SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-84130)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 42 [X]
and
REGISTRATION STATEMENT (No. 811-3759)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 42 [X]
Fidelity Advisor Series VI
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
(X) on (August 30, 1996) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on ( ) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) 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 filed the Notice required by such Rule
on January 18, 1996.
FIDELITY ADVISOR CLASS A, CLASS T, AND CLASS B PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b,c .............................. *
3 a .............................. Financial Highlights
b .............................. *
c .............................. Performance, Appendix
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; 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; Who May Want to Invest
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
FIDELITY ADVISOR FUNDS
CLASS A, CLASS T (FORMERLY 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 August
30 , 1996. 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, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
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- 08 96
GROWTH FUNDS: Classes
Fidelity Advisor Overseas Fund A, T,
B
Fidelity Advisor Mid Cap Fund A, T,
B
Fidelity Advisor Equity Growth Fund A , T
Fidelity Advisor Natural Resources Fund
A, T,
(formerly Advisor Global Resources Fund) B
Fidelity Advisor Growth Opportunities A , T
Fund
Fidelity Advisor Strategic Opportunities A, T,
Fund B
Fidelity Advisor Large Cap Fund A, T,
B
GROWTH AND INCOME FUNDS:
Fidelity Advisor Equity Income Fund A, T,
B
Fidelity Advisor Income & Growth Fund A , T
TAXABLE INCOME FUNDS:
Fidelity Advisor Emerging Markets Income A, T,
Fund B
Fidelity Advisor High Yield Fund A, T,
B
Fidelity Advisor Strategic Income Fund A, T,
B
Fidelity Advisor Government Investment A, T,
Fund B
Fidelity Advisor Intermediate Bond Fund A, T,
B
Fidelity Advisor Short Fixed-Income Fund A , T
MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal A, T,
Fund B
Fidelity Advisor Intermediate Municipal A, T,
Income Fund B
Fidelity Advisor Short-Intermediate A , T
Municipal Income Fund
STATE MUNICIPAL FUNDS:
Fidelity Advisor California Municipal A, T,
Income Fund B
Fidelity Advisor New York Municipal A, T,
Income Fund B
PROSPECTUS
AUGUST 30 , 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
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.
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 ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
APPENDIX A
APPENDIX B
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Class A, Class T and Class B shares are offered to investors
who engage an investment professional for investment advice.
Overseas, Mid Cap, Equity Growth, Natural Resources , Growth
Opportunities, Strategic Opportunities, Large Cap, Equity Income, Income &
Growth, High Yield, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, and Intermediate Municipal Income are
diversified funds.
Emerging Markets Income, Strategic Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income are
non-diversified funds. Non-diversified funds may invest a greater portion
of their assets in securities of individual issuers than diversified funds.
As a result, changes in the market value of a single issuer could cause
greater fluctuations in share value than would occur in a more diversified
fund.
Overseas, Mid Cap, Equity Growth, Natural Resources , Growth
Opportunities, Strategic Opportunities, Large Cap, 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, Mid Cap, Equity Growth, Natural Resources , Growth
Opportunities, Strategic Opportunities, and Large Cap 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. 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 is designed for investors who seek high current
income from a portfolio of U.S. Government securities in a manner
consistent with preserving principal.
Intermediate Bond and Short Fixed-Income are designed for investors who
seek high current income from a portfolio of investment-grade debt
securities consistent with capital preservation.
High Income Municipal, Intermediate Municipal Income, and
Short-Intermediate Municipal Income are designed for investors in higher
tax brackets who seek high current income that is free from federal income
tax. Intermediate Municipal Income and Short-Intermediate Municipal Income
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.
California Municipal Income is designed for investors in higher tax
brackets who seek high current income that is free from federal and
California personal income taxes. New York Municipal Income is designed for
investors in higher tax brackets who seek high current income that is free
from federal and New York State and City personal income taxes.
The value of each fund's investments and, as applicable, the income they
generate, will vary from day to day, and generally reflect 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, Intermediate
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, Natural 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
additional diversification and participate in growth opportunities around
the world.
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.
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio. Class A
and Class T shares have front-end sales charges and pay distribution fees.
Class T shares may be subject to a contingent deferred sales charge (CDSC).
Class B shares do not have a front-end sales charge, but do have a CDSC,
and pay a distribution fee and a shareholder service fee. Institutional
Class shares have no sales charge and do not pay a distribution fee or a
shareholder service fee, but are available only to certain types of
investors. See "Sales Charge Reductions and Waivers," page for
Institutional Class eligibility information.
You may obtain more information about Institutional Class shares, which are
not offered through this prospectus, by calling 1-800-843-3001 or from your
investment professional. Contact your investment professional to discuss
which class is appropriate for you.
