, at our discretion, to verify that
capability through inspection of your tracking and accounting system or
otherwise.
5. Upon request, we will furnish you a reasonable number of copies of the
then current prospectus and statement of additional information of each of
the Portfolios and the printed information referred to in paragraph 7 below
issued as supplements thereto.
6. (a) You represent that you either (i) are registered as a securities
broker/dealer with the Securities and Exchange Commission and are and will
remain a member in good standing of the National Association of Securities
Dealers, Inc. ("NASD"), and agree to abide by all of its rules and
regulations including its Rules of Fair Practice (reference is hereby
specifically made to Section 26, Article III, of the Rules of Fair Practice
of the NASD, which is incorporated herein as if set forth in full); or (ii)
you are a bank as defined in Section 3(a)(6) of the Securities Exchange Act
of 1934, as amended, and are duly authorized to engage in the Transactions
to be performed hereunder. If your membership in the NASD terminates, or
you violate any provision of said Section 26, or if you cease to be a bank
as defined above, this Agreement will be immediately and automatically
terminated.
(b) We shall not purchase Portfolio shares from the Portfolio except for
the purpose of covering purchase orders already received by us, and you
shall not purchase Portfolio shares from us, other than for investment,
except for the purpose of covering purchase orders already received by you.
(c) You shall not withhold placing customers' orders for Portfolio shares
so as to profit yourself as a result of such withholding, e.g., by virtue
of a change in the Portfolio's net asset value per share from that used in
determining the offering price to your customers.
(d) We shall not accept a conditional order for Portfolio shares on any
basis other than at a definite specified price.
(e) If, within seven business days after confirmation by us of the
original purchase order for shares of a Portfolio, such shares are
repurchased by the issuing Portfolio or by us for the account of such
Portfolio or are tendered for redemption by the customer, you shall
forthwith refund, or forfeit the right to receive, the full amount of any
agency compensation on the original sale pursuant to paragraph 2(a) above
and any distribution payments or service payments made to you pursuant to
paragraph 2(b) above. You shall refund to the Portfolio immediately upon
receipt the amount of any dividends or distributions paid to you as nominee
for your customers with respect to redeemed or repurchased Portfolio shares
to the extent that the proceeds of such redemption or repurchase may
include the dividends or distributions payable on such shares. You shall
be notified by us of such repurchase or redemption within ten days of the
date of such transaction.
(f) In the event any adjustment in the amount of agency compensation made
to you on any sale under paragraph 2(a) or in distribution payments or
service payments made to you under paragraph 2(b) shall result in an
overpayment by us of such compensation or payment, you shall forthwith
remit to us such overpayment. The term "adjustment" as used in the
preceding sentence shall not include any changes in amounts paid to or due
you caused by a change in or discontinuance of such compensation,
distribution payments or service payments (as provided under paragraphs
2(a), 2(b) and 8) prior to the effective date of such change or
discontinuance of such compensation or payments. You acknowledge that the
foregoing shall in no way limit our right to change or discontinue such
compensation, distribution payments or service payments as provided in
paragraphs 2 and 8 hereof, and that, after the effective date of a change
in, or discontinuance by us of the agency compensation under paragraph 2(a)
or the distribution payments or service payments under paragraph 2(b), or
the termination of any Plan, any such agency compensation under paragraph
2(a) or distribution payments or service payments under paragraph 2(b)
shall be in amounts and made in accordance with such change,
discontinuation or termination.
7. (a) In all sales of Portfolio shares to the public you shall act as
agent for your own customer and in no transaction shall you have any
authority to act or hold yourself out as agent for us or any Portfolio, and
nothing in this Agreement, including the use of the word "compensation" or
"payment," shall cause you to be our partner, employee, or agent or give
you any authority to act for us or for any Portfolio. Neither we nor any
Portfolio shall be liable for any of your acts or obligations under this
Agreement.
(b) No person is authorized to make any representations concerning
Portfolio shares except those contained in such Portfolio's then current
prospectus and statement of additional information and in such printed
information subsequently issued to you by us or by the Portfolios as a
supplement to such prospectus and statement of additional information. You
shall rely solely on the representations contained in the appropriate
prospectus and statement of additional information and in the supplemental
information referred to in the preceding sentence. We or the Portfolio
shall bear the expense of qualifying Portfolio shares under the securities
laws of the various states. Any printed information which we shall furnish
you (other than the Portfolios' prospectuses, statements of additional
information, periodic reports and supplemental information) is our sole
responsibility and not the responsibility of the respective Portfolios.
You agree that the Portfolios shall have no liability or responsibility to
you with respect to any such printed information. No sales literature or
advertising material (including material disseminated through radio,
television or other electronic media) concerning Portfolio shares, other
than such printed information, shall be used by you in connection with
making Portfolio shares available without obtaining our prior written
approval. You shall not distribute or make available to investors any
printed information furnished by us which is marked "FOR DEALER USE ONLY"
or which otherwise indicates that it is confidential or not intended to be
distributed to investors.
(c) You will comply with all applicable state and federal laws and with
the rules and regulations of authorized regulatory agencies thereunder.
You will not make available shares of any Portfolio unless such shares are
duly registered under the applicable state and federal statutes and the
rules and regulations thereunder.
8. All orders are subject to acceptance or rejection by us. We reserve the
right in our discretion, without notice, to suspend sales or to withdraw
the offering of Portfolio shares, in whole or in part, or to make a limited
offering of Portfolio shares. This Agreement, with respect to any Plan as
defined under paragraph 2(b) hereof, shall continue in force for one year
from the effective date, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically
subject to termination without penalty at any time if a majority of a
Portfolio's Trustees who are not interested persons of the Portfolio, as
defined in the Investment Company Act of 1940, or a majority of the
outstanding shares of the Portfolio or class thereof, as applicable, vote
to terminate or not to continue such Plan. Either of us may cancel this
Agreement upon telephonic or written notice to the other. Upon telephonic
or written notice to you, we may also change or amend any provision of this
Agreement. Upon telephonic or written notice to you, we or any Portfolio
may change, amend or discontinue any schedule or schedules of compensation
or payments issued by us from time to time and may issue a new or
replacement schedule or schedules of compensation or payments from time to
time. You hereby agree that you shall have no vested interest in any type,
amount or rate of compensation or payment and that you shall have no claim
against us or any Portfolio by virtue of any change or diminution in the
rate or amount of, or discontinuance of, any compensation or payment in
connection with the shares of any Portfolio.
9. You agree, in connection with any Portfolio(s) that offer multiple
classes of shares, (i) to comply with our policies regarding the sale of
classes of shares as provided to you from time to time, and (ii) to
disclose to investors that are eligible to purchase the other class(es) of
such Portfolio(s) (as set forth in the prospectus of the applicable
Portfolio) the availability of such other class(es).
10. Failure of either party to terminate this Agreement upon the occurrence
of any event set forth in this Agreement as a cause for termination shall
not constitute a waiver of the right to terminate this Agreement at a later
time on account of such occurrence.
11. In the event of a dispute, such dispute shall be settled by arbitration
before arbitrators sitting in Boston, Massachusetts in accordance with the
commercial rules then in effect at the National Association of Securities
Dealers, Inc. The arbitrators shall act by majority decision, and their
award may allocate attorneys' fees and arbitration costs between the
parties; such award shall be final and binding between the parties and
judgment thereon may be entered in any court of competent jurisdiction.
12. All communications to us should be sent to us at our offices, 82
Devonshire Street, Mail Zone L12C, Boston, Massachusetts 02109, Attn: Bank
Wholesale Market. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below. This Agreement
shall become binding upon receipt by us in Boston, Massachusetts of a
counterpart hereof duly accepted and signed by you. This Agreement will
terminate automatically in the event of its assignment, as defined in the
Investment Company Act of 1940. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
13. This Agreement supersedes and cancels all previous agreements between
us, whether oral or written.
Very truly yours,
[Signature lines and schedules omitted]
13. This Agreement supersedes and cancels all previous agreements between
us, whether oral or written.
Very truly yours,
FIDELITY DISTRIBUTORS CORPORATION
By__________________________________
Dated:_______________________________
ACCEPTED AND AGREED:
By ___________________________________________________
Authorized Representative
______________________________________________________
Name and Title (Please print or type)
_______________________________________________________
Name of Firm
Address: _______________________________________________________
_______________________________________________________
_______________________________________________________
NOTE: Please return two signed copies of this Agreement to Fidelity
Distributors Corporation. Upon acceptance, one countersigned copy will be
returned to you.
Schedule A to Bank Agency Agreement
THE FIDELITY ADVISOR FUNDS CURRENTLY ARE:
Dated:_______________
Schedule B to Bank Agency Agreement
THE FIDELITY FUNDS ARE:
Dated:__________________
Schedule C to Bank Agency Agreement
PURSUANT TO PARAGRAPH 4 OF THE BANK AGENCY AGREEMENT:
[ ] Boston Financial Data Services, Inc.
[ ] Fidelity Investments Institutional Operations Company
IS HEREBY APPOINTED TO EXECUTE PURCHASE, SALE, TRANSFER, OR REDEMPTION
TRANSACTIONS IN SHARES OF THE FIDELITY ADVISOR FUNDS.
SELLING DEALER AGREEMENT
As the principal underwriter of the shares of the Fidelity Advisor Funds
and the Money Funds (the "Portfolios"), we (Fidelity Distributors
Corporation) agree to sell to you (____________________________) shares of
each of the Portfolios purchased by us as principal from the Portfolios for
resale by you as principal upon the following terms and conditions:
1. As used herein the following terms shall have the meaning hereinafter
set forth (unless a different meaning is plainly required by the context):
(a) "Fidelity Advisor Funds" shall mean the open-end investment
companies, series, or (in the case of companies or series offering multiple
classes of shares) classes of one or more of the foregoing, the shares of
which from time to time shall be offered by us as principal underwriter to
you hereunder and which are designated by us as such by telephonic or
written notice to you. This Agreement shall apply only to such companies,
series or classes so designated and offered and only such companies, series
or classes shall be considered to be Fidelity Advisor Funds.
(b) "Money Fund" shall mean Daily Money Fund, Daily Tax Exempt Money Fund
and any other open-end investment companies, series or (in the case of
companies or series offering multiple classes of shares) classes of one or
more of the foregoing, the shares of which from time to time shall be
offered by us as principal underwriter to you hereunder and which are
designated by us as such by telephonic or written notice to you. This
Agreement shall apply only to such companies, series or classes so
designated and offered and only such companies, series or classes shall be
considered to be Money Funds.
(c) "Portfolio" shall mean any one of the Fidelity Advisor Funds or Money
Funds.
(d) "Money Fund Shareholders" shall mean shareholders of the Money Funds
who have purchased such shares from you or have acquired shares of a Money
Fund by exchange of shares of a Fidelity Advisor Fund or another Money Fund
pursuant to this Agreement.
2. (a) In all resales to the public of shares of the Portfolios sold to
you by us (i) you shall sell at the applicable public offering price giving
effect, where applicable, to cumulative or quantity discounts or other
purchase programs, plans or services described in the then current
prospectus of the Portfolio whose shares are being resold, (ii) you shall
act as dealer, and (iii) your discount or concession, if any, with respect
to the resale shall be as set forth in the applicable schedule of discounts
or concessions issued by us and in effect at the time of the sale by us to
you of such shares or as set forth in the then current prospectus. Such
discount or concession schedules are subject to change or discontinuance by
us or the Portfolios from time to time as set forth in paragraph 7 below.
(b) In the case of a Portfolio which has adopted a plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 (a "Plan"), we may elect
from time to time to make distribution payments or service payments to you
as provided under such Plan. In the case of a Portfolio that has no
currently effective Plan, we or Fidelity Management & Research Company may
elect to make distribution payments or service payments to you from our own
funds. Any such distribution payments or service payments shall be made in
the amount and manner set forth in the applicable schedule of distribution
payments or service payments issued by us and then in effect or as set
forth in the then current prospectus. Such schedule of distribution
payments or service payments may be changed or discontinued by us from time
to time and shall be in effect with respect to a Portfolio which has a Plan
only so long as such Portfolio's Plan remains in effect.
3. (a) The placing of orders with us shall be governed by instructions
which we shall issue from time to time. Payment for shares shall be made
in New York or Boston Clearing House funds in accordance with such
instructions, but in no event to be received by us later than five business
days (as defined in the Portfolio's current prospectus) after our
acceptance of your order. If such payment is not received by us, we
reserve the right, without notice, forthwith to cancel the sale, or, at our
option, to sell the shares ordered back to the issuing Portfolio, in which
latter case we may hold you responsible for any loss, including loss of
profit, suffered by us as a result of your failure to make payment as
aforesaid.
(b) Certificates evidencing Portfolio shares shall be available only upon
request, and only upon payment for Portfolio shares in accordance with
paragraph 3(a) above. A confirmation statement evidencing purchase,
transfer, redemption, repurchase or sale ("Transaction") of Portfolio
shares shall be transmitted to you. Any Transaction in uncertificated
Portfolio shares, shall be effected and evidenced by book-entry on the
records maintained by Boston Financial Data Services, Inc. or such other
entity as we may appoint from time to time upon notice to you
(collectively, "BFDS").
(c) You designate BFDS to execute customers' Transactions in Portfolio
shares sold to you by us in accordance with the terms and provisions of any
account, program, plan or service established or used by your customers and
to confirm each such Transaction to your customers on your behalf, and at
the time of the Transaction you guarantee the legal capacity of your
customers so transacting in such shares and any co-owners of such shares.
(d) You may instruct BFDS to register shares purchased in your name and
account as nominee for your customers, in which event all prospectuses,
proxy statements, periodic reports and other printed material will be sent
to you and all confirmations and other communications to shareholders will
be transmitted to you. You shall be responsible for forwarding such
printed material, confirmations and communications, or the information
contained therein, to all customers for whom you hold such shares as
nominee. However, we or BFDS on behalf of itself or the Portfolios shall
be responsible for the costs associated with your forwarding such printed
material, confirmations and communications and shall reimburse you in full
for such costs. You shall also be responsible for complying with all
reporting and tax withholding requirements with respect to the customers
for whose account you are holding any shares as nominee. With respect to
customers other than such customers, you shall provide us with all
information (including, without limitation, certification of taxpayer
identification numbers and back-up withholding instructions) necessary or
appropriate for us to comply with legal and regulatory reporting
requirements.
