SUPPLEMENT TO THE
FIDELITY REAL ESTATE HIGH INCOME FUND
MARCH 30, 1998
PROSPECTUS
The following information replaces similar information on the front
cover:
The fund seeks high current income by investing primarily in real
estate-related instruments, with an emphasis on lower-quality debt
securities.
The following information replaces the first paragraph in the "Who May
Want to Invest" section on page 3:
This non-diversified fund is designed for those who seek high current
income, with some potential for capital growth, from a portfolio of
lower-quality, high-yielding real estate-related securities, including
commercial mortgage-backed and other mortgage-related securities.
Shares of the fund are offered to banks and trust institutions
investing for their own accounts or for accounts of their customers;
retirement plan sponsors; and similar institutional customers. The
fund's level of risk and potential reward depend on the quality and
maturity of its investments. Since the fund invests in commercial
mortgage-backed securities and other mortgage and real estate-related
securities, including lower-quality securities, the fund has the
potential for higher yields but also carries a higher degree of risk.
The fund may be appropriate for aggressive institutional investors who
understand the potential risks and rewards of investing in real
estate-related securities, including lower-quality securities, and who
are willing to accept the greater price movements and credit risks of
these securities.
The following information replaces the first paragraph in the
"Investment Principles and Risks" section beginning on page 7:
REAL ESTATE HIGH INCOME seeks a high level of current income by
investing primarily in real estate-related instruments. As a secondary
objective, the fund also seeks growth of capital.
Under normal market conditions, FMR will invest at least 65% of the
Fund's total assets in commercial and residential mortgage-backed
securities; debt securities of real estate entities; equity securities
of entities whose primary assets are mortgage loans or commercial or
residential mortgage-backed securities; and preferred stock of real
estate investment trusts.
Under normal market conditions, FMR will invest at least 90% of the
Fund's net assets in commercial and residential mortgage-backed
securities; debt securities of real estate entities; equity securities
of entities whose primary assets are mortgage loans or commercial or
residential mortgage-backed securities; preferred stock of real estate
investment trusts; U.S. Government securities; cash equivalents; and
related futures and options.
For purposes of these investment policies, a "real estate entity" is
any company that is primarily engaged in the real estate industry. FMR
considers a company to be primarily engaged in the real estate
industry if at least 50% of its assets, gross income, or net profits
are committed to, or derived from, real estate.
The fund does not currently intend to invest more than 5% of its total
assets in non-U.S. dollar-denominated securities. Additionally, the
fund does not currently intend to invest in any emerging market
securities. For purposes of this latter policy, 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 following information replaces the second-to-last paragraph in the
"Investment Principles and Risks" section on page 8:
The fund's yield and share price change daily and are based on changes
in interest rates, market conditions, other economic and political
news, and on the quality and maturity of its investments. In general,
bond prices rise when interest rates fall, and vice versa. This effect
is usually more pronounced for longer-term securities. Lower-quality
securities offer higher yields, but also carry more risk. FMR may use
various investment techniques to hedge a portion of the fund's risk,
but there is no guarantee that these strategies will work as intended.
When you sell your shares, they may be worth more or less than what
you paid for them.
The following information replaces the third paragraph in the
"Securities and Investment Practices" section on page 8:
Under normal market conditions, the fund will invest primarily in
commercial and residential mortgage-backed securities; debt securities
of real estate entities; equity securities of entities whose primary
assets are mortgage loans or commercial or residential mortgage-backed
securities; and preferred stock of real estate investment trusts. The
fund may also invest in other types of mortgage-backed securities;
collateralized mortgage obligations; regular interests in real estate
mortgage investment conduits ("REMICs"); adjustable rate mortgages;
bank debt; corporate debt securities; a variety of money market
instruments; U.S. Government securities; cash equivalents; and related
futures and options. The fund may invest without limitation in
lower-rated securities and non-rated securities of lower quality. Such
securities are commonly referred to as "junk bonds" and have a greater
risk of default of principal and interest.
The following information replaces similar information in the
"Securities and Investment Practices" section on page 13:
EQUITY SECURITIES may include common stocks and warrants. Common
stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 50% of total assets, the fund may not
purchase more than 10% of the outstanding voting securities of a
single issuer. This limitation does not apply to securities of other
investment companies.
The following information replaces similar information in the
"Securities and Investment Practices" section on page 13:
REAL ESTATE INVESTMENT TRUSTS are entities which either own properties
or make construction or mortgage loans. Equity trusts own real estate
directly, and the value of, and income earned by, the trust depends
upon the income of the underlying properties and the rental income
they earn. Equity trusts may also include operating or finance
companies. Equity trusts can also realize capital gains by selling
properties that have appreciated in value. A mortgage trust can make
construction, development, or long-term mortgage loans, and is
sensitive to the credit quality of the borrower. Mortgage trusts
derive their income from interest payments. Hybrid trusts combine the
characteristics of both equity and mortgage trusts, generally by
holding both ownership interests and mortgage interests in real
estate. The value of real estate investment trusts is also affected by
management skill, cash flow, and tax and regulatory requirements.
The following information supplements the information in the
"Securities and Investment Practices" section on page 15:
OTHER INSTRUMENTS may include convertible securities and preferred
stocks.
The following information replaces the second paragraph in the
"Fundamental Investment Policies and Restrictions" section on page 16:
The fund seeks a high level of current income by investing primarily
in real estate-related instruments. As a secondary objective, the fund
also seeks growth of capital.
SUPPLEMENT TO FIDELITY REAL ESTATE HIGH INCOME FUND:
MARCH 30, 1998
STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION REPLACES THE SECOND, THIRD, AND FOURTH
PARAGRAPHS UNDER THE HEADING "EXPOSURE TO FOREIGN MARKETS" IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION BEGINNING ON PAGE 3.
Foreign investments involve risks relating to local political,
economic, regulatory, or social instability, military action or
unrest, or adverse diplomatic developments, and may be affected by
actions of foreign governments adverse to the interests of U.S.
investors. Such actions may include expropriation or nationalization
of assets, confiscatory taxation, restrictions on U.S. investment or
on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There is no assurance that
FMR will be able to anticipate these potential events or counter their
effects. In addition, the value of securities denominated in foreign
currencies and of dividends and interest paid with respect to such
securities will fluctuate based on the relative strength of the U.S.
dollar.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States.
Foreign markets may offer less protection to investors than U.S.
markets. It is anticipated that in most cases the best available
market for foreign securities will be on an exchange or in
over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and
securities of some foreign issuers (particularly those located in
developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading
practices, including those involving securities settlement where fund
assets may be released prior to receipt of payment, may result in
increased risk in the event of a failed trade or the insolvency of a
foreign broker-dealer, and may involve substantial delays. In
addition, the costs of foreign investing, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
for U.S. investors. In general, there is less overall governmental
supervision and regulation of securities exchanges, brokers, and
listed companies than in the United States. It may also be difficult
to enforce legal rights in foreign countries. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those
applicable to U.S. issuers.
THE FOLLOWING INFORMATION REPLACES THE SECOND PARAGRAPH UNDER THE
HEADING "ILLIQUID INVESTMENTS" IN THE "INVESTMENT POLICIES AND
LIMITATIONS" SECTION ON PAGE 7.
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days, non-government
stripped fixed-rate mortgage-backed securities, and over-the-counter
options. Also, FMR may determine some restricted securities,
government-stripped fixed-rate mortgage-backed securities, loans and
other direct debt instruments, 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.