In determining which class of shares is the most appropriate for you, you
should consider, among other factors, the length of time you intend to hold
your shares. In general, because of its higher front-end load, Class A
shares have higher costs than Class T for a short holding period and,
because of their lower 12b-1 fees, lower costs than Class T for a longer
holding period. If you are planning to invest a significant amount either
at one time or through a regular investment program, you should consider
the reduced sales charges available on Class A and Class T shares. If you
prefer not to pay a front-end sales charge and plan to hold your shares for
more than three or five years, as applicable, you should consider Class B
shares. While Class B shares are subject to higher ongoing expenses, they
are sold without a front-end sales charge so your entire purchase amount is
immediately invested. However, if you sell your Class B shares within six
years, you will normally pay a CDSC that varies depending on how long you
have held your shares.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell, or
hold shares of a fund. Lower front-end sales charges may be available with
purchases of $50,000 or more. See "Transaction Details," page , for an
explanation of how and when these charges apply.
A CDSC is imposed on Class B shares only if you redeem Class B shares
within three years of purchase for Intermediate Bond and Intermediate
Municipal Income, or within five years of purchase for all other funds. See
"Transaction Details," page , for information about the CDSC.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Clas Clas Class B
s A s T
Maximum sales charge (as a % of offering price) on
purchases of: Overseas, Mid Cap, Equity Growth, 5.25 3.50 None
Natural Resources , Growth Opportunities,
Strategic Opportunities, Large Cap, Equity Income, and % %
Income & Growth (the Equity Funds)
Maximum sales charge (as a % of offering price) on purchases
of: Emerging Markets Income, High 4.25 3.50 None
Yield, Strategic Income, Government Investment, High
Income Municipal, California Municipal % %
Income, and New York Municipal Income (the Bond Funds)
Maximum sales charge (as a % of offering price) on purchases
of: Intermediate Bond and 3.25 2.75 None
Intermediate Municipal Income (the Intermediate-Term Bond Funds) % %
Maximum sales charge (as a % of offering price) on purchases
of: Short-Fixed Income and 1.50 1.50 None
Short-Intermediate Municipal Income (the Short-Term
Bond Funds) % %
Maximum CDSC for all funds that offer Class B shares (except
the Intermediate-Term Bond Funds) None None 4.00%[A]
(as a % of the lesser of original purchase price or
redemption proceeds) [C]
Maximum CDSC for the Intermediate-Term Bond Funds (as a % of
the lesser of original purchase None None 3.00%[B]
price or redemption proceeds) [C]
Maximum sales charge on reinvested distributions None None None
Redemption fee (except Natural Resources) None None None
Redemption fee for Natural Resources on shares held less
than 60 days[D] (as a % of amount 1.00 1.00 1.00%
redeemed). % %
Exchange fee None None None
Annual account maintenance fee $12.0 $12.0 $12.00
(for accounts under $2,500) 0 0
</TABLE>
[A] DECLINES OVER 5 YEARS FROM 4.00% TO 0%.
[B] DECLINES OVER 3 YEARS FROM 3.00% TO 0%.
[C] A CONTINGENT DEFERRED SALES CHARGE OF 0.25% IS ASSESSED ON CERTAIN
REDEMPTIONS OF CLASS T SHARES THAT WERE PURCHASED WITHOUT AN INITIAL
SALES CHARGE. SEE "TRANSACTION DETAILS."
[D] NATURAL RESOURCES WILL CHARGE A REDEMPTION FEE ON SHARES PURCHASED
ON OR AFTER MARCH 1, 1997.
ANNUAL OPERATING EXPENSES are paid out of each fund'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. Each fund also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and financial reports.
12b-1 fees for Class A, Class T and Class B include a distribution
fee and, for Class B, 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's
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. 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 ).
The tables beginning on page are based on estimated or historical
expenses, adjusted for current fees, of each class of each fund, and are
calculated as a percentage of average net assets of the applicable class of
each fund. A portion of the brokerage commissions that certain of the funds
paid was used to reduce other expenses. Including this reduction, total
operating expenses presented in the tables beginning on page for Class
T and Class B would have been:
Class T Class B
Equity Growth 1.39 *
%
Natural Resources 1.54 2.12
% %
Growth Opportunities 1.43 *
%
Strategic Opportunities 1.46 2.10
% %
Equity Income 1.32 1.84
% %
Income & Growth 1.26 *
%
* FUND DOES NOT OFFER CLASS B SHARES.