(e) You shall be responsible for determining, in accordance with the then
current prospectus, whether, and the extent to which, a contingent deferred
sales charge is applicable to a purchase of shares from a customer for
whose account you are holding such shares as nominee; and you agree to
present immediately to us any contingent deferred sales charge to which
such purchase was subject. You hereby represent that if you hold shares
subject to such a charge, you have the capability to track and account for
such charge; and we reserve the right, at our discretion, to verify that
capability through inspection of your tracking and accounting system or
otherwise.
4. Upon request, we will furnish you a reasonable number of copies of the
then current prospectus and statement of additional information of each of
the Portfolios and the printed information referred to in paragraph 6 below
issued as supplements thereto.
5. (a) You represent that you are and will remain a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"),
and agree to abide by all of its rules and regulations including its Rules
of Fair Practice. Reference is hereby specifically made to Section 26,
Article III, of the Rules of Fair Practice of the NASD, which is
incorporated herein as if set forth in full. The termination of your
membership in the NASD or any violation of said Section 26 will immediately
and automatically terminate this Agreement.
(b) We shall not purchase Portfolio shares from the Portfolio except for
the purpose of covering purchase orders already received by us, and you
shall not purchase Portfolio shares from us other than for investment
except for the purpose of covering purchase orders already received by you.
(c) You shall not withhold placing customers' orders for Portfolio shares
so as to profit yourself as a result of such withholding, e.g., by virtue
of a change in the Portfolio's net asset value per share from that used in
determining the offering price to your customers.
(d) We shall not accept a conditional order for Portfolio shares on any
basis other than at a definite specified price.
(e) If, within seven business days after confirmation by us of your
original purchase order for shares of a Fidelity Advisor Fund, such shares
are repurchased by the issuing Fidelity Advisor Fund or by us for the
account of such Fidelity Advisor Fund or are tendered for redemption by the
customer, (i) you shall forthwith refund to us the full discount retained
by, or concession paid to, you on the original sale pursuant to paragraph
2(a) above and any distribution payments or service payments made to you
pursuant to paragraph 2(b) above and (ii) we shall forthwith pay to such
Fidelity Advisor Fund our share of any sales charge on the original sale by
us, and shall also pay such Fidelity Advisor Fund the refund received under
clause (i) when we receive it. You shall refund to the Fidelity Advisor
Fund immediately upon receipt the amount of any dividends or distributions
paid to you as nominee for your customers with respect to redeemed or
repurchased Fidelity Advisor Fund shares to the extent that the proceeds of
such redemption or repurchase may include the dividends or distributions
payable on such shares. In the case of certificated Fidelity Advisor Fund
shares, you shall be notified by us of such repurchase or redemption within
ten days of the date on which a properly executed share certificate and
stock power together with appropriate supporting papers is delivered to us
or to such Fidelity Advisor Fund; and in the case of uncertificated
Fidelity Advisor Fund shares, you shall be notified by us of such
repurchase or redemption within ten days of such repurchase or redemption.
Delivery to BFDS is delivery to the Fidelity Advisor Fund.
(f) In the event any adjustment in the discount retained by, or
concession paid to, you on any sale under paragraph 2(a) or in the
distribution payments or service payments made to you under paragraph 2(b)
shall result in an overpayment by us of such discount, concession or
payment, you shall forthwith remit such overpayment. The term "adjustment"
as used in the preceding sentence shall not include any changes in amounts
paid to, retained by, or due you caused by a change in or discontinuance of
such discounts, concessions, distribution payments or service payments (as
provided under paragraphs 2(a), 2(b) and 7) prior to the effective date of
such change or discontinuance of discounts, concessions, distribution
payments or service payments. You acknowledge that the foregoing shall in
no way limit our right to change or discontinue such discounts,
concessions, distribution payments or service payments as provided in
paragraphs 2 and 7 hereof, and that, after the effective date of a change
in or discontinuance by us of the discount or concession schedules or
distribution payments or service payments or termination of any Plan, any
such discounts or concessions under paragraph 2(a) or distribution payments
or service payments under paragraph 2(b) shall be in amounts and made in
accordance with such change, discontinuation or termination.
(g) Neither we nor you shall, as principal, purchase Portfolio shares
from a record holder at a price lower than the bid price (net asset value
less any applicable contingent deferred sales charge) next quoted by or for
the issuing Portfolio.
6. (a) In all sales of Portfolio shares to the public you shall act as a
dealer for your own account and in no transaction shall you have any
authority to act or hold yourself out as agent for us, or any Portfolio,
and nothing in this Agreement including the use of the words "discount,"
"concession" or "payment," shall cause you to be our partner, employee, or
agent or give you any authority to act for us or for any Portfolio.
Neither we nor any Portfolio shall be liable for any of your acts or
obligations as a dealer under this Agreement.
(b) No person is authorized to make any representations concerning
Portfolio shares except those contained in such Portfolio's then current
prospectus and statement of additional information and in such printed
information subsequently issued to you by us or by the Portfolios as a
supplement to such prospectus and statement of additional information. In
buying shares from us or selling shares to us hereunder, you shall rely
solely on the representations contained in the appropriate prospectus and
statement of additional information and in the supplemental information
referred to in the preceding sentence. We or the Portfolio shall bear the
expense of qualifying Portfolio shares under the securities laws of the
various states. Any printed information which we shall furnish you (other
than the Portfolios' prospectuses, statements of additional information,
periodic reports and supplemental information) is our sole responsibility
and not the responsibility of the respective Portfolios. You agree that
the Portfolios shall have no liability or responsibility to you with
respect to any such printed information. No sales literature or
advertising material (including material disseminated through radio,
television or other electronic media) concerning Portfolio shares, other
than such printed information, shall be used by you in connection with the
offer or sale of Portfolio shares without obtaining our prior written
approval. You shall not distribute or make available to investors any
printed information furnished by us which is marked "FOR DEALER USE ONLY"
or which otherwise indicates that it is confidential or not intended to be
distributed to investors.
(c) You will comply with all applicable state and federal laws and with
the rules and regulations of authorized regulatory agencies thereunder.
You will not offer shares of any Portfolio for sale unless such shares are
duly registered under the applicable state and federal statutes and the
rules and regulations thereunder.
7. All orders are subject to acceptance or rejection by us. We reserve
the right in our discretion, without notice, to suspend sales or to
withdraw the offering of Portfolio shares, in whole or in part, or to make
a limited offering of Portfolio shares. This Agreement, with respect to
any Plan as defined under paragraph 2(b) hereof, shall continue in force
for one year from the effective date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically subject to termination without penalty at any time if a
majority of a Portfolio's Trustees who are not interested persons of the
Portfolio, as defined in the Investment Company Act of 1940, or a majority
of the outstanding shares of the Portfolio or class thereof, as applicable,
vote to terminate or not to continue such Plan. Either of us may cancel
this Agreement upon telephonic or written notice to the other. Upon
telephonic or written notice to you, we may also change, or amend any
provision of this Agreement. Upon telephonic or written notice to you, we
or any Portfolio may change, amend or discontinue any schedule or schedules
of discounts, concessions, distribution payments or service payments issued
by us from time to time and may issue a new or replacement schedule or
schedules of discounts, concessions, distribution payments or service
payments from time to time. You hereby agree that you shall have no vested
interest in any type, amount or rate of discount, concession, distribution
payment or service payment and that you shall have no claim against us or
any Portfolio by virtue of any change or diminution in the rate or amount
of, or discontinuance of, any discount, concession, distribution payment or
service payment in connection with the shares of any Portfolio.
8. We hereby agree that (a) we will keep the record keeping and
shareholder service operations of the Fidelity Advisor Funds and those of
the Money Funds as they relate to Money Fund Shareholders strictly
segregated from those of any investment companies, other than the Fidelity
Advisor Funds or the Money Funds as herein provided, for which we or one of
our affiliates acts as investment advisor, manager, administrator or
distributor (the "Fidelity Funds"); (b) we will not institute, or allow any
of the Portfolios to institute, any privilege permitting shares of the
Portfolios owned by Fidelity Advisor Fund shareholders or Money Fund
Shareholders to be exchanged for shares of the Fidelity Funds except that
shares of a Fidelity Advisor Fund may be exchanged for shares of another
Fidelity Advisor Fund or Money Fund and Money Fund shares may be exchanged
for Fidelity Advisor Fund shares or for shares of another Money Fund; and
(c) we will not permit any of the Portfolios to solicit, communicate with
or disseminate any written materials to Fidelity Advisor Fund shareholders
or Money Fund Shareholders with respect to shares of any Fidelity Fund or
services offered by us or any of our affiliates, except that we may
communicate (i) with shareholders of the Portfolios about matters relating
to the Portfolios, (ii) with shareholders of any Fidelity Fund who are also
shareholders of the Portfolios to the same extent as other shareholders of
such Fidelity Fund, (iii) with shareholders of the Money Funds who are not
Money Fund Shareholders, and (iv) with shareholders of the Portfolios in
their capacity as members of the general public in connection with
advertising or other communications directed to the general public. The
provisions of this paragraph 8 shall survive the amendment or termination
of this Agreement.
9. You agree, in connection with any Portfolio(s) that offer multiple
classes of shares, (i) to comply with our policies regarding the sale of
classes of shares as provided to you from time to time, and (ii) to
disclose to investors that are eligible to purchase the other class(es) of
such Portfolio(s) (as set forth in the prospectus of the applicable
Portfolio) the availability of such other class(es).
10. Failure of either party to terminate this Agreement upon the
occurrence of any event set forth in this Agreement as a cause for
termination shall not constitute a waiver of the right to terminate this
Agreement at a later time on account of such occurrence.
11. In the event of a dispute, such dispute shall be settled by
arbitration before arbitrators sitting in Boston, Massachusetts in
accordance with the commercial rules then in effect at the National
Association of Securities Dealers, Inc. The arbitrators shall act by
majority decision, and their award may allocate attorneys' fees and
arbitration costs between the parties; such award shall be final and
binding between the parties and judgment thereon may be entered in any
court of competent jurisdiction.
12. All communications to us should be sent to us at our offices, 82
Devonshire Street, Mail Zone L9C, Boston, Massachusetts 02109, Attn: Broker
Dealer Services Group. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below. This Agreement
shall become binding upon receipt by us in Boston, Massachusetts of a
counterpart hereof duly accepted and signed by you. This Agreement will
terminate automatically in the event of its assignment, as defined in the
Investment Company Act of 1940. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
13. This Agreement supersedes and cancels all previous agreements between
us, whether oral or written.
Very truly yours,
Dated:_________________ [Signature lines
and schedules omitted]
By ____________________
ACCEPTED AND AGREED:
___________________________
Firm
By ________________________
Authorized Representative
Address: ____________________
___________________________
___________________________
Schedule A to Selling Dealer Agreement
The Fidelity Advisor Funds currently are:
The Money Funds currently are:
Dated:______________
(right pointer) Text line numbering is not supported. (left pointer)
EXHIBIT D
SELLING DEALER AGREEMENT
(For Bank Related Transactions)
You ________________ are registered as a broker-dealer under the
Securities Exchange Act of 1934 and have executed a written agreement with
a bank or bank affiliate to provide brokerage services to that bank, bank
affiliate and/or their customers. As principal underwriter of the Fidelity
Advisor Funds and the Fidelity Funds (the "Portfolios"), we (Fidelity
Distributors Corporation) agree to sell to you shares of each of the
Portfolios purchased by us as principal from the Portfolios for resale by
you as principal to Bank Clients (as hereinafter defined) upon the
following terms and conditions:
1. As used herein the following terms shall have the meaning hereinafter
set forth (unless a different meaning is plainly required by the context):
(a) "Bank" shall mean a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, or an affiliate of such a
bank, with which you have entered into a written agreement to provide
brokerage services; and "Bank Client" shall mean the customers of such a
Bank.
(b) "Fidelity Advisor Funds" shall mean the open-end investment companies,
series, or (in the case of companies or series offering multiple classes of
shares) classes of one or more of the foregoing, the shares of which from
time to time shall be offered by us as principal underwriter to you
hereunder and which are designated as such on Schedule A, as amended by us
from time to time upon notice to you. This Agreement shall apply only to
such companies, series, or classes so designated and only such companies,
series or classes shall be considered to be Fidelity Advisor Funds.
(c) "Fidelity Funds" shall mean the open-end investment companies, series
or (in the case of companies or series offering multiple classes of shares)
classes of one or more of the foregoing, the shares of which from time to
time shall be offered by us as principal underwriter to you hereunder and
which are designated as such on Schedule B, as amended by us from time to
time upon notice to you. This Agreement shall apply only to such
companies, series, or classes so designated and only such companies, series
or classes shall be considered to be Fidelity Funds.
(d) "Portfolio" shall mean any one of the Fidelity Advisor Funds or
Fidelity Funds.
(e) "Transfer Agent" shall mean (i) with respect to the Fidelity Advisor
Funds, the person designated on Schedule C and appointed by you pursuant to
paragraph 4 to provide the services described under such paragraph; and
(ii) with respect to the Fidelity Funds, the transfer agent of such
Fidelity Fund.
2. (a) In all resales to the public of shares of the Portfolios sold to you
by us (i) you shall sell at the applicable public offering price, giving
effect, where applicable, to cumulative or quantity discounts or other
purchase programs, plans or services as described in the then current
prospectus of the Portfolio whose shares are being resold and you shall
transmit payment for such shares in accordance with paragraph 3; (ii) you
shall act as dealer; and (iii) your discount or concession, if any, with
respect to the resale shall be as set forth in the applicable schedule of
discounts or concessions issued by us and in effect at the time of the sale
by us to you of such shares or as set forth in the then current prospectus.
Such discount and concession schedules are subject to change or
discontinuance by us or the Portfolios from time to time as set forth in
paragraph 8 below.
(b) In the case of a Portfolio which has adopted a plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 (a "Plan"), we may elect
from time to time to make distribution payments or service payments to you
under such Plan. In the case of a Portfolio that has no currently
effective Plan, we or Fidelity Management & Research Company may elect to
make distribution payments or service payments to you from our own funds.
Any such distribution payments or service payments shall be made in the
amount and manner set forth in the applicable schedule of distribution
payments or service payments issued by us and then in effect or as set
forth in the then current prospectus. Such schedule of distribution
payments or service payments may be changed or discontinued by us from time
to time and shall be in effect with respect to a Portfolio which has a Plan
only so long as such Portfolio's Plan remains in effect.
(c) Discounts or concessions under paragraph 2(a) and distribution
payments or service payments under paragraph 2(b), shall apply only with
respect to (i) those shares of the Fidelity Funds purchased or maintained
for the account of Bank Clients; and (ii) shares of the Fidelity Advisor
Funds. Anything to the contrary notwithstanding, neither we nor any
Portfolio shall provide to you, nor shall you retain, discounts or
concessions on the resale of shares of, or distribution payments or service
payments with respect to assets of, the Fidelity Funds attributable to you
or any of your clients, other than Bank Clients. In placing a purchase,
sale, transfer or redemption order in shares of the Fidelity Funds with us,
you shall identify the Bank on behalf of whose Clients you are placing the
order; and you shall identify as a non-Bank Client Order, any purchase,
sale, transfer or redemption order in shares of the Fidelity Funds placed
for the account of a non-Bank Client.
3. The placing of orders with us shall be governed by instructions which we
shall issue from time to time. Payment for shares shall be made in New
York or Boston Clearing House funds in accordance with such instructions,
but in no event to be received by us later than five business days (as
defined in the Portfolio's current prospectus) after our acceptance of the
order. If such payment is not received by us, we reserve the right,
without notice, forthwith to cancel the sale or, at our option, to sell the
shares ordered back to the issuing Portfolio, in which latter case we may
hold you responsible for any loss, including loss of profit, suffered by us
as a result of your failure to make payment as aforesaid.
4. (a) The Fidelity Advisor Funds offer you the option of transacting
business with such funds either through the fund's own transfer agent or
through a third party record keeper. You may designate your selection with
respect to the Fidelity Advisor Funds on Schedule C.
(b) You designate the Transfer Agent for each Portfolio to execute your
customers' purchase, sale, transfer, or redemption orders ("Transactions")
in Portfolio shares sold to you by us in accordance with the terms and
provisions of any account, program, plan or service established or used by
your customers and to confirm each such Transaction to your customers on
your behalf on a fully disclosed basis, and at the time of the Transaction,
you guarantee the legal capacity of your customers and any co-owners of
such shares so transacting in such shares.
(c) You may instruct the Transfer Agent to register shares purchased in
your name and account as nominee for your customers, in which event all
prospectuses, proxy statements, periodic reports and other printed material
will be sent to you and all confirmations and other communications to
shareholders will be transmitted to you. You shall be responsible for
forwarding such printed material, confirmations and communications, or the
information contained therein, to all customers for whom you hold such
shares as nominee. However, we or the Transfer Agent on behalf of itself
or the Portfolios shall be responsible for the costs associated with your
forwarding such printed material, confirmations and communications and
shall reimburse you in full for such costs. You shall also be responsible
for complying with all reporting and tax withholding requirements with
respect to the customers for whose account you are holding any shares as
nominee. With respect to customers other than such customers, you shall
provide us with all information (including, without limitation,
certification of taxpayer identification numbers and back-up withholding
instructions) necessary or appropriate for us to comply with legal and
regulatory reporting requirements.
(d) You shall be responsible for determining, in accordance with the then
current prospectus, whether, and the extent to which, a contingent deferred
sales charge is applicable to a purchase of shares from a customer for
whose account you are holding such shares as nominee; and you agree to
present immediately to us any contingent deferred sales charge to which
such purchase was subject. You hereby represent that if you hold shares
subject to such a charge, you have the capability to track and account for
such charge; and we reserve the right, at our discretion, to verify that
capability through inspection of your tracking and accounting system or
otherwise.
5. Upon request, we will furnish you with a reasonable number of copies of
the then current prospectus and statement of additional information of each
of the Portfolios and the printed information referred to in paragraph 7
below issued as supplements thereto.
6. (a) You represent that you are and will remain a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD"), and agree
to abide by all of its rules and regulations including its Rules of Fair
Practice (reference is hereby specifically made to Section 26, Article III,
of the Rules of Fair Practice of the NASD, which is incorporated herein as
if set forth in full). The termination of your membership in the NASD or
any violation of said Section 26 will immediately and automatically
terminate this Agreement.
(b) We shall not purchase Portfolio shares from the Portfolio except for
the purpose of covering purchase orders already received by us, and you
shall not purchase Portfolio shares from us, other than for investment,
except for the purpose of covering purchase orders already received by you.
(c) You shall not withhold placing customers' orders for Portfolio shares
so as to profit yourself as a result of such withholding, e.g., by virtue
of a change in the Portfolio's net asset value per share from that used in
determining the offering price to your customers.
(d) We shall not accept a conditional order for Portfolio shares on any
basis other than at a definite specified price.
(e) If, within seven business days after confirmation by us of your
original purchase order for shares of a Portfolio, such shares are
repurchased by the issuing Portfolio or by us for the account of such
Portfolio or are tendered for redemption by the customer, (i) you shall
forthwith refund to us the full discount retained by, or concession paid
to, you on the original sale pursuant to paragraph 2(a) above and any
distribution payments or service payments made to you pursuant to paragraph
2(b) above and (ii) we shall, as applicable, forthwith pay to such
Portfolio our share of the sales charge on the original sale by us and
shall also pay such Portfolio the refund received under clause (i) when we
receive it. You shall refund to the Portfolio immediately upon receipt the
amount of any dividends or distributions paid to you as nominee for your
customers with respect to Portfolio shares so redeemed or repurchased to
the extent that the proceeds of such redemption or repurchase may include
the dividends or distributions payable on such shares. You shall be
notified by us of such repurchase or redemption within ten days of such
repurchase or redemption.
(f) In the event any adjustment in the discount retained by, or concession
paid to, you on any sale under paragraph 2(a) or in the distribution
payments or service payments made to you under paragraph 2(b) shall result
in an overpayment by us of such discount, concession or payment, you shall
forthwith remit to us such overpayment. The term "adjustment" as used in
the preceding sentence shall not include any changes in amounts paid to,
retained by, or due you caused by a change in, or discontinuance of, such
discounts, concessions, distribution payments or service payments (as
provided under paragraphs 2(a), 2(b) and 8) prior to the effective date of
such change or discontinuance of such discounts, concessions, distribution
payments or service payments. You acknowledge that the foregoing shall in
no way limit our right to change or discontinue such discounts,
concessions, distribution payments or service payments as provided in
paragraphs 2 and 8 hereof, and that, after the effective date of a change
in, or discontinuance by us of the discount or concession schedules or
distribution payments or service payments or the termination of any Plan,
any such discounts or concessions under paragraph 2(a) or distribution
payments or service payments under paragraph 2(b) shall be in amounts and
made in accordance with such change, discontinuation or termination.
(g) Neither we nor you shall, as principal, purchase Portfolio shares from
a record holder at a price lower than the bid price (net asset value less
any applicable contingent deferred sales charge) next quoted by or for the
issuing Portfolio.
7. (a) In all sales of Portfolio shares to the public you shall act as a
dealer for your own account and in no transaction shall you have any
authority to act or hold yourself out as agent for us, or any Portfolio,
and nothing in this Agreement, including the use of the words "discount,"
"concession" or "payment," shall cause you to be our partner, employee, or
agent or give you any authority to act for us or for any Portfolio.
Neither we nor any Portfolio shall be liable for any of your acts or
obligations as a dealer under this Agreement.
(b) No person is authorized to make any representations concerning
Portfolio shares except those contained in such Portfolio's then current
prospectus and statement of additional information and in such printed
information subsequently issued to you by us or by the Portfolios as a
supplement to such prospectus and statement of additional information. In
buying shares from us or selling shares to us hereunder, you shall rely
solely on the representations contained in the appropriate prospectus and
statement of additional information and in the supplemental information
referred to in the preceding sentence. We or the Portfolio shall bear the
expense of qualifying Portfolio shares under the securities laws of the
various states. Any printed information which we shall furnish you (other
than the Portfolios' prospectuses, statements of additional information,
periodic reports and supplemental information) is our sole responsibility
and not the responsibility of the respective Portfolios. You agree that
the Portfolios shall have no liability or responsibility to you with
respect to any such printed information. No sales literature or
advertising material (including material disseminated through radio,
television or other electronic media) concerning Portfolio shares, other
than such printed information, shall be used by you in connection with the
offer or sale of Portfolio shares without obtaining our prior written
approval. You shall not distribute or make available to investors any
printed information furnished by us which is marked "FOR DEALER USE ONLY"
or which otherwise indicates that it is confidential or not intended to be
distributed to investors.
(c) You will comply with all applicable state and federal laws and with
the rules and regulations of authorized regulatory agencies thereunder.
You will not offer shares of any Portfolio for sale unless such shares are
duly registered under the applicable state and federal statutes and the
rules and regulations thereunder.
8. All orders are subject to acceptance or rejection by us. We reserve the
right in our discretion, without notice, to suspend sales or to withdraw
the offering of Portfolio shares, in whole or in part, or to make a limited
offering of Portfolio shares. This Agreement, with respect to any Plan as
defined under paragraph 2(b) hereof, shall continue in force for one year
from the effective date, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically
subject to termination without penalty at any time if a majority of a
Portfolio's Trustees who are not interested persons of the Portfolio, as
defined in the Investment Company Act of 1940, or a majority of the
outstanding shares of the Portfolio or class thereof, as applicable, vote
to terminate or not to continue such Plan. Either of us may cancel this
Agreement upon telephonic or written notice to the other. Upon telephonic
or written notice to you, we may also change or amend any provision of this
Agreement. Upon telephonic or written notice to you, we or any Portfolio
may change, amend or discontinue any schedule or schedules of discounts,
concessions, distribution payments or service payments issued by us from
time to time and may issue a new or replacement schedule or schedules of
discounts, concessions, distribution payments or service payments from time
to time. You hereby agree that you shall have no vested interest in any
type, amount or rate of discount, concession, distribution payment or
service payment and that you shall have no claim against us or any
Portfolio by virtue of any change or diminution in the rate or amount of,
or discontinuance of, any discount, concession, distribution payment or
service payment in connection with the shares of any Portfolio.
9. You agree, in connection with any Portfolio(s) that offer multiple
classes of shares, (i) to comply with our policies regarding the sale of
classes of shares as provided to you from time to time, and (ii) to
disclose to investors that are eligible to purchase the other class(es) of
such Portfolio(s) (as set forth in the prospectus of the applicable
Portfolio) the availability of such other class(es).
10. Failure of either party to terminate this Agreement upon the occurrence
of any event set forth in this Agreement as a cause for termination shall
not constitute a waiver of the right to terminate this Agreement at a later
time on account of such occurrence.
11. In the event of a dispute, such dispute shall be settled by arbitration
before arbitrators sitting in Boston, Massachusetts in accordance with the
commercial rules then in effect at the National Association of Securities
Dealers, Inc. The arbitrators shall act by majority decision, and their
award may allocate attorneys' fees and arbitration costs between the
parties; such award shall be final and binding between the parties and
judgment thereon may be entered in any court of competent jurisdiction.
12. All communications to us should be sent to us at our offices, 82
Devonshire Street, Mail Zone L12C, Boston, Massachusetts 02109, Attn: Bank
Wholesale Market. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below. This Agreement
shall become binding upon receipt by us in Boston, Massachusetts of a
counterpart hereof duly accepted and signed by you. This Agreement will
terminate automatically in the event of its assignment, as defined in the
Investment Company Act of 1940. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
13. This Agreement supersedes and cancels all previous agreements between
us, whether oral or written.
Very truly yours,
[Signature lines and schedules omitted]
FIDELITY DISTRIBUTORS CORPORATION
By__________________________________
Dated:_______________________________
ACCEPTED AND AGREED:
By ___________________________________________________
Authorized Representative
______________________________________________________
Name and Title (Please print or type)
_______________________________________________________
Name of Firm
Address: _______________________________________________________
_______________________________________________________
_______________________________________________________
NOTE: Please return two signed copies of this Agreement to Fidelity
Distributors Corporation. Upon acceptance, one countersigned copy will be
returned to you.
Schedule A to Bank Related Selling Dealer Agreement
THE FIDELITY ADVISOR FUNDS CURRENTLY ARE:
Dated:_______________
Schedule B to Bank Related Selling Dealer Agreement
THE FIDELITY FUNDS ARE:
Dated:________________
Schedule C to Bank Related Selling Dealer Agreement
PURSUANT TO PARAGRAPH 4 OF THE BANK RELATED SELLING DEALER AGREEMENT:
[ ] Boston Financial Data Services, Inc.
[ ] Fidelity Investments Institutional Operations Company
IS HEREBY APPOINTED TO EXECUTE PURCHASE, SALE, TRANSFER, OR REDEMPTION
TRANSACTIONS IN SHARES OF THE FIDELITY ADVISOR FUNDS.
CUSTODIAN AGREEMENT
Dated as of: December 1, 1994
Between
Each of the Investment Companies
Listed on Appendix "A" Attached Hereto
and
The Bank of New York
TABLE OF CONTENTS
ARTICLE
Page
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping 1
2.02 Manner of Holding Securities 1
2.03 Security Purchases 2
2.04 Exchanges of Securities 2
2.05 Sales of Securities 3
2.06 Depositary Receipts 3
2.07 Exercise of Rights; Tender Offers 3
2.08 Stock Dividends, Rights, Etc. 3
2.09 Options 4
2.10 Futures Contracts 4
2.11 Borrowing 4
2.12 Interest Bearing Deposits 5
2.13 Foreign Exchange Transactions 5
2.14 Securities Loans 5
2.15 Collections 6
2.16 Dividends, Distributions and Redemptions 6
2.17 Proceeds from Shares Sold 6
2.18 Proxies, Notices, Etc. 6
2.19 Bills and Other Disbursements 7
2.20 Nondiscretionary Functions 7
2.21 Bank Accounts 7
2.22 Deposit of Fund Assets in Securities Systems 7
2.23 Other Transfers 8
2.24 Establishment of Segregated Account 9
2.25 Custodian's Books and Records . 9
2.26 Opinion of Fund's Independent Certified Public
Accountants 9
2.27 Reports of Independent Certified Public Accountants 10
2.28 Overdraft Facility 10
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 10
3.01 Proper Instructions and Special Instructions 10
3.02 Authorized Persons 11
3.03 Persons Having Access to Assets of the Portfolios 11
3.04 Actions of the Custodian Based on Proper Instructions and
Special Instructions 11
i
IV. SUBCUSTODIANS 11
4.01 Domestic Subcustodians 12
4.02 Foreign Subcustodians and Interim Subcustodians 12
4.03 Special Subcustodians 13
4.04 Termination of a Subcustodian 13
4.05 Certification Regarding Foreign Subcustodians 13
V. STANDARD OF CARE; INDEMNIFICATION 14
5.01 Standard of Care 14
5.02 Liability of Custodian for Actions of Other Persons 15
5.03 Indemnification 15
5.04 Investment Limitations 16
5.05 Fund's Right to Proceed 16
VI. COMPENSATION 17
VII. TERMINATION 17
7.01 Termination of Agreement as to One or More Funds 17
7.02 Termination as to One or More Portfolios 18
VIII. DEFINED TERMS 18
IX. MISCELLANEOUS 19
9.01 Execution of Documents, Etc 19
9.02 Representative Capacity; Nonrecourse Obligations 19
9.03 Several Obligations of the Funds and the Portfolios 19
9.04 Representations and Warranties 19
9.05 Entire Agreement 20
9.06 Waivers and Amendments 20
9.07 Interpretation 20
9.08 Captions 20
9.09 Governing Law 20
9.10 Notices 21
IX. MISCELLANEOUS 21
9.11 Assignment 21
9.12 Counterparts 21
9.13 Confidentiality; Survival of Obligations 21
ii
APPENDICES
Appendix "A" - List of Funds and Portfolios
Appendix "B" - List of Additional Custodians,
Special Subcustodians and Foreign Subcustodians
Appendix "C" - Procedures Relating to
Custodian's Security Interest
iii
CUSTODIAN AGREEMENT
AGREEMENT made as of the 1st day of December, 1994 between each of the
Investment Companies Listed on Appendix "A" hereto, as the same may be
amended from time to time (each a "Fund" and collectively the "Funds") and
The Bank of New York (the "Custodian").