EQUITY FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
OVERSEAS Management fee 0.81% 0.81 0.81
% %
12b-1 fee (including 0.25% Shareholder 0.25% 0.50 1.00
Service Fee for Class B shares) % %
Other expenses 0.51%
0.44 0.53%[
% A]
Total operating expenses 1.57% 1.75 2.34
% %
MID CAP Management fee 0.61% 0.61 0.61
% %
12b-1 fee (including 0.25% Shareholder 0.25% 0.50 1.00
Service Fee for Class B shares) % %
Other expenses 0.52%[A
] 0.53%[ 0.60%[
A] A]
Total operating expenses 1.38% 1.64 2.21
% %
EQUITY GROWTH Management fee [B] (after fee reduction) 0.61% 0.61 *
%
12b-1 fee (Distribution fee) 0.25% 0.50 *
%
Other expenses 0.33%[A *
] 0.29
%
Total operating expenses 1.19% 1.40 *
%
NATURAL RESOURCES Management fee [C] (after fee reduction) 0.61% 0.61
% 0.61
%
12b-1 fee (including 0.25% Shareholder 0.25% 0.50 1.00
Service Fee for Class B shares) % %
Other expenses 0.57%[A
] 0.45 0.53%[
% A]
Total operating expenses 1.43% 1.56 2.14
% %
GROWTH OPPORTUNITIES Management fee 0.69% 0.69 *
%
12b-1 fee (Distribution fee) 0.25% 0.50 *
%
Other expenses 0.28%[A 0.25 *
] %
Total operating expenses 1.22% 1.44 *
%
STRATEGIC OPPORTUNITIES Management fee 0.62% 0.62 0.62
% %
12b-1 fee (including 0.25% Shareholder 0.25% 0.50 1.00
Service Fee for Class B shares) % %
Other expenses 0.52%[A 0.34 0.49
] % %
Total operating expenses 1.39% 1.46 2.11
% %
LARGE CAP Management fee 0.61% 0.61 0.61
% %
12b-1 fee (including 0.25% Shareholder 0.25% 0.50 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement Class 0.89%[A 0.60
A) ] %[A] 0.67%[
A]
Total operating expenses 1.75% 1.71 2.28
% %
EQUITY INCOME Management fee 0.50% 0.50 0.50
% %
12b-1 fee (including 0.25% Shareholder 0.25% 0.50 1.00
Service Fee for Class B shares) % %
Other expenses 0.35%[A
] 0.33 0.35
% %
Total operating expenses 1.10% 1.33 1.85
% %
INCOME & GROWTH Management fee [D] (after fee reduction) 0.46% 0.46 *
%
12b-1 fee (Distribution fee) 0.25% 0.50 *
%
Other expenses 0.40%[A *
] 0.31
%
Total operating expenses 1.11% 1.27 *
%
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
[B] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.33% TO 0.30%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE 0.64% AND TOTAL OPERATING EXPENSES WOULD BE 1.22% AND
1.43% FOR CLASS A AND CLASS T, RESPECTIVELY .
[C] EFFECTIVE SEPTEMBER 1, 1996, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.45% TO 0.30%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE 0.76% AND TOTAL OPERATING EXPENSES WOULD BE 1.58%, 1.71%, AND
2.29% FOR CLASS A, CLASS T, AND CLASS B, RESPECTIVELY.
[D] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.20% TO 0.15%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE 0.51% AND TOTAL OPERATING EXPENSES WOULD BE 1.16% AND 1.32% FOR
CLASS A AND CLASS T, RESPECTIVELY.
TAXABLE INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
EMERGING MARKETS INCOME Management fee 0.70% 0.70 0.70
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.90
Service Fee for Class B shares) 0.25 %
%
Other expenses (after reimbursement) 0.55%[A
] 0.55 0.55
% %
Total operating expenses 1.40% 1.50 2.15
% %
HIGH YIELD Management fee 0.60% 0.60 0.60
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses 0.37%[A 0.41
] 0.30 %
%
Total operating expenses 1.12% 1.15 1.91
% %
STRATEGIC INCOME Management fee 0.60% 0.60 0.60
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.50%[A
] 0.50 0.50
% %
Total operating expenses 1.25% 1.35 2.00
% %
GOVERNMENT INVESTMENT Management fee 0.45% 0.45 0.45
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.30%[A
] 0.30 0.30
% %
Total operating expenses 0.90% 1.00 1.65
% %
INTERMEDIATE BOND Management fee 0.45% 0.45 0.45
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement Class 0.30%[A
A and Class B) ] 0.30 0.30
% %
Total operating expenses 0.90% 1.00 1.65
% %
SHORT FIXED-INCOME Management fee 0.45% 0.45 *
%
12b-1 fee (Distribution fee) 0.15% 0.15 *
%
Other expenses (after reimbursement Class 0.30%[A *