W I T N E S S E T H
WHEREAS, each Fund is or may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio
of cash, securities and other assets (all such existing and additional
series now or hereafter listed on Appendix "A" being hereinafter referred
to individually, as a "Portfolio," and collectively, as the "Portfolios");
and
WHEREAS, each Fund desires to appoint the Custodian as custodian on behalf
of each of its Portfolios in accordance with the provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
and regulations thereunder, under the terms and conditions set forth in
this Agreement, and the Custodian has agreed so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of each of its Portfolios, each Fund hereby employs and appoints
the Custodian as a custodian, subject to the terms and provisions of this
Agreement. Each Fund shall deliver to the Custodian, or shall cause to be
delivered to the Custodian, cash, securities and other assets owned by each
of its Portfolios from time to time during the term of this Agreement and
shall specify to which of its Portfolios such cash, securities and other
assets are to be specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article
IV hereof, the Custodian may appoint one or more Subcustodians (as
hereinafter defined) to exercise the powers and perform the duties of the
Custodian set forth in this Article II and references to the Custodian in
this Article II shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash,
securities and other assets of each Fund's Portfolios delivered to the
Custodian and, on behalf of such Portfolios, the Custodian shall, from time
to time, accept delivery of cash, securities and other assets for
safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of each Fund's
Portfolios either: (i) by physical possession of the share certificates or
other instruments representing such securities in registered or bearer
form; or (ii) in book-entry form by a Securities System (as hereinafter
defined) in accordance with the provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of each
Portfolio in the name of the Custodian, the Portfolio or a nominee of
either of them, unless specifically directed by Proper Instructions to hold
such registered securities in so-called street name; provided that, in any
event, all such securities and other assets shall be held in an account of
the Custodian containing only assets of a Portfolio, or only assets held by
the Custodian as a fiduciary or custodian for customers; and provided
further, that the records of the Custodian shall indicate at all times the
Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions
(as hereinafter defined), the Custodian shall pay for and receive
securities purchased for the account of a Portfolio, provided that payment
shall be made by the Custodian only upon receipt of the securities: (a) by
the Custodian; (b) by a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) by a Securities System.
Notwithstanding the foregoing, upon receipt of Proper Instructions: (i) in
the case of a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System
that the securities underlying such repurchase agreement have been
transferred by book-entry into the Account (as hereinafter defined)
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the
Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of
time deposits, call account deposits, currency deposits, and other
deposits, foreign exchange transactions, futures contracts or options,
pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; (iii) in the case
of the purchase of securities, the settlement of which occurs outside of
the United States of America, the Custodian may make payment therefor and
receive delivery of such securities in accordance with local custom and
practice generally accepted by Institutional Clients (as hereinafter
defined) in the country in which the settlement occurs, but in all events
subject to the standard of care set forth in Article V hereof; and (iv) in
the case of the purchase of securities in which, in accordance with
standard industry custom and practice generally accepted by Institutional
Clients with respect to such securities, the receipt of such securities and
the payment therefor take place in different countries, the Custodian may
receive delivery of such securities and make payment therefor in accordance
with standard industry custom and practice for such securities generally
accepted by Institutional Clients, but in all events subject to the
standard of care set forth in Article V hereof. For purposes of this
Agreement, an "Institutional Client" shall mean a major commercial bank,
corporation, insurance company, or substantially similar institution,
which, as a substantial part of its business operations, purchases or sells
securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the
account of a Portfolio for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities, and shall deposit any such securities in accordance with the
terms of any reorganization or protective plan. The Custodian shall,
without receiving Proper Instructions: surrender securities in temporary
form for definitive securities; surrender securities for transfer into the
name of the Custodian, a Portfolio or a nominee of either of them, as
permitted by Section 2.02(b); and surrender securities for a different
number of certificates or instruments representing the same number of
shares or same principal amount of indebtedness, provided that the
securities to be issued will be delivered to the Custodian or a nominee of
the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for
the account of a Portfolio, but only against payment therefor in the form
of: (a) cash, certified check, bank cashier's check, bank credit, or bank
wire transfer; (b) credit to the account of the Custodian with a clearing
corporation of a national securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities
System, in accordance with the provisions of Section 2.22 hereof.
Notwithstanding the foregoing: (i) in the case of the sale of securities,
the settlement of which occurs outside of the United States of America,
such securities shall be delivered and paid for in accordance with local
custom and practice generally accepted by Institutional Clients in the
country in which the settlement occurs, but in all events subject to the
standard of care set forth in Article V hereof; (ii) in the case of the
sale of securities in which, in accordance with standard industry custom
and practice generally accepted by Institutional Clients with respect to
such securities, the delivery of such securities and receipt of payment
therefor take place in different countries, the Custodian may deliver such
securities and receive payment therefor in accordance with standard
industry custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of care
set forth in Article V hereof; and (iii) in the case of securities held in
physical form, such securities shall be delivered and paid for in
accordance with "street delivery custom" to a broker or its clearing agent,
against delivery to the Custodian of a receipt for such securities,
provided that the Custodian shall have taken reasonable steps to ensure
prompt collection of the payment for, or the return of, such securities by
the broker or its clearing agent, and provided further that the Custodian
shall not be responsible for the selection of or the failure or inability
to perform of such broker or its clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter referred to, collectively, as "ADRs"),
against a written receipt therefor adequately describing such securities
and written evidence satisfactory to the Custodian that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
securities in the name of the Custodian or a nominee of the Custodian, for
delivery to the Custodian at such place as the Custodian may from time to
time designate. Upon receipt of Proper Instructions, the Custodian shall
surrender ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof, or to the
agent of such issuer or trustee, for the purpose of exercise or sale,
provided that the new securities, cash or other assets, if any, acquired as
a result of such actions are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the
Custodian, or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Proper Instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar rights of
security ownership, and shall promptly notify each applicable Fund of such
action in writing by facsimile transmission or in such other manner as such
Fund and the Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and,
upon receipt of Proper Instructions, take action with respect to the same
as directed in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, a Fund on behalf of any
applicable Portfolio relating to compliance with the rules of the Options
Clearing Corporation or of any registered national securities exchange or
similar organization(s), the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or
writing of an option on a security or securities index by the applicable
Portfolio; (b) deposit and maintain in a segregated account, securities
(either physically or by book-entry in a Securities System), cash or other
assets; and (c) pay, release and/or transfer such securities, cash or other
assets in accordance with notices or other communications evidencing the
expiration, termination or exercise of such options furnished by the
Options Clearing Corporation, the securities or options exchange on which
such options are traded, or such other organization as may be responsible
for handling such option transactions. Each Fund, on behalf of its
applicable Portfolios, and the broker-dealer shall be responsible for the
sufficiency of assets held in any segregated account established in
compliance with applicable margin maintenance requirements and the
performance of other terms of any option contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among
a Fund, on behalf of any applicable Portfolio, the Custodian and any
futures commission merchant (a "Procedural Agreement"), the Custodian
shall: (a) receive and retain confirmations, if any, evidencing the
purchase or sale of a futures contract or an option on a futures contract
by the applicable Portfolio; (b) deposit and maintain in a segregated
account, cash, securities and other assets designated as initial,
maintenance or variation "margin" deposits intended to secure the
applicable Portfolio's performance of its obligations under any futures
contracts purchased or sold or any options on futures contracts written by
the Portfolio, in accordance with the provisions of any Procedural
Agreement designed to comply with the rules of the Commodity Futures
Trading Commission and/or any commodity exchange or contract market (such
as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release assets from and/or transfer assets
into such margin accounts only in accordance with any such Procedural
Agreements. Each Fund, on behalf of its applicable Portfolios, and such
futures commission merchant shall be responsible for the sufficiency of
assets held in the segregated account in compliance with applicable margin
maintenance requirements and the performance of any futures contract or
option on a futures contract in accordance with its terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of a Portfolio to lenders or their
agents, or otherwise establish a segregated account as agreed to by the
applicable Fund on behalf of such Portfolio and the Custodian, as
collateral for borrowings effected by such Portfolio, provided that such
borrowed money is payable by the lender (a) to or upon the Custodian's
order, as Custodian for such Portfolio, and (b) concurrently with delivery
of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of a
Portfolio, the Custodian shall purchase such Interest Bearing Deposits in
the name of the Portfolio with such banks or trust companies (including the
Custodian, any Subcustodian or any subsidiary or affiliate of the
Custodian) (hereinafter referred to as "Banking Institutions") and in such
amounts as the applicable Fund may direct pursuant to Proper Instructions.
Such Interest Bearing Deposits may be denominated in U.S. Dollars or other
currencies, as the applicable Fund on behalf of its Portfolio may determine
and direct pursuant to Proper Instructions. The Custodian shall include in
its records with respect to the assets of each Portfolio appropriate
notation as to the amount and currency of each such Interest Bearing Bank
Deposit, the accepting Banking Institution and all other appropriate
details, and shall retain such forms of advice or receipt evidencing such
account, if any, as may be forwarded to the Custodian by the Banking
Institution. The responsibilities of the Custodian to each Fund for
Interest Bearing Deposits accepted on the Custodian's books in the United
States on behalf of the Fund's Portfolios shall be that of a U.S. bank for
a similar deposit. With respect to Interest Bearing Deposits other than
those accepted on the Custodian's books, (a) the Custodian shall be
responsible for the collection of income as set forth in Section 2.15 and
the transmission of cash and instructions to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or, so long as the Custodian acts in accordance with
Proper Instructions, for the failure of such Banking Institution to pay
upon demand. Upon receipt of Proper Instructions, the Custodian shall take
such reasonable actions as the applicable Fund deems necessary or
appropriate to cause each such Interest Bearing Deposit Account to be
insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other Than as Principal. Upon receipt
of Proper Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for spot and
future delivery on behalf of and for the account of a Portfolio with such
currency brokers or Banking Institutions as the applicable Fund may
determine and direct pursuant to Proper Instructions. The Custodian shall
be responsible for the transmission of cash and instructions to and from
the currency broker or Banking Institution with which the contract or
option is made, the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions and
the maintenance of proper records as set forth in Section 2.25. The
Custodian shall have no duty with respect to the selection of the currency
brokers or Banking Institutions with which a Fund deals on behalf of its
Portfolios or, so long as the Custodian acts in accordance with Proper
Instructions, for the failure of such brokers or Banking Institutions to
comply with the terms of any contract or option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal.
However, if the Custodian has made available to a Fund its services as a
principal in foreign exchange transactions, upon receipt of Proper
Instructions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of a Portfolio of such Fund with
the Custodian as principal. The Custodian shall be responsible for the
selection of the currency brokers or Banking Institutions and the failure
of such currency brokers or Banking Institutions to comply with the terms
of any contract or option.
(c) Payments. Notwithstanding anything to the contrary contained herein,
upon receipt of Proper Instructions the Custodian may, in connection with a
foreign exchange contract, make free outgoing payments of cash in the form
of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue
currency completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by a Portfolio,
deliver securities of such Portfolio to the borrower thereof prior to
receipt of the collateral, if any, for such borrowing; provided that, in
cases of loans of securities secured by cash collateral, the Custodian's
instructions to the Securities System shall require that the Securities
System deliver the securities of the Portfolio to the borrower thereof only
upon receipt of the collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to each Fund with
respect to portfolio securities and other assets of each of such Fund's
Portfolios; (b) promptly credit to the account of each applicable Portfolio
all income and other payments relating to portfolio securities and other
assets held by the Custodian hereunder upon Custodian's receipt of such
income or payments or as otherwise agreed in writing by the Custodian and
the applicable Fund; (c) promptly endorse and deliver any instruments
required to effect such collections; (d) promptly execute ownership and
other certificates and affidavits for all federal, state and foreign tax
purposes in connection with receipt of income, capital gains or other
payments with respect to portfolio securities and other assets of each
applicable Portfolio, or in connection with the purchase, sale or transfer
of such securities or other assets; and (e) promptly file any certificates
or other affidavits for the refund or reclaim of foreign taxes paid, and
promptly notify each applicable Fund of any changes to law, interpretative
rulings or procedures regarding such reclaims, and otherwise use all
available measures customarily used to minimize the imposition of foreign
taxes at source, and promptly inform each applicable Fund of alternative
means of minimizing such taxes of which the Custodian shall become aware
(or with the exercise of reasonable care should have become aware);
provided, however, that with respect to portfolio securities registered in
so-called street name, the Custodian shall use its best efforts to collect
amounts due and payable to each Fund with respect to its Portfolios. The
Custodian shall promptly notify each applicable Fund in writing by
facsimile transmission or in such other manner as each such Fund and the
Custodian may agree in writing if any amount payable with respect to
portfolio securities or other assets of the Portfolios of such Fund(s) is
not received by the Custodian when due. The Custodian shall not be
responsible for the collection of amounts due and payable with respect to
portfolio securities or other assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian
shall promptly release funds or securities: (a) upon receipt of Proper
Instructions, to one or more Distribution Accounts designated by the
applicable Fund or Funds in such Proper Instructions; or (b) upon receipt
of Special Instructions, as otherwise directed by the applicable Fund or
Funds, for the purpose of the payment of dividends or other distributions
to shareholders of each applicable Portfolio, and payment to shareholders
who have requested repurchase or redemption of their shares of the
Portfolio(s) (collectively, the "Shares"). For purposes of this Agreement,
a "Distribution Account" shall mean an account established at a Banking
Institution designated by the applicable Fund on behalf of one or more of
its Portfolios in Special Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from
time to time by the Funds, and shall promptly credit such funds to the
account(s) of the applicable Portfolio(s). The Custodian shall promptly
notify each applicable Fund of Custodian's receipt of cash in payment for
Shares issued by such Fund by facsimile transmission or in such other
manner as the Fund and Custodian may agree in writing. Upon receipt of
Proper Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for Shares in payment for such
investments as may be set forth in such Proper Instructions and at a time
agreed upon between the Custodian and the applicable Fund; and (b) make
federal funds available to the applicable Fund as of specified times agreed
upon from time to time by the applicable Fund and the Custodian, in the
amount of checks received in payment for Shares which are deposited to the
accounts of each applicable Portfolio.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to each
applicable Fund, in the most expeditious manner practicable, all forms of
proxies, all notices of meetings, and any other notices or announcements
affecting or relating to securities owned by one or more of the applicable
Fund's Portfolios that are received by the Custodian, any Subcustodian, or
any nominee of either of them, and, upon receipt of Proper Instructions,
the Custodian shall execute and deliver, or cause such Subcustodian or
nominee to execute and deliver, such proxies or other authorizations as may
be required. Except as directed pursuant to Proper Instructions, neither
the Custodian nor any Subcustodian or nominee shall vote upon any such
securities, or execute any proxy to vote thereon, or give any consent or
take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of each Portfolio.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to
all nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
assets of each Portfolio held by the Custodian, except as otherwise
directed from time to time pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall
open and operate a bank account or accounts (hereinafter referred to
collectively, as "Bank Accounts") on the books of the Custodian or any
Subcustodian provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of a Portfolio,
and shall be subject only to the draft or order of the Custodian; provided
however, that such Bank Accounts in countries other than the United States
may be held in an account of the Custodian containing only assets held by
the Custodian as a fiduciary or custodian for customers, and provided
further, that the records of the Custodian shall indicate at all times the
Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein. Such Bank
Accounts may be denominated in either U.S. Dollars or other currencies.
The responsibilities of the Custodian to each applicable Fund for deposits
accepted on the Custodian's books in the United States shall be that of a
U.S. bank for a similar deposit. The responsibilities of the Custodian to
each applicable Fund for deposits accepted on any Subcustodian's books
shall be governed by the provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of a Portfolio, in the name of the
Custodian or a nominee of the Custodian, at a Banking Institution other
than the Custodian or any Subcustodian, provided that such account(s) shall
be in the name of the Custodian or a nominee of the Custodian, for the
account of a Portfolio, and shall be subject only to the draft or order of
the Custodian; provided however, that such Bank Accounts may be held in an
account of the Custodian containing only assets held by the Custodian as a
fiduciary or custodian for customers, and provided further, that the
records of the Custodian shall indicate at all times the Portfolio or other
customer for which such securities and other assets are held in such
account and the respective interests therein. Such Bank Accounts may be
denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian
shall take such reasonable actions as the applicable Fund deems necessary
or appropriate to cause each deposit account established by the Custodian
pursuant to this Section 2.21 to be insured to the maximum extent possible
by all applicable deposit insurers including, without limitation, the
Federal Deposit Insurance Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by a
Portfolio in: (a) The Depository Trust Company; (b) the Participants Trust
Company; (c) any book-entry system as provided in (i) Subpart O of Treasury
Circular No. 300, 31 CFR 306.115, (ii) Subpart B of Treasury Circular
Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the book-entry
regulations of federal agencies substantially in the form of 31 CFR
306.115; or (d) any other domestic clearing agency registered with the
Securities and Exchange Commission ("SEC") under Section 17A of the
Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository
or clearing agent for the securities or other assets of investment
companies) which acts as a securities depository and the use of which each
applicable Fund has previously approved by Special Instructions (as
hereinafter defined) (each of the foregoing being referred to in this
Agreement as a "Securities System"). Use of a Securities System shall be
in accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder
in a Securities System, provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which Account
shall not contain any assets of the Custodian other than assets held as a
fiduciary, custodian, or otherwise for customers and shall be so designated
on the books and records of the Securities System.
(B) The Securities System shall be obligated to comply with the
Custodian's directions with respect to the securities held in such Account
and shall not be entitled to a lien against the assets in such Account for
extensions of credit to the Custodian other than for payment of the
purchase price of such assets.
(C) Each Fund hereby designates the Custodian as the party in whose name
any securities deposited by the Custodian in the Account are to be
registered.
(D) The books and records of the Custodian shall at all times identify
those securities belonging to each Portfolio which are maintained in a
Securities System.
(E) The Custodian shall pay for securities purchased for the account of a
Portfolio only upon (w) receipt of advice from the Securities System that
such securities have been transferred to the Account of the Custodian, and
(x) the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of such Portfolio. The Custodian
shall transfer securities sold for the account of a Portfolio only upon (y)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account of the Custodian, and (z)
the making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Portfolio. Copies of all
advices from the Securities System relating to transfers of securities for
the account of a Portfolio shall identify such Portfolio and shall be
maintained for such Portfolio by the Custodian. The Custodian shall
deliver to each applicable Fund on the next succeeding business day daily
transaction reports which shall include each day's transactions in the
Securities System for the account of each applicable Portfolio. Such
transaction reports shall be delivered to each applicable Fund or any agent
designated by such Fund pursuant to Proper Instructions, by computer or in
such other manner as such Fund and the Custodian may agree in writing.
(F) The Custodian shall, if requested by a Fund pursuant to Proper
Instructions, provide such Fund with all reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System.
(G) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System (except the federal book-entry system) on
behalf of any Portfolio as promptly as practicable and shall take all
actions reasonably practicable to safeguard the securities of any Portfolio
maintained with such Securities System.
Section 2.23. Other Transfers.
(a) Upon receipt of Proper Instructions, the Custodian shall transfer to
or receive from a third party that has been appointed to serve as an
additional custodian of one or more Portfolios (an "Additional Custodian")
securities, cash and other assets of such Portfolio(s) in accordance with
such Proper Instructions. Each Additional Custodian shall be identified as
such on Appendix B, as the same may be amended from time to time in
accordance with the provisions of Section 9.06(c).
(b) Upon receipt of Special Instructions, the Custodian shall make such
other dispositions of securities, funds or other property of a Portfolio in
a manner or for purposes other than as expressly set forth in this
Agreement, provided that the Special Instructions relating to such
disposition shall include a statement of the purpose for which the delivery
is to be made, the amount of funds and/or securities to be delivered, and
the name of the person or persons to whom delivery is to be made, and shall
otherwise comply with the provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its
books a segregated account or accounts for and on behalf of a Portfolio,
into which account or accounts may be transferred cash and/or securities or
other assets of such Portfolio, including securities maintained by the
Custodian in a Securities System pursuant to Section 2.22 hereof, said
account or accounts to be maintained: (a) for the purposes set forth in
Sections 2.09, 2.10 and 2.11 hereof; (b) for the purposes of compliance by
the Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered investment
companies; or (c) for such other purposes as set forth, from time to time,
in Special Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide
any assistance reasonably requested by a Fund in the preparation of reports
to such Fund's shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete
and accurate records with respect to securities and other assets held for
the accounts of each Portfolio as required by the rules and regulations of
the SEC applicable to investment companies registered under the 1940 Act,
including: (a) journals or other records of original entry containing a
detailed and itemized daily record of all receipts and deliveries of
securities (including certificate and transaction identification numbers,
if any), and all receipts and disbursements of cash; (b) ledgers or other
records reflecting (i) securities in transfer, (ii) securities in physical
possession, (iii) securities borrowed, loaned or collateralizing
obligations of each Portfolio, (iv) monies borrowed and monies loaned
(together with a record of the collateral therefor and substitutions of
such collateral), (v) dividends and interest received, (vi) the amount of
tax withheld by any person in respect of any collection made by the
Custodian or any Subcustodian, and (vii) the amount of reclaims or refunds
for foreign taxes paid; and (c) cancelled checks and bank records related
thereto. The Custodian shall keep such other books and records of each
Fund as such Fund shall reasonably request. All such books and records
maintained by the Custodian shall be maintained in a form acceptable to the
applicable Fund and in compliance with the rules and regulations of the
SEC, including, but not limited to, books and records required to be
maintained by Section 31(a) of the 1940 Act and the rules and regulations
from time to time adopted thereunder. All books and records maintained by
the Custodian pursuant to this Agreement shall at all times be the property
of each applicable Fund and shall be available during normal business hours
for inspection and use by such Fund and its agents, including, without
limitation, its independent certified public accountants. Notwithstanding
the preceding sentence, no Fund shall take any actions or cause the
Custodian to take any actions which would cause, either directly or
indirectly, the Custodian to violate any applicable laws, regulations or
orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as a Fund may request to
obtain from year to year favorable opinions from such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Fund's Form N-1A and
the Fund's Form N-SAR or other periodic reports to the SEC and with respect
to any other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of a Fund, the Custodian shall deliver to such Fund a written
report prepared by the Custodian's independent certified public accountants
with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding cash,
securities and other assets, including cash, securities and other assets
deposited and/or maintained in a Securities System or with a Subcustodian.
Such report shall be of sufficient scope and in sufficient detail as may
reasonably be required by any Fund and as may reasonably be obtained by the
Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of a Portfolio for which there would be, at the close of business on
the date of such payment or transfer, insufficient funds held by the
Custodian on behalf of such Portfolio, the Custodian may, in its
discretion, provide an overdraft (an "Overdraft") to the applicable Fund on
behalf of such Portfolio, in an amount sufficient to allow the completion
of such payment. Any Overdraft provided hereunder: (a) shall be payable
on the next Business Day, unless otherwise agreed by the applicable Fund
and the Custodian; and (b) shall accrue interest from the date of the
Overdraft to the date of payment in full by the applicable Fund on behalf
of the applicable Portfolio at a rate agreed upon in writing, from time to
time, by the Custodian and the applicable Fund. The Custodian and each
Fund acknowledge that the purpose of such Overdrafts is to temporarily
finance the purchase or sale of securities for prompt delivery in
accordance with the terms hereof, or to meet emergency expenses not
reasonably foreseeable by such Fund. The Custodian shall promptly notify
each applicable Fund in writing (an "Overdraft Notice") of any Overdraft by
facsimile transmission or in such other manner as such Fund and the
Custodian may agree in writing. At the request of the Custodian, each
applicable Fund, on behalf of one or more of its Portfolios, shall pledge,
assign and grant to the Custodian a security interest in certain specified
securities of the applicable Portfolio, as security for Overdrafts provided
to such Portfolio, under the terms and conditions set forth in Appendix "C"
attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification
signed or initialed by or on behalf of the applicable Fund by one or more
Authorized Persons (as hereinafter defined); (ii) a telephonic or other
oral communication by one or more Authorized Persons; or (iii) a
communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) by or on behalf
of the applicable Fund by one or more Authorized Persons; provided,
however, that communications of the types described in clauses (ii) and
(iii) above purporting to be given by an Authorized Person shall be
considered Proper Instructions only if the Custodian reasonably believes
such communications to have been given by an Authorized Person with respect
to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the applicable Fund by tested telex or
in writing in the manner set forth in clause (i) above, but the lack of
such confirmation shall in no way affect any action taken by the Custodian
in reliance upon such oral instructions prior to the Custodian's receipt of
such confirmation. Each Fund and the Custodian are hereby authorized to
record any and all telephonic or other oral instructions communicated to
the Custodian. Proper Instructions may relate to specific transactions or
to types or classes of transactions, and may be in the form of standing
instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the applicable Fund or any other
person designated by the Treasurer of such Fund in writing, which
countersignature or confirmation shall be (i) included on the same
instrument containing the Proper Instructions or on a separate instrument
relating thereto, and (ii) delivered by hand, by facsimile transmission, or
in such other manner as the applicable Fund and the Custodian agree in
writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian
at the address and/or telephone, telecopy or telex number agreed upon from
time to time by the Custodian and the applicable Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, each Fund
shall deliver to the Custodian, duly certified as appropriate by a
Treasurer or Assistant Treasurer of such Fund, a certificate setting forth:
(a) the names, titles, signatures and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request,
direction, instruction, certificate or instrument on behalf of such Fund
(collectively, the "Authorized Persons" and individually, an "Authorized
Person"); and (b) the names, titles and signatures of those persons
authorized to issue Special Instructions. Such certificate may be accepted
and relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary. Upon
delivery of a certificate which deletes the name(s) of a person previously
authorized by a Fund to give Proper Instructions or to issue Special
Instructions, such persons shall no longer be considered an Authorized
Person or authorized to issue Special Instructions for that Fund.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of any Fund shall
have physical access to the assets of any Portfolio of that Fund held by
the Custodian nor shall the Custodian deliver any assets of a Portfolio for
delivery to an account of such person; provided, however, that nothing in
this Section 3.03 shall prohibit (a) any Authorized Person from giving
Proper Instructions, or any person authorized to issue Special Instructions
from issuing Special Instructions, so long as such action does not result
in delivery of or access to assets of any Portfolio prohibited by this
Section 3.03; or (b) each Fund's independent certified public accountants
from examining or reviewing the assets of the Portfolios of the Fund held
by the Custodian. Each Fund shall deliver to the Custodian a written
certificate identifying such Authorized Persons, Trustees, officers,
employees and agents of such Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts
in accordance with (a) Proper Instructions or Special Instructions, as the
case may be, and (b) the terms of this Agreement, the Custodian shall not
be responsible for the title, validity or genuineness of any property, or
evidence of title thereof, received by it or delivered by it pursuant to
this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to
act on behalf of a Portfolio. (For purposes of this Agreement, all duly
appointed Domestic Subcustodians, Foreign Subcustodians, Interim
Subcustodians, and Special Subcustodians are hereinafter referred to
collectively, as "Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the
1940 Act meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of one
or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other
functions of the Custodian within the United States (a "Domestic
Subcustodian"); provided, that, the Custodian shall notify each applicable
Fund in writing of the identity and qualifications of any proposed Domestic
Subcustodian at least thirty (30) days prior to appointment of such
Domestic Subcustodian, and such Fund may, in its sole discretion, by
written notice to the Custodian executed by an Authorized Person disapprove
of the appointment of such Domestic Subcustodian. If, following notice by
the Custodian to each applicable Fund regarding appointment of a Domestic
Subcustodian and the expiration of thirty (30) days after the date of such
notice, such Fund shall have failed to notify the Custodian of its
disapproval thereof, the Custodian may, in its discretion, appoint such
proposed Domestic Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time
to time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the
1940 Act and the rules and regulations thereunder or by order of the
Securities and Exchange Commission exempted therefrom, or (ii) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act on behalf of one or more Portfolios as a subcustodian for
purposes of holding cash, securities and other assets of such Portfolios
and performing other functions of the Custodian in countries other than the
United States of America (a "Foreign Subcustodian"); provided, that, prior
to the appointment of any Foreign Subcustodian, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees or
other governing body or entity of each applicable Fund on behalf of its
applicable Portfolio(s) (which approval may be withheld in the sole
discretion of such Board of Trustees or other governing body or entity)
with respect to (i) the identity and qualifications of any proposed Foreign
Subcustodian, (ii) the country or countries in which, and the securities
depositories or clearing agencies, if any, through which, any proposed
Foreign Subcustodian is authorized to hold securities and other assets of
the applicable Portfolio(s), and (iii) the form and terms of the
subcustodian agreement to be entered into between such proposed Foreign
Subcustodian and the Custodian. Each such duly approved Foreign
Subcustodian and the countries where and the securities depositories and
clearing agencies through which they may hold securities and other assets
of the applicable Portfolios shall be listed on Appendix "B" attached
hereto, as it may be amended, from time to time, in accordance with the
provisions of Section 9.05(c) hereof. Each Fund shall be responsible for
informing the Custodian sufficiently in advance of a proposed investment by
one of its Portfolios which is to be held in a country in which no Foreign
Subcustodian is authorized to act, in order that there shall be sufficient
time for the Custodian to effect the appropriate arrangements with a
proposed foreign subcustodian, including obtaining approval as provided in
this Section 4.02(a). The Custodian shall not amend any subcustodian
agreement entered into with a Foreign Subcustodian, or agree to change or
permit any changes thereunder, or waive any rights under such agreement,
which materially affect a Fund's rights or the Foreign Subcustodian's
obligations or duties to a Fund under such agreement, except upon prior
approval pursuant to Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the event
that a Portfolio shall invest in a security or other asset to be held in a
country in which no Foreign Subcustodian is authorized to act, the
Custodian shall promptly notify the applicable Fund in writing by facsimile
transmission or in such other manner as such Fund and Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in
such country; and the Custodian shall, upon receipt of Special
Instructions, appoint any Person designated by the applicable Fund in such
Special Instructions to hold such security or other asset. (Any Person
appointed as a subcustodian pursuant to this Section 4.02(b) is hereinafter
referred to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of one or more Portfolios,
appoint one or more banks, trust companies or other entities designated in
such Special Instructions to act as a subcustodian for purposes of: (i)
effecting third-party repurchase transactions with banks, brokers, dealers
or other entities through the use of a common custodian or subcustodian;
(ii) establishing a joint trading account for the applicable Portfolio(s)
and other registered open-end management investment companies for which
Fidelity Management & Research Company serves as investment adviser,
through which such Portfolios and such other investment companies shall
collectively participate in certain repurchase transactions; (iii)
providing depository and clearing agency services with respect to certain
variable rate demand note securities; and (iv) effecting any other
transactions designated by each applicable Fund in Special Instructions.