A) ] 0.29
%
Total operating expenses 0.90% 0.89 *
%
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
HIGH INCOME MUNICIPAL Management fee 0.40% 0.40 0.40
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement Class 0.35%[A 0.35
A and Class B) ] 0.26 %
%
Total operating expenses 0.90% 0.91 1.65
% %
INTERMEDIATE MUNICIPAL INCOME Management fee 0.40% 0.40 0.40
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.35%[A
] 0.35 0.35
% %
Total operating expenses 0.90% 1.00 1.65
% %
SHORT-INTERMEDIATE MUNICIPAL INCOME Management fee 0.40% 0.40 *
%
12b-1 fee (Distribution fee) 0.15% 0.15 *
%
Other expenses (after reimbursement) 0.35%[A *
] 0.35
%
Total operating expenses 0.90% 0.90 *
%
</TABLE>
STATE MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
CALIFORNIA MUNICIPAL INCOME Management fee 0.40% 0.40 0.40
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.35%[A 0.35%[A
] 0.35%[A ]
]
Total operating expenses 0.90% 1.00 1.65
% %
NEW YORK MUNICIPAL INCOME Management fee 0.40% 0.40 0.40
% %
12b-1 fee (including 0.25% Shareholder 0.15% 0.25 0.90
Service Fee for Class B shares) % %
Other expenses (after reimbursement) 0.35%[A
] 0.35%[A 0.35%[A
] ]
Total operating expenses 0.90% 1.00 1.65
% %
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] B ASED 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 full redemption or no
redemption, at the end of each time period:
EQUITY FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Clas Class T Class B Class B
s A
OVERSEAS After 1 year $6 $52 $64[A] $24
8
After 3 $99 $88 $103[A $73
years ]
After 5 $13 $127 $135[A $125
years 4 ]
After 10 $22 $234 $239 $239
years[B] 9
MID CAP After 1 year $66 $51 $62[A] $22
After 3 $94 $85 $99[A] $69
years
EQUITY GROWTH After 1 year $64 $49 * *
After 3 $88 $78 * *
years
After 5 $114 $109 * *
years
After 10 $18 $197 * *
years 9
NATURAL RESOURCES After 1 year $66 $50 $6 2 [A] $2 2
After 3 $95 $8 3 $ 97 [A] $ 67
years
After 5 $12 $11 7 $1 25 [A $1 15
years 7 ]
After 10 $21 $21 4 $ 219 $2 19
years[B] 5
GROWTH OPPORTUNITIES After 1 year $64 $49 * *
After 3 $89 $79 * *
years
After 5 $116 $111 * *
years
After 10 $19 $201 * *
years 2
STRATEGIC OPPORTUNITIES After 1 year $66 $49 $61[A] $21
After 3 $94 $80 $96[A] $66
years
After 5 $12 $112 $123[A $113
years 5 ]
After 10 $211 $204 $212 $212
years[B]
LARGE CAP After 1 year $69 $52 $63[A] $23
After 3 $10 $87 $101[A $71
years 5 ]
EQUITY INCOME After 1 year $63 $48 $59[A] $19
After 3 $86 $76 $88[A] $58
years
After 5 $110 $105 $110[A] $100
years
After 10 $17 $190 $191 $191
years [B] 9
INCOME & GROWTH After 1 year $63 $4 7 * *
After 3 $86 $7 4 * *
years
After 5 $110 $10 2 * *
years
After 10 $18 $18 3 * *
years 1
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS T SHARES
AFTER SIX YEARS.
TAXABLE INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Class Class T Class B Class B
A
EMERGING MARKETS INCOME After 1 year $56 $50 $62[A] $22
After 3 years $85 $81 $97[A] $67
After 5 years $116 $114 $125[A] $115
After 10 $20 $208 $217 $217
years[B] 3
HIGH YIELD After 1 year $53 $46 $59[A] $19
After 3 years $77 $70 $90[A] $60
After 5 years $10 $96 $113[A] $103
2
After 10 $17 $170 $185 $185
years[B] 3
STRATEGIC INCOME After 1 year $55 $48 $60[A] $20
After 3 years $80 $76 $93[A] $63
After 5 years $10 $106 $118[A] $108
8
After 10 $18 $192 $201 $201
years[B] 7
GOVERNMENT INVESTMENT After 1 year $51 $45 $57[A] $17
After 3 years $70 $66 $82[A] $52
After 5 years $90 $88 $100[A] $90
After 10 $14 $153 $162 $162
years[B] 9
INTERMEDIATE BOND After 1 year $41 $37 $47[A] $17
After 3 years $60 $58 $62[A] $52
After 5 $81 $81 $82 $82
years[C]
After 10 $14 $147 $148 $148
years[C] 0
SHORT FIXED-INCOME After 1 year $24 $24 * *
After 3 years $43 $43 * *
After 5 years $64 $64 * *
After 10 $12 $123 * *
years 4
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS T SHARES
AFTER SIX YEARS.
[C] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS T SHARES
AFTER FOUR YEARS.
MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Class Class T Class B Class B
A
HIGH INCOME MUNICIPAL After 1 year $51 $44 $57[A] $17
After 3 $70 $63 $82[A] $52
years
After 5 $90 $84 $100[A $90
years ]
After 10 $14 $143 $158 $158
years[B] 9
INTERMEDIATE MUNICIPAL INCOME After 1 year $41 $37 $47[A] $17
After 3 $60 $58 $62[A] $52
years
After 5 $81 $81 $82 $82
years[C]
After 10 $14 $147 $148 $148
years[C] 0
SHORT-INTERMEDIATE MUNICIPAL INCOME After 1 year $24 $24 * *
After 3 $43 $43 * *
years
After 5 $64 $64 * *
years
After 10 $12 $124 * *
years 4
</TABLE>
STATE MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Class Class T Class B Class B
A
CALIFORNIA MUNICIPAL INCOME After 1 year $ 51 $45 $57 [A] $17
After 3 $ 70 $66 $82[A] $52
years
NEW YORK MUNICIPAL INCOME After 1 year $ 51 $45 $57[A] $17
After 3 $ 70 $66 $82[A] $52
years
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS T SHARES
AFTER SIX YEARS.
[C] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS T SHARES
AFTER FOUR 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, Class T, and Class
B of certain funds to the extent that total operating expenses as a
percentage of their respective average net assets exceed the following
rates:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class Effectiv Class Effecti Class Effecti
A e T ve B ve
Date Date Date
Overseas 2.00 8/30/96 2.25 1/1/96 2.75 10/30/9
% % % 5
Mid Cap 1.75 8/30/96 2.00 2/26/96 2.50 2/26/96
% % %
Natural
Resources 1.75 8/30/96 2.00 8/30 /96 2.5 0 8 /30/9 6
% % %
Large Cap 1.75 8/30/96 2.00 2/26/96 2.50 2/26/96
% % %
Income & Growth 1.50 8/30/96 1.75 1/1/96 * *
% %
Emerging Markets 1.40 8/30/96 1.50 3/10/94 2.15 1/1/96
Income % % %
High Yield 1.25 8/30/96 1.35 7/1/95 2.00 1/1/96
% % %
Strategic Income 1.25 8/30/96 1.35 10/31/9 2.00 1/1/96
% % 4 %
Government 0.90 8/30/96 1.00 7/1/95 1.65 1/1/96
Investment % % %
Intermediate Bond 0.90 8/30/96 1.00 7/1/95 1.65 1/1/96
% % %
Short Fixed-Income 0.90 8/30/96 0.90 8 / 30 /9 6 * *
% %
High Income
Municipal 0.90 8/30/96 1.00 7/1/95 1.65 1/1/96
% % %
Intermediate 0.90 8/30/96 1.00 7/1/95 1.65 1/1/96
Municipal Income % % %
Short-Intermediate
Municipal Income 0.90 8/30/96 0.90 7/1/95 * *
% %
California
Municipal 0.90 8/30/96 1.00 8/1/95 1.65 1/1/96
Income % % %
New York Municipal
Income 0.90 8/30/96 1.00 8/1/95 1.65 1/1/96
% % %
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
If these agreements were not in effect, other expenses and total
operating expenses as a percentage of average net assets would have
been the following amounts:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Other
Expenses Total Operating Expenses
Class Class Class Class Class Class B
A [A] T B A [A] T
Large
Cap[A] 0.96% ** ** 1.82% ** **
Emerging Markets
Income 1.30 0.79 0.94 2.15% 1.74 2.50 % [
% % % % B]
Strategic Income 0.64 0.66 0.70 1.39% 1.51 2.20 %
% % % %
Government 0.72 0.44 1.36 1.32% 1.14 2.50 % [
Investment % % % % B]
Intermediate Bond 0.48 (dagger) 0.98 1.08% (dagger) 2.33 %
% %
Short Fixed-
Income 0.50 (dagger) * 1.10% (dagger) *
%
High Income 0.48 (dagger) 0.67 1.03% (dagger) 1.97 %
Municipal % %
Intermediate 1.00 0.36 1.66 1.55% 1.01 2.50 % [
Municipal Income % % % % B]
Short-
Intermediate 1.29 0.95 * 1.84% 1.50 *
Municipal
Income % % %
California Municipal
Income [A] 2.01 0.38 0.95 2.50%[ 1.03 2.25 %
% % % B] %
New York Municipal
Income [A] 1.95 0.38 0.95 2.50% 1.03 2.25 %
% % % %
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
** TOTAL OPERATING EXPENSES ARE NOT EXPECTED TO EXCEED THE VOLUNTARY
EXPENSE CAPS IN EFFECT DURING THE FISCAL YEAR ENDED 1996.
(dagger) TOTAL OPERATING EXPENSES WERE LESS THAN THE VOLUNTARY EXPENSE CAPS
IN EFFECT DURING THE FISCAL YEAR ENDED 1995.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR .
[B] LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS
LIMITATION, TOTAL OPERATING EXPENSES WOULD BE 2.54%, 2.71%, 2.96%, AND
2.56% FOR EMERGING MARKETS INCOME: CLASS B; GOVERNMENT INVESTMENT: CLASS B;
INTERMEDIATE MUNICIPAL INCOME: CLASS B; CALIFORNIA MUNICIPAL INCOME: CLASS
A, RESPECTIVELY.