(Each such designated subcustodian is hereinafter referred to as a "Special
Subcustodian.") Each such duly appointed Special Subcustodian shall be
listed on Appendix "B" attached hereto, as it may be amended from time to
time in accordance with the provisions of Section 9.05(c) hereof. In
connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in
form and substance approved by each applicable Fund, provided that such
agreement shall in all events comply with the provisions of the 1940 Act
and the rules and regulations thereunder and the terms and provisions of
this Agreement. The Custodian shall not amend any subcustodian agreement
entered into with a Special Subcustodian, or agree to change or permit any
changes thereunder, or waive any rights under such agreement, except upon
prior approval pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use
its best efforts to cause each Interim Subcustodian and Special
Subcustodian to, perform all of its obligations in accordance with the
terms and conditions of the subcustodian agreement between the Custodian
and such Subcustodian. In the event that the Custodian is unable to cause
such Subcustodian to fully perform its obligations thereunder, the
Custodian shall forthwith, upon the receipt of Special Instructions,
terminate such Subcustodian with respect to each applicable Fund and, if
necessary or desirable, appoint a replacement Subcustodian in accordance
with the provisions of Section 4.01 or Section 4.02, as the case may be.
In addition to the foregoing, the Custodian (A) may, at any time in its
discretion, upon written notification to each applicable Fund, terminate
any Domestic Subcustodian, Foreign Subcustodian or Interim Subcustodian,
and (B) shall, upon receipt of Special Instructions, terminate any
Subcustodian with respect to each applicable Fund, in accordance with the
termination provisions under the applicable subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon
request of a Fund, the Custodian shall deliver to such Fund a certificate
stating: (i) the identity of each Foreign Subcustodian then acting on
behalf of the Custodian for such Fund and its Portfolios; (ii) the
countries in which and the securities depositories and clearing agents
through which each such Foreign Subcustodian is then holding cash,
securities and other assets of any Portfolio of such Fund; and (iii) such
other information as may be requested by such Fund to ensure compliance
with Rule 17(f)-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under
this Agreement, and shall be liable to each Fund for all loss, damage and
expense suffered or incurred by such Fund or its Portfolios resulting from
the failure of the Custodian to exercise such reasonable care and
diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, securities depository or securities
system utilized by any such Subcustodian, or any nominee of the Custodian
or any Subcustodian (individually, a "Person") is prevented, forbidden or
delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason
of: (i) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any foreign
country, or political subdivision thereof or of any court of competent
jurisdiction; or (ii) any act of God or war or other similar circumstance
beyond the control of the Custodian, unless, in each case, such delay or
nonperformance is caused by (A) the negligence, misfeasance or misconduct
of the applicable Person, or (B) a malfunction or failure of equipment
operated or utilized by the applicable Person other than a malfunction or
failure beyond such Person's control and which could not reasonably be
anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to any Fund or Portfolio,
(i) the Custodian shall, (ii) the Custodian shall cause any applicable
Domestic Subcustodian or Foreign Subcustodian to, and (iii) the Custodian
shall use its best efforts to cause any applicable Interim Subcustodian or
Special Subcustodian to, use all commercially reasonable efforts and take
all reasonable steps under the circumstances to mitigate the effects of
such event and to avoid continuing harm to the Funds and the Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act
upon advice of counsel on all matters. The Custodian shall be without
liability for any action reasonably taken or omitted in good faith pursuant
to the advice of (i) counsel for the applicable Fund or Funds, or (ii) at
the expense of the Custodian, such other counsel as the applicable Fund(s)
and the Custodian may agree upon; provided, however, with respect to the
performance of any action or omission of any action upon such advice, the
Custodian shall be required to conform to the standard of care set forth in
Section 5.01(a).
(e) Expenses of the Funds. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to each applicable Fund
for all reasonable costs and expenses incurred by such Fund in connection
with any claim by such Fund against the Custodian arising from the
obligations of the Custodian hereunder, including, without limitation, all
reasonable attorneys' fees and expenses incurred by such Fund in asserting
any such claim, and all expenses incurred by such Fund in connection with
any investigations, lawsuits or proceedings relating to such claim;
provided, that such Fund has recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by a Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian's
duties hereunder by reason of the Custodian's reliance upon records that
were maintained for such Fund by entities other than the Custodian prior to
the Custodian's appointment as custodian for such Fund.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall
be liable for the actions or omissions of any Domestic Subcustodian or any
Foreign Subcustodian to the same extent as if such action or omission were
performed by the Custodian itself. In the event of any loss, damage or
expense suffered or incurred by a Fund caused by or resulting from the
actions or omissions of any Domestic Subcustodian or Foreign Subcustodian
for which the Custodian would otherwise be liable, the Custodian shall
promptly reimburse such Fund in the amount of any such loss, damage or
expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary, the Custodian shall not be liable to a Fund for any loss,
damage or expense suffered or incurred by such Fund or any of its
Portfolios resulting from the actions or omissions of an Interim
Subcustodian unless such loss, damage or expense is caused by, or results
from, the negligence, misfeasance or misconduct of the Custodian; provided,
however, in the event of any such loss, damage or expense, the Custodian
shall take all reasonable steps to enforce such rights as it may have
against such Interim Subcustodian to protect the interests of the Funds and
the Portfolios.
(c) Special Subcustodians and Additional Custodians. Notwithstanding the
provisions of Section 5.01 to the contrary and except as otherwise provided
in any subcustodian agreement to which the Custodian, a Fund and any
Special Subcustodian or Additional Custodian are parties, the Custodian
shall not be liable to a Fund for any loss, damage or expense suffered or
incurred by such Fund or any of its Portfolios resulting from the actions
or omissions of a Special Subcustodian or Additional Subcustodian, unless
such loss, damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, that in the
event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against any Special
Subcustodian or Additional Custodian to protect the interests of the Funds
and the Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to a Fund for any loss,
damage or expense suffered or incurred by such Fund or any of its
Portfolios resulting from the use by the Custodian of a Securities System,
unless such loss, damage or expense is caused by, or results from, the
negligence, misfeasance or misconduct of the Custodian; provided, however,
that in the event of any such loss, damage or expense, the Custodian shall
take all reasonable steps to enforce such rights as it may have against the
Securities System to protect the interests of the Funds and the Portfolios.
(e) Reimbursement of Expenses. Each Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian on behalf of such Fund in connection with the fulfillment of its
obligations under this Section 5.02; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, each Fund severally and not jointly agrees to indemnify and
hold harmless the Custodian and its nominees from all loss, damage and
expense (including reasonable attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian on behalf of such Fund in the performance of its duties and
obligations under this Agreement; provided, however, that such indemnity
shall not apply to loss, damage and expense occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian or its nominee.
In addition, each Fund agrees severally and not jointly to indemnify any
Person against any liability incurred by reason of taxes assessed to such
Person, or other loss, damage or expenses incurred by such Person,
resulting from the fact that securities and other property of such Fund's
Portfolios are registered in the name of such Person; provided, however,
that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any
Person.
(b) Notice of Litigation, Right to Prosecute, Etc. No Fund shall be
liable for indemnification under this Section 5.03 unless a Person shall
have promptly notified such Fund in writing of the commencement of any
litigation or proceeding brought against such Person in respect of which
indemnity may be sought under this Section 5.03. With respect to claims in
such litigation or proceedings for which indemnity by a Fund may be sought
and subject to applicable law and the ruling of any court of competent
jurisdiction, such Fund shall be entitled to participate in any such
litigation or proceeding and, after written notice from such Fund to any
Person, such Fund may assume the defense of such litigation or proceeding
with counsel of its choice at its own expense in respect of that portion of
the litigation for which such Fund may be subject to an indemnification
obligation; provided, however, a Person shall be entitled to participate in
(but not control) at its own cost and expense, the defense of any such
litigation or proceeding if such Fund has not acknowledged in writing its
obligation to indemnify the Person with respect to such litigation or
proceeding. If such Fund is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, such Person shall reasonably prosecute such
litigation or proceeding. A Person shall not consent to the entry of any
judgment or enter into any settlement in any such litigation or proceeding
without providing each applicable Fund with adequate notice of any such
settlement or judgment, and without each such Fund's prior written consent.
All Persons shall submit written evidence to each applicable Fund with
respect to any cost or expense for which they are seeking indemnification
in such form and detail as such Fund may reasonably request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duties generally, and more particularly in connection with the purchase,
sale or exchange of securities made by or for a Portfolio, the Custodian
shall not be liable to the applicable Fund and such Fund agrees to
indemnify the Custodian and its nominees, for any loss, damage or expense
suffered or incurred by the Custodian and its nominees arising out of any
violation of any investment or other limitation to which such Fund is
subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, each Fund shall have, at its election upon
reasonable notice to the Custodian, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Custodian's
rights against any Subcustodian, Securities System, or other Person for
loss, damage or expense caused such Fund by such Subcustodian, Securities
System, or other Person, and shall be entitled to enforce the rights of the
Custodian with respect to any claim against such Subcustodian, Securities
System or other Person, which the Custodian may have as a consequence of
any such loss, damage or expense, if and to the extent that such Fund has
not been made whole for any such loss or damage. If the Custodian makes
such Fund whole for any such loss or damage, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian,
Securities System or other Person. Upon such Fund's election to enforce
any rights of the Custodian under this Section 5.05, such Fund shall
reasonably prosecute all actions and proceedings directly relating to the
rights of the Custodian in respect of the loss, damage or expense incurred
by such Fund; provided that, so long as such Fund has acknowledged in
writing its obligation to indemnify the Custodian under Section 5.03 hereof
with respect to such claim, such Fund shall retain the right to settle,
compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by such Fund without the Custodian's
consent and provided further, that if such Fund has not made an
acknowledgement of its obligation to indemnify, such Fund shall not settle,
compromise or terminate any such action or proceeding without the written
consent of the Custodian, which consent shall not be unreasonably withheld
or delayed. The Custodian agrees to cooperate with each Fund and take all
actions reasonably requested by such Fund in connection with such Fund's
enforcement of any rights of the Custodian. Each Fund agrees to reimburse
the Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian on behalf of such Fund in connection with the fulfillment of its
obligations under this Section 5.05; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian.
ARTICLE VI
COMPENSATION
On behalf of each of its Portfolios, each Fund shall compensate the
Custodian in an amount, and at such times, as may be agreed upon in
writing, from time to time, by the Custodian and such Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement as to One or More Funds. With
respect to each Fund, this Agreement shall continue in full force and
effect until the first to occur of: (a) termination by the Custodian by an
instrument in writing delivered or mailed to such Fund, such termination to
take effect not sooner than ninety (90) days after the date of such
delivery; (b) termination by such Fund by an instrument in writing
delivered or mailed to the Custodian, such termination to take effect not
sooner than thirty (30) days after the date of such delivery; or (c)
termination by such Fund by written notice delivered to the Custodian,
based upon such Fund's determination that there is a reasonable basis to
conclude that the Custodian is insolvent or that the financial condition of
the Custodian is deteriorating in any material respect, in which case
termination shall take effect upon the Custodian's receipt of such notice
or at such later time as such Fund shall designate. In the event of
termination pursuant to this Section 7.01 by any Fund (a "Terminating
Fund"), each Terminating Fund shall make payment of all accrued fees and
unreimbursed expenses with respect to such Terminating Fund within a
reasonable time following termination and delivery of a statement to the
Terminating Fund setting forth such fees and expenses. Each Terminating
Fund shall identify in any notice of termination a successor custodian or
custodians to which the cash, securities and other assets of its Portfolios
shall, upon termination of this Agreement with respect to such Terminating
Fund, be delivered. In the event that no written notice designating a
successor custodian shall have been delivered to the Custodian on or before
the date when termination of this Agreement as to a Terminating Fund shall
become effective, the Custodian may deliver to a bank or trust company
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities and other
assets of such Terminating Fund's Portfolios held by the Custodian and all
instruments held by the Custodian relative thereto and all other property
of the Terminating Fund's Portfolios held by the Custodian under this
Agreement. Thereafter, such bank or trust company shall be the successor
of the Custodian with respect to such Terminating Fund under this
Agreement. In the event that securities and other assets of such
Terminating Fund's Portfolios remain in the possession of the Custodian
after the date of termination hereof with respect to such Terminating Fund
owing to failure of the Terminating Fund to appoint a successor custodian,
the Custodian shall be entitled to compensation for its services in
accordance with the fee schedule most recently in effect, for such period
as the Custodian retains possession of such securities and other assets,
and the provisions of this Agreement relating to the duties and obligations
of the Custodian and the Terminating Fund shall remain in full force and
effect. In the event of the appointment of a successor custodian, it is
agreed that the cash, securities and other property owned by a Terminating
Fund and held by the Custodian, any Subcustodian or nominee shall be
delivered to the successor custodian; and the Custodian agrees to cooperate
with such Terminating Fund in the execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
Section 7.02. Termination as to One or More Portfolios. This Agreement
may be terminated as to one or more of a Fund's Portfolios (but less than
all of its Portfolios) by delivery of an amended Appendix "A" deleting such
Portfolios pursuant to Section 9.05(b) hereof, in which case termination as
to such deleted Portfolios shall take effect thirty (30) days after the
date of such delivery. The execution and delivery of an amended Appendix
"A" which deletes one or more Portfolios shall constitute a termination of
this Agreement only with respect to such deleted Portfolio(s), shall be
governed by the preceding provisions of Section 7.01 as to the
identification of a successor custodian and the delivery of cash,
securities and other assets of the Portfolio(s) so deleted, and shall not
affect the obligations of the Custodian and any Fund hereunder with respect
to the other Portfolios set forth in Appendix "A," as amended from time to
time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Additional Custodian 2.23(a)
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Fund Preamble
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
Terminating Fund 7.01
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by each Fund. Upon request, each Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of their
respective obligations to such Fund under this Agreement or any applicable
subcustodian agreement with respect to such Fund, provided that the
exercise by the Custodian or any Subcustodian of any such rights shall in
all events be in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to each applicable Fund or to such
other parties as such Fund(s) may designate in such Proper Instructions,
all such documents, instruments or agreements as may be reasonable and
necessary or desirable in order to effectuate any of the transactions
contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY
OF THE DECLARATION OF TRUST OR OTHER ORGANIZATIONAL DOCUMENT OF EACH FUND
IS ON FILE WITH THE SECRETARY OF THE STATE OF THE FUND'S FORMATION, AND
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT EXECUTED ON BEHALF OF THE
TRUSTEES OF ANY FUND AS INDIVIDUALS, AND THE OBLIGATIONS OF THIS AGREEMENT
ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS, SHAREHOLDERS OR
PARTNERS OF ANY FUND INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND
PROPERTY OF EACH FUND'S RESPECTIVE PORTFOLIOS. THE CUSTODIAN AGREES THAT
NO SHAREHOLDER, TRUSTEE, OFFICER OR PARTNER OF ANY FUND MAY BE HELD
PERSONALLY LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF ANY FUND ARISING
OUT OF THIS AGREEMENT.
Section 9.03. Several Obligations of the Funds and the Portfolios. WITH
RESPECT TO ANY OBLIGATIONS OF A FUND ON BEHALF OF ANY OF ITS PORTFOLIOS
ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE
OBLIGATIONS ARISING UNDER SECTIONS 2.28, 5.03, 5.05 and ARTICLE VI HEREOF,
THE CUSTODIAN SHALL LOOK FOR PAYMENT OR SATISFACTION OF ANY OBLIGATION
SOLELY TO THE ASSETS AND PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION
RELATES AS THOUGH EACH FUND HAD SEPARATELY CONTRACTED WITH THE CUSTODIAN BY
SEPARATE WRITTEN INSTRUMENT WITH RESPECT TO EACH OF ITS PORTFOLIOS.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of Each Fund. Each Fund hereby
severally and not jointly represents and warrants that each of the
following shall be true, correct and complete with respect to each Fund at
all times during the term of this Agreement: (i) the Fund is duly organized
under the laws of its jurisdiction of organization and is registered as an
open-end management investment company under the 1940 Act; and (ii) the
execution, delivery and performance by the Fund of this Agreement are (w)
within its power, (x) have been duly authorized by all necessary action,
and (y) will not (A) contribute to or result in a breach of or default
under or conflict with any existing law, order, regulation or ruling of any
governmental or regulatory agency or authority, or (B) violate any
provision of the Fund's corporate charter, Declaration of Trust or other
organizational document, or bylaws, or any amendment thereof or any
provision of its most recent Prospectus or Statement of Additional
Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants to each Fund that each of the following
shall be true, correct and complete at all times during the term of this
Agreement: (i) the Custodian is duly organized under the laws of its
jurisdiction of organization and qualifies to act as a custodian to
open-end management investment companies under the provisions of the 1940
Act; and (ii) the execution, delivery and performance by the Custodian of
this Agreement are (w) within its power, (x) have been duly authorized by
all necessary action, and (y) will not (A) contribute to or result in a
breach of or default under or conflict with any existing law, order,
regulation or ruling of any governmental or regulatory agency or authority,
or (B) violate any provision of the Custodian's corporate charter, or other
organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the Fund, on the one hand, and the
Custodian, on the other, with respect to the subject matter hereof and
accordingly, supersedes as of the effective date of this Agreement any
custodian agreement heretofore in effect between each Fund and the
Custodian.
Section 9.06. Waivers and Amendments. No provision of this Agreement may
be waived, amended or terminated except by a statement in writing signed by
the party against which enforcement of such waiver, amendment or
termination is sought; provided, however: (a) Appendix "A" listing the
Portfolios of each Fund for which the Custodian serves as custodian may be
amended from time to time to add one or more Portfolios for one or more
Funds, by each applicable Fund's execution and delivery to the Custodian of
an amended Appendix "A", and the execution of such amended Appendix by the
Custodian, in which case such amendment shall take effect immediately upon
execution by the Custodian; (b) Appendix "A" may be amended from time to
time to delete one or more Portfolios (but less than all of the Portfolios)
of one or more of the Funds, by each applicable Fund's execution and
delivery to the Custodian of an amended Appendix "A", in which case such
amendment shall take effect thirty (30) days after such delivery, unless
otherwise agreed by the Custodian and each applicable Fund in writing; (c)
Appendix "B" listing Foreign Subcustodians, Special Subcustodians and
Additional Custodians approved by any Fund may be amended from time to time
to add or delete one or more Foreign Subcustodians, Special Subcustodians
or Additional Custodians for a Fund or Funds by each applicable Fund's
execution and delivery to the Custodian of an amended Appendix "B", in
which case such amendment shall take effect immediately upon execution by
the Custodian; and (d) Appendix "C" setting forth the procedures relating
to the Custodian's security interest with respect to each Fund may be
amended only by an instrument in writing executed by each applicable Fund
and the Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and any Fund may agree in writing from time to
time on such provisions interpretative of or in addition to the provisions
of this Agreement with respect to such Fund as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative
or additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Agreement or affect any other Fund.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the
parties hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may
arise in connection with the custodianship of foreign securities pursuant
to an agreement with a Foreign Subcustodian that is governed by the laws of
the State of New York, the provisions of this Agreement shall be construed
in accordance with and governed by the laws of the State of New York,
provided that in all other instances this Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of
Massachusetts, in each case without giving effect to principles of
conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or
Special Instructions, notices and other writings contemplated by this
Agreement shall be delivered by hand or by facsimile transmission (provided
that in the case of delivery by facsimile transmission, notice shall also
be mailed postage prepaid to the parties at the following addresses:
(a) If to any Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Treasurer of the Fidelity Funds
Telephone: (617) 563-7000
Telefax: (617) 476-4195
(b) If to the Custodian:
The Bank of New York
90 Washington Street, 22nd Floor
New York, New York 10286
Attn: Joseph F. Keenan, Vice President
Telephone: (212) 495-2116
Telefax: (212) 495-2975
or to such other address as a Fund or the Custodian may have designated in
writing to the other.
Section 9.11. Assignment. This Agreement shall be binding on and shall
inure to the benefit of each Fund severally and the Custodian and their
respective successors and assigns, provided that, subject to the provisions
of Section 7.01 hereof, neither the Custodian nor any Fund may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party.
Section 9.12. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original. With respect
to each Fund, this Agreement shall become effective when one or more
counterparts have been signed and delivered by such Fund and the Custodian.
Section 9.13. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions
of this Agreement and all information provided by each party to the other
regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely
for the purpose of rendering services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required to be
disclosed by any bank examiner of the Custodian or any Subcustodian, any
auditor of the parties hereto, by judicial or administrative process or
otherwise by applicable law or regulation. The provisions of this Section
9.13 and Sections 9.01, 9.02, 9.03, 9.09, Section 2.28, Section 3.04,
Section 7.01, Article V and Article VI hereof and any other rights or
obligations incurred or accrued by any party hereto prior to termination of
this Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
Each of the Investment Companies Listed on The Bank of New York
Appendix "A" Attached Hereto, on Behalf
of each of Their Respective Portfolios
By: ______________________ By: _______________________
Name: ______________________ Name: _______________________
Title: ______________________ Title: _______________________
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
The Bank of New York and each of the following Investment Companies
Dated as of December 1, 1994
The following is a list of the Funds and their respective Portfolios for
which the Custodian shall serve under a Custodian Agreement dated as of
December 1, 1994:
Fund Portfolio Effective as of:
Fidelity Advisor Annuity Fund Fidelity Advisor Annuity Government
Investment Fund December 1, 1994
Fidelity Advisor Annuity High Yield Fund December 1, 1994
Fidelity Advisor Series II Fidelity Advisor Government Investment Fund
December 1, 1994
Fidelity Advisor High Yield Fund December 1, 1994
Fidelity Advisor Short Fixed-Income Fund December 1, 1994
Fidelity Advisor IV Fidelity Advisor Limited Term Bond Fund December 1,
1994
Fidelity Institutional Short-Intermediate Government Portfolio December 1,
1994
Fidelity Real Estate High Income Fund December 1, 1994
Fidelity Advisor Series VIII Fidelity Advisor Strategic Income Fund
December 1, 1994
Fidelity Charles Street Trust Fidelity Short-Intermediate Government Fund
December 1, 1994
Spartan Short-Term Income Fund December 1, 1994
Spartan Investment-Grade Bond Fund December 1, 1994
Fidelity Commonwealth Trust Fidelity Intermediate Bond Fund December 1,
1994
Fidelity Devonshire Trust Spartan Long-Term Government Bond Fund December
1, 1994
Spartan Adjustable Rate Government Fund December 1, 1994
Fidelity Fixed-Income Trust Fidelity Short-Term Bond Portfolio December 1,
1994
Fidelity Investment Grade Bond Fund December 1, 1994
Spartan Government Income Fund December 1, 1994
Spartan High Income Fund December 1, 1994
Spartan Short-Intermediate Government Fund December 1, 1994
Fidelity Government Securities Fund Fidelity Government Securities Fund
December 1, 1994
Fidelity Hereford Street Trust Spartan Money Market Fund December 1, 1994
Fidelity Income Fund Fidelity Ginnie Mae Portfolio December 1, 1994
Fidelity Mortgage Securities Portfolio December 1, 1994
Spartan Limited Maturity Government Fund December 1, 1994
Fidelity Institutional Cash Portfolios U.S. Treasury Portfolio II December
1, 1994
Fidelity Institutional Trust Fidelity U.S. Bond Index Portfolio December 1,
1994
Fidelity Phillips Street Trust Fidelity Cash Reserves December 1, 1994
Fidelity School Street Trust Spartan Bond Strategist December 1, 1994
Fidelity Select Portfolios Money Market Portfolio December 1, 1994
Fidelity Summer Street Trust Fidelity Capital & Income Fund December 1,
1994
Fidelity Union Street Trust Spartan Ginnie Mae Fund December 1, 1994
Fidelity Union Street Trust II Fidelity Daily Income Trust December 1,
1994
Spartan World Money Market Fund December 1, 1994
Variable Insurance Products Fund High Income Portfolio December 1, 1994
Variable Insurance Products Fund II Investment Grade Bond Portfolio
December 1, 1994
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to
be executed in its name and behalf as of the day and year first set forth
opposite each such Portfolio.
Each of the Investment Companies The Bank of New York
listed on this Appendix "A", on behalf
of each of their respective Portfolios
By: ________________________ By: ________________________
Name: ________________________ Name: ________________________
Title: ________________________ Title: ________________________
Appendix "B"
To
Custodian Agreement
Between
The Bank of new York and Each of the Investment
Companies Listed on Appendix "A" thereto
Dated as of December 15, 1994
The following is a list of Additional Custodians, Special Subcustodians
and Foreign Subcustodians under the Custodian Agreement dated as of
December 1, 1994 (the "Custodian Agreement"):
A. Additional Custodians
CUSTODIAN PURPOSE
None
B. Special Subcustodians:
SUBCUSTODIAN PURPOSE
Morgan Guaranty Trust Co. of New York FICASH
Chemical Bank, N.A. Third Party Repurchase Agreements*
* Chemical Bank, N.A. will act as Special Subcustodian with respect to
third party repurchase agreements for the
following Portfolios only;
FUND PORTFOLIO
Fidelity Institutional Cash Portfolios U.S. Treasury Portfolio II
Fidelity Hereford Street Trust Spartan Money Market Fund
Fidelity Select Portfolios Money Market Portfolio
Fidelity Union Street Trust II Fidelity Daily Income Trust
Spartan World Money Market Fund
Fidelity Phillips Street Trust Fidelity Cash Reserves
C. Foreign Subcustodians:
COUNTRY FOREIGN SUBCUSTODIAN DEPOSITORY
Argentina First National Bank of Boston, Buenos Aires Caja de Valores,
S.A.