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 each fund's Annual Report and have been audited
by Coopers & Lybrand L.L.P. or Price Waterhouse LLP (Overseas only). Their
reports on the financial statements and financial highlights are included
in each fund's 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. The financial highlights information for
the six month period ending April 30, 1996 for Overseas, Natural Resources,
Growth Opportunities, Income & Growth, High Yield, Government Investment,
Short Fixed-Income, High Income Municipal, California Municipal Income and
New York Municipal Income; May 31, 1996 for Mid Cap, Equity Growth, Large
Cap, Equity Income, Intermediate Bond, Intermediate Municipal Income, and
Short-Intermediate Municipal Income; and June 30, 1996 for Strategic
Opportunities, Strategic Income, and Emerging Markets Income , is
unaudited.
OVERSEAS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share
Data and Ratios Class T Class B
Years ended
October 31 1996I 1995 1994F 1993 1992 1991 1990B 1996I/r> 1995G
Net asset value, beginning
of period $ 13.92 $ 14.06 $ 12.93 $ 9.07 $ 9.78 $ 9.55 $ 10.00
$ 13.92 $ 13.89
Income from Investment
Operations
Net investment
income .06 I .07 .01 .03 .05 .14 .05 .00J .01
Net realized and unrealized
gain (loss) 1.39 (.11) 1.14 3.93 (.62) .17 (.50) 1.38 .02
Total from investment
operations 1.45 (.04) 1.15 3.96 (.57) .31 (.45) 1.38 .03
Less
Distributions
From net investment
income (.09) -- -- (.07) (.14) (.07) -- (.19) --
From net realized
gain (.01) (.10) (.02) (.03)D -- (.01)D -- (.01) --
Total
distributions (.10) (.10) (.02) (.10) (.14) (.08) -- (.20) --
Net asset value, end
of period $ 15.27 $ 13.92 $ 14.06 $ 12.93 $ 9.07 $ 9.78 $ 9.55 $ 15.10 $ 13.92
Total returnC 10.47% (.25)% 8.91% 44.13% (5.88)% 3.25% (4.50)% 10.02% .22%
Net assets, end of period
(000 omitted) $ 956,07 $ 741,92 $ 653,77 $ 221,37 $ 18,652 $ 19,091 $ 18,161 $ 13,155 $ 2,999
8 8 4 0
Ratio of expenses to average
net assets 1.71% A 1.90%H 2.12% 2.38% 2.64% 2.85% 3.07%A,E 2.56%A,H 1.97%A,H
Ratio of expenses to average net assets
after 1.70%A,K 1.90% 2.12% 2.38% 2.64% 2.85% 3.07%A 2.56%A 1.97%A
expense reductions
Ratio of net investment income (loss) to
average net .81%A 1.01% .05% (.18)% .48% 1.48% 1.45%A (.05)%A .94%A
assets
Portfolio turnover
rate 86% A 47% 34% 42% 168% 226% 137%A 86%A 47%
Average commission
rateL $.0216 $.0216
</TABLE>
A 1.ANNUALIZED
B 2.APRIL 23, 1990 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1990.
C TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURN WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY
RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
F EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G COMMENCEMENT OF SALE OF CLASS B SHARES JULY 3, 1995.
H FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
I SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
K FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
L FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
EQUITY GROWTH
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T
Years ended November 30 1996L 1995 1994K 1993 1992C
Net asset value, beginning of period $ 39.83 $ 28.52 $ 29.50 $ 26.33 $ 23.78
Income from Investment Operations
Net investment income (loss) .15D .06 .08 (.07)D .01D
Net realized and unrealized gain (loss) 3.72 11.54 .39 3.82 2.54
Total from investment operations 3.87 11.60 .47 3.75 2.55
Less Distributions
From net investment income (.06) (.08) -- (.08) --
From net realized gain (2.08) (.16) (1.45) (.50) --
In excess of net realized gain -- (.05) -- -- --
Total distributions (2.14) (.29) (1.45) (.58) --
Net asset value, end of period $ 41.56 $ 39.83 $ 28.52 $ 29.50 $ 26.33
Total returnE 10.37% 41.11% 1.58% 14.52 10.72
% %
Net assets, end of period $ 2,959,5 $ 2,051,4 $ 874,1 $ 377,8 $ 22,65
(000 omitted) 97 29 72 94 5
Ratio of expenses to average net assets 1.37%A 1.55% 1.71% 1.85% 1.47%A
Ratio of expenses to average net assets after expense reductions 1.37%A 1.54%G 1.70%G 1.84% 1.47%A
Ratio of net investment income .77%A .21% .15% (.24)% .25%A
(loss) to average net assets
Portfolio turnover rate 78%A 97% 137% 160% 240%
Average commission rateN $.0406
</TABLE>