Australia Australia and New Zealand Banking Austraclear Limited
Group Ltd. (ANZ), Melbourne
The Reserve Bank Information and
Transfer System (RITS)
Austria GiroCredit Bank AG der Osterreichische Kontrollbank
Osterreichischen Sparkassen (GiroCredit) Aktiengesellschaft (OEKB)
Belgium Banque Bruxelles Lambert Caisse Interprofessionnelle de Depot
et de Virement de Titres (CIK)
Brazil First National Bank of Boston, Sao Paulo Stock Exchange
Sao Paulo (BOVESPA), Sistema Especial de
Liquidacao e Custodia (SELIC)
Rio de Janeiro Exchange (BVRJ);
Camara de Liquidacao e Custodia
S.A (CLC)
Canada Royal Bank of Canada Canadian Depository for Securities,
Ltd. (CDS)
Chile Banco de Chile None
First National Bank of Boston, Santiago
China- Shanghai Standard Chartered Bank, Shanghai Shanghai Securities
Central Clearing
& Registration Corp. (SSCCRC)
China- Shenzhen Standard Chartered Bank, Shenzhen Shenzhen Securities
Registration
Corp. Ltd. (SSRC)
Colombia Cititrust Colombia S.A., Sociedad Fiduciaria, None
Bogota
Denmark Den Danske Bank, Copenhagen Vaerdipapircentralen-VP Center
Finland Union Bank of Finland Ltd., Helsinki None
France Banque Paribas, Paris SICOVAM
Germany Dresdner Bank AG Deutscher Kassenverein AG (DKV)
Greece Alpha Credit Bank, A.E. None
Hong Kong The Hongkong & Shanghai Banking Hong Kong Securities Clearing
Co.,
Corp. Ltd., Hong Kong Ltd. (HKSCC); Central Clearing &
Settlement System (CCASS)
Hungary Citibank Budapest Rt. None
India Hongkong & Shanghai Banking Corp. Ltd., None
Bombay
Indonesia Hongkong & Shanghai Banking Corp. Ltd., None
Jakarta
Ireland Allied Irish Banks, plc., Dublin Gilt Settlement Office (GSO)
Israel Israel Discount Bank None
Italy Banca Commerciale Italiana, Milan Monte Titoli S.p.A.
Citibank, N.A., Milan
Japan Yasuda Trust & Banking Co. Ltd. Japan Securities Depository
Center
(JASDEC)
Malaysia Hongkong Bank Malaysia Berhad Malaysian Central Depository Sdn.
Bhd. (MCD)
Mexico Citibank, N.A., Mexico City Institucion para el Deposito de
Valores- S.D. INDEVAL, S.A. de Banco Nacional de Mexico S.A.,
Mexico, D.F. C.V.
Netherlands ABN-AMRO, Bank N.V., Amsterdam Nederlands Centraal Instituut
voor Giraal Effectenverkeer BV (NECIGEF)/KAS
Associatie, N.V. (KAS)
New Zealand Australia and New Zealand Banking Austraclear Limited (RBNA)
through
Group Ltd. (ANZ) the Reserve Bank of New Zealand
Norway Den norske Bank, Oslo Verdipapirsentralen (VPS)
Pakistan Standard Chartered Bank, Karachi None
Peru Citibank, N.A., Lima Caja de Valores (CAVAL)
Philippines Hongkong & Shanghai Banking Corp. Ltd., None
Manila
Poland Bank Handlowy W. Warszawie, S.A. National Depository of
Securities
Warsaw
Portugal Banco Comercial Portugues, S.A. Central de Valores Mobiliaros
(Interbolsa)
Singapore United Overseas Bank Central Depository Pte Ltd. (CDP)
South Africa Standard Bank of South Africa Ltd., None
Johannesburg
South Korea Bank of Seoul Korean Securities Depository (KSD)
Spain Banco Bilbao Vizcaya Servicio de Compensacio'n y
Liquidacio'n de Valores (SCLV)
Sri Lanka Standard Chartered Bank, Colombo Central Depository System,
(Pvt) Limited (CDS)
Sweden Skandinaviska Enskilda Banken, Stokholm Vardepappercentralen VPC
AB
Switzerland Union Bank of Switzerland, Zurich Schweizerische Effecten-
Giro A. G. (SEGA)
Taiwan Hongkong and Shanghai Banking Corp., Ltd., Taiwan Securities
Central Depository
Taipei Co., Ltd., (TSCD)
Thailand The Siam Commercial Bank Public Company Ltd. Share Depository
Center (SDC)
Transnational CEDEL S.A., Luxembourg
Euroclear Clearance System
Societe Cooperative, Belgium.
Turkey Citibank, N.A., Istanbul Takas ve Saklama A.S., (TvS)
United Kingdom The Bank of New York, London None
Uruguay The First National Bank of Boston, Montevideo None
Venezuela Citibank, N.A., Caracas None
Each of the Investment Companies Listed
on Appendix "A" to the Custodian Agreement,
on Behalf of each of Their Respective Portfolios
By: ___________________________________
Name: ___________________________________
Title: ____________________________________
Appendix "C" to the
Custodian Agreement
Between
Each of the Investment Companies
Listed on Appendix "A" Thereto
And
THE BANK of NEW YORK
Dated as of December 1, 1994
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian Agreement) of
any Portfolio, the applicable Fund, on behalf of such Portfolio, shall
pledge, assign and grant to the Custodian a security interest in Collateral
(as hereinafter defined), under the terms, circumstances and conditions set
forth in this Appendix "C".
Section 1. Defined Terms. As used in this Appendix "C" the following
terms shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which the Custodian is closed for business.
(b) "Collateral" shall mean, with respect to any Portfolio, securities
held by the Custodian on behalf of the Portfolio having a fair market value
(as determined in accordance with the procedures set forth in the
prospectus for the Portfolio) equal to the aggregate of all Overdraft
Obligations of such Portfolio: (i) identified in any Pledge Certificate
executed on behalf of such Portfolio; or (ii) designated by the Custodian
for such Portfolio pursuant to Section 3 of this Appendix C. Such
securities shall consist of marketable securities held by the Custodian on
behalf of such Portfolio or, if no such marketable securities are held by
the Custodian on behalf of such Portfolio, such other securities designated
by the applicable Fund in the applicable Pledge Certificate or by the
Custodian pursuant to Section 3 of this Appendix C.
(c) "Overdraft Obligations" shall mean, with respect to any Portfolio, the
amount of any outstanding Overdraft(s) provided by the Custodian to such
Portfolio together with all accrued interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached to this Appendix "C" as Schedule 1 executed by a duly authorized
officer of the applicable Fund and delivered by such Fund to the Custodian
by facsimile transmission or in such other manner as the applicable Fund
and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form
attached to this Appendix "C" as Schedule 2 executed by a duly authorized
officer of the Custodian and delivered by the Custodian to the applicable
Fund by facsimile transmission or in such other manner as such Fund and the
Custodian may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by
facsimile transmission or in such other manner as the applicable Fund and
the Custodian shall agree in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft
Obligations of a Portfolio are not satisfied by the close of business on
the first Business Day following the Business Day on which the applicable
Fund receives Written Notice requesting security for such Overdraft
Obligation and stating the amount of such Overdraft Obligation, the
applicable Fund, on behalf of such Portfolio, shall pledge, assign and
grant to the Custodian a first priority security interest, by delivering to
the Custodian, a Pledge Certificate executed by such Fund on behalf of such
Portfolio describing the applicable Collateral. Such Written Notice may,
in the discretion of the Custodian, be included within or accompany the
Overdraft Notice relating to the applicable Overdraft Obligations.
Section 3. Failure to Pledge Collateral. In the event that the
applicable Fund shall fail: (a) to pay, on behalf of the applicable
Portfolio, the Overdraft Obligation described in such Written Notice; (b)
to deliver to the Custodian a Pledge Certificate pursuant to Section 2; or
(c) to identify substitute securities pursuant to Section 6 upon the sale
or maturity of any securities identified as Collateral, the Custodian may,
by Written Notice to the applicable Fund specify Collateral which shall
secure the applicable Overdraft Obligation. Such Fund, on behalf of any
applicable Portfolio, hereby pledges, assigns and grants to the Custodian a
first priority security interest in any and all Collateral specified in
such Written Notice; provided that such pledge, assignment and grant of
security shall be deemed to be effective only upon receipt by the
applicable Fund of such Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the
Custodian shall notify a Fund by Written Notice that the fair market value
of the Collateral securing any Overdraft Obligation of one of such Fund's
Portfolios is less than the amount of such Overdraft Obligation, such Fund,
on behalf of the applicable Portfolio, shall deliver to the Custodian,
within one (1) Business Day following the Fund's receipt of such Written
Notice, an additional Pledge Certificate describing additional Collateral.
If such Fund shall fail to deliver such additional Pledge Certificate, the
Custodian may specify Collateral which shall secure the unsecured amount of
the applicable Overdraft Obligation in accordance with Section 3 of this
Appendix C.
Section 5. Release of Collateral. Upon payment by a Fund, on behalf of
one of its Portfolios, of any Overdraft Obligation secured by the pledge of
Collateral, the Custodian shall promptly deliver to such Fund a Release
Certificate pursuant to which the Custodian shall release Collateral from
the lien under the applicable Pledge Certificate or Written Notice pursuant
to Section 3 having a fair market value equal to the amount paid by such
Fund on account of such Overdraft Obligation. In addition, if at any time
a Fund shall notify the Custodian by Written Notice that such Fund desires
that specified Collateral be released and: (a) that the fair market value
of the Collateral securing any Overdraft Obligation shall exceed the amount
of such Overdraft Obligation; or (b) that the Fund has delivered a Pledge
Certificate substituting Collateral for such Overdraft Obligation, the
Custodian shall deliver to such Fund, within one (1) Business Day following
the Custodian's receipt of such Written Notice, a Release Certificate
relating to the Collateral specified in such Written Notice.
Section 6. Substitution of Collateral. A Fund may substitute securities
for any securities identified as Collateral by delivery to the Custodian of
a Pledge Certificate executed by such Fund on behalf of the applicable
Portfolio, indicating the securities pledged as Collateral.
Section 7. Security for Individual Portfolios' Overdraft Obligations.
The pledge of Collateral by a Fund on behalf of any of its individual
Portfolios shall secure only the Overdraft Obligations of such Portfolio.
In no event shall the pledge of Collateral by one of a Fund's Portfolios be
deemed or considered to be security for the Overdraft Obligations of any
other Portfolio of such Fund or of any other Fund.
Section 8. Custodian's Remedies. Upon (a) a Fund's failure to pay any
Overdraft Obligation of an applicable Portfolio within thirty (30) days
after receipt by such Fund of a Written Notice demanding security
therefore, and (b) one (1) Business Day's prior Written Notice to such
Fund, the Custodian may elect to enforce its security interest in the
Collateral securing such Overdraft Obligation, by taking title to (at the
then prevailing fair market value), or selling in a commercially reasonable
manner, so much of the Collateral as shall be required to pay such
Overdraft Obligation in full. Notwithstanding the provisions of any
applicable law, including, without limitation, the Uniform Commercial Code,
the remedy set forth in the preceding sentence shall be the only right or
remedy to which the Custodian is entitled with respect to the pledge and
security interest granted pursuant to any Pledge Certificate or Section 3.
Without limiting the foregoing, the Custodian hereby waives and
relinquishes all contractual and common law rights of set off to which it
may now or hereafter be or become entitled with respect to any obligations
of any Fund to the Custodian arising under this Appendix "C" to the
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to be
executed in its name and behalf on the day and year first above written.
Each of the Investment Companies Listed on The Bank of New York
Schedule "A" to the Custodian Agreement, on
Behalf of Each of Their Respective Portfolios
By: ______________________ By: ______________________
Name: ______________________ Name: ______________________
Title: ______________________ Title: ______________________
SCHEDULE 1
TO
APPENDIX "C"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian Agreement
dated as of [ ] (the "Agreement"), between [ ] (the
"Fund") and [ ] (the "Custodian"). Capitalized terms used herein
without definition shall have the respective meanings ascribed to them in
the Agreement. Pursuant to [Section 2 or Section 4] of Appendix "C"
attached to the Agreement, the Fund, on behalf of [ ] (the
"Portfolio"), hereby pledges, assigns and grants to the Custodian a first
priority security interest in the securities listed on Exhibit "A" attached
to this Pledge Certificate (collectively, the "Pledged Securities"). Upon
delivery of this Pledge Certificate, the Pledged Securities shall
constitute Collateral, and shall secure all Overdraft Obligations of the
Portfolio described in that certain Written Notice dated , 19 ,
delivered by the Custodian to the Fund. The pledge, assignment and grant
of security in the Pledged Securities hereunder shall be subject in all
respect to the terms and conditions of the Agreement, including, without
limitation, Sections 7 and 8 of Appendix "C" attached thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be
executed in its name, on behalf of the Portfolio this day of 19 .
[FUND], on Behalf of [Portfolio]
By: ___________________
Name: ___________________
Title: ___________________
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
SCHEDULE 2
TO
APPENDIX "C"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian Agreement
dated as of [ ] (the "Agreement"), between [ ] (the
"Fund") and [ ] (the "Custodian"). Capitalized terms used herein
without definition shall have the respective meanings ascribed to them in
the Agreement. Pursuant to Section 5 of Appendix "C" attached to the
Agreement, the Custodian hereby releases the securities listed on Exhibit
"A" attached to this Release Certificate from the lien under the [Pledge
Certificate dated ___________, 19 or the Written Notice delivered
pursuant to Section 3 of Appendix "C" dated _________, 19 ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to
be executed in its name and on its behalf this day of 19 .
THE BANK OF NEW YORK
By: _____________________
Name: _____________________
Title: _____________________
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