NATURAL RESOURCES (FORMERLY GLOBAL RESOURCES)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Years ended October
31 1996M 1995 1994K 1993 1992 1991J 1990 1989 1988B 1996M 1995C
Net asset value, beginning of
period $ 19.25 $ 17.56 $ 17.59 $ 13.88 $ 14.11 $ 12.30 $ 12.60 $ 11.47 $ 10.00 $ 19.23 $ 18.87
Income from Investment Operations
Net investment income
(loss) (.01)D (.05)D (.11)D .22 (.10) (.15) (.10) .10I (.05) (.10)D (.03)D
Net realized and unrealized
gain 4.95 2.00 .76 4.91 .79 2.45 .93 1.96 1.52 4.92 .39
(loss)
Total from investment operat
ions 4.94 1.95 .65 5.13 .69 2.30 .83 2.06 1.47 4.82 .36
Less Distributions
From net investment
income -- -- -- -- -- -- (.08) -- -- -- --
From net realized
gain (.69) (.26) (.68) (1.42) (.92) (.49) (1.05) (.93) -- (.69) --
Total distribut
ions (.69) (.26) (.68) (1.42) (.92) (.49) (1.13) (.93) -- (.69) --
Net asset value, end of
period $ 23.50 $ 19.25 $ 17.56 $ 17.59 $ 13.88 $ 14.11 $ 12.30 $ 12.60 $ 11.47 $ 23.36 $ 19.23
Total
returnE 26.30% 11.40% 3.97% 41.05% 5.97% 19.50% 6.37% 19.63% 14.70% 25.69% 1.91%
Net assets, end of period
(000 $ 486,43 $ 272,97 $ 199,36 $ 40,309 $ 7,087 $ 5,940 $ 4,615 $ 2,049 $ 916 $ 17,968 $ 2,508
omitted) 2 9 1
Ratio of expenses to average
net 1.69%A 1.86%F 2.10% 2.63% 3.27%H 3.35%H 3.34%H 3.23% 2.85%A 2.56% 2.23%A,
assets A,F F
Ratio of expenses to average
net 1.66% 1.84% 2.07% 2.62% 3.27% 3.35% 3.34% 3.23% 2.85%A 2.56%A 2.21%A,
assets A,G G G G G
after expense reductions
Ratio of net investment income
(loss) (.12)%A (.30)% (.67)% (1.18)% (1.22)% (1.28)% (1.13)% .83% (.64)%A (1.02)%A (.67)%A
to average net assets
Portfolio turnover
rate 160%A 161% 125% 208% 248% 256% 229% 249% 220%A 160%A 161%
Average commission
rateN $.0298 $.0298
</TABLE>
A ANNUALIZED
B DECEMBER 29, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C COMMENCEMENT OF SALE OF EQUITY GROWTH CLASS T SHARES SEPTEMBER 10,
1992; COMMENCEMENT OF SALE OF NATURAL RESOURCES CLASS B SHARES JULY 3,
1995.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD .
E TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
F FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
H EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
I NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.17 PER SHARE.
J AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
K EFFECTIVE DECEMBER 1, 1993 AND NOVEMBER 1, 1993, EQUITY GROWTH AND
NATURAL RESOURCES, RESPECTIVELY, ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
L SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED).
M SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
N FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
GROWTH OPPORTUNITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T
Years ended
October 31 1996H 1995 1994G 1993 1992 1991 1990 1989 1988B
Net asset value,
beginning of period $ 30.89 $ 26.62 $ 25.39 $ 21.14 $ 20.58 $ 12.99 $ 16.53 $ 14.27 $ 10.00
Income from Investment
Operations
Net investment
income .27I .39 .22 .08 .14 .06 .18C .02 .05
Net realized and unrealized
gain (loss) on 2.18 5.31 1.92 5.56 2.04 7.70 (2.50) 3.03 4.22
investments
Total from investment
operations 2.45 5.70 2.14 5.64 2.18 7.76 (2.32) 3.05 4.27
Less Distributions
From net investment
income (.41) (.27) (.07) (.13) (.09) (.17) (.05) (.03) --
From net realized
gain (.40) (1.16) (.84) (1.26) (1.53) -- (1.17) (.76) --
Total distributions (.81) (1.43) (.91) (1.39) (1.62) (.17) (1.22) (.79) --
Net asset value,
end of period $ 32.53 $ 30.89 $ 26.62 $ 25.39 $ 21.14 $ 20.58 $ 12.99 $ 16.53 $ 14.27
Total returnE 8.04% 22.88% 8.71% 28.11% 12.09% 60.25% (15.05) 22.69% 42.70%
%
Net assets, end of
period (000 omitted) $ 12,496,6 $ 9,690,9 $ 4,598,6 $ 2,054,9 $ 580,59 $ 213,09 $ 51,122 $ 34,351 $ 8,097
36 92 68 88 5 5
Ratio of expenses to
average net assets 1.44%A 1.59% 1.63% 1.65% 1.60% 1.73% 2.00% 2.45% 2.52%A,
F
Ratio of expenses to average
net assets after 1.43%A,D 1.58%D 1.62%D 1.64%D 1.60% 1.73% 2.00% 2.45% 2.52%A
expense reductions
Ratio of net investment income to
average net assets 1.75%A 1.56% 1.12% .43% .80% .47% 1.49% .31% .82%A
Portfolio turnover
rate 42%A 39% 43% 69% 94% 142% 136% 163% 143%A
Average commission
rateJ $.0380
</TABLE>
A ANNUALIZED
B NOVEMBER 18, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1988.
C NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $.09 PER SHARE.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
E TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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.
G EFFECTIVE NOVEMBER 1, 1993 THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
H SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
I NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
J FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
LARGE CAP
<TABLE>
<CAPTION>
<S> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Period ended May 31, 1996 1996D 1996D
Net asset value, beginning of period $ 10.00 $ 10.00
Income from Investment Operations
Net investment income (loss) .00C (.01)C
Net realized and unrealized gain (loss) .34 .34
Total from investment operations .34 .33
Net asset value, end of period $ 10.34 $ 10.33
Total returnB 3.40% 3.30%
Net assets, end of period (000 omitted) $ 10,121 $ 2,598
Ratio of expenses to average net assets 2.00%A,E 2.50%A,E
Ratio of net investment income to average net assets .11%A (.39)%A
Portfolio turnover 85%A 85%A
Average commission rateF $.0253 $.0253
</TABLE>
MID CAP
<TABLE>
<CAPTION>
<S> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Period ended May 31, 1996 1996D 1996D
Net asset value, beginning of period $ 10.00 $ 10.00
Income from Investment Operations
Net investment income (loss) (.01)C (.03)C
Net realized and unrealized gain (loss) 1.28 1.27
Total from investment operations 1.27 1.24
Net asset value, end of period $ 11.27 $ 11.24
Total returnB 12.70% 12.40%
Net assets, end of period (000 omitted) $ 121,406 $ 16,554
Ratio of expenses to average net assets 2.00%A,E 2.50%A,E
Ratio of net investment income (loss) to average net assets (.48)%A (.98)%A
Portfolio turnover 66%A 66%A
Average commission rateF $.0326 $.0326
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURN WOULD
HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD
SHOWN.
C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED
ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
MAY 31, 1996.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
F A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER
SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY
VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE
STRUCTURES MAY DIFFER.
STRATEGIC OPPORTUNITIES
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Years ended
1996O 1995 1994D 1994E,H 1993E 1992E,I 1991E 1990E 1989E 1988E 1987E 1986B 1996O 1995 1994D 1994C
December 31
Net asset value,
$ 24.8 $ 18.70 $ 19.96 $ 22.5 $ 19.5 $ 21.3 $ 17.2 $ 19.5 $ 15.5 $ 19.0 $ 16.7 $ 17.8 $ 24.56 $ 18.57 $ 19.98 $ 19.6
beginning of period
8 2 3 8 1 5 3 6 1 1 5
Income from
Investment Operations
Net investment
.15M .39 .10M .39M .33 .61 .66 .70 .50 .42 .46 .08I .08M .38 .06M .05M
income
Net realized and
(.15) 6.73 (.75) (.81) 4.44 .58 4.26 (2.49) 4.08 (1.80) 2.95 (1.18) (.15) 6.54 (.74) .28
unrealized gain (loss)
Total from investment
- -- 7.12 (.65) (.42) 4.77 1.19 4.92 (1.79) 4.58 (1.38) 3.41 (1.10) (.07) 6.92 (.68) .33
operations
Less Distributions
From net investment
-- (.39) (.35) (.43) (.57) (.62) (.75) (.55) (.56) (.24) (.09) -- -- (.38) (.47) --
income
From net realized
(.41) (.55) (.26) (1.71) (1.21) (2.42) -- -- -- (1.91) (.97) -- (.41) (.55) (.26) --
gain
Total distributions
(.41) (.94) (.61) (2.14) (1.78) (3.04) (.75) (.55) (.56) (2.15) (1.06) -- (.41) (.93) (.73) --
Net asset value, end of
$ 24.4 $ 24.88 $ 18.70 $ 19.9 $ 22.5 $ 19.5 $ 21.3 $ 17.2 $ 19.5 $ 15.5 $ 19.0 $ 16.7 $ 24.08 $ 24.56 $ 18.57 $ 19.9
period 7 6 2 3 8 1 5 3 6 1 8
Total returnG
.01% 38.16 (3.26) (2.24) 26.33 7.26% 29.51 (9.49) 30.45 (4.98) 21.43 (6.18) (.28)% 37.35 (3.41) 1.68%
% % % % % % % % % % % %
Net assets, end of
$ 618,8 $ 619,9 $ 375,6 $ 385,3 $ 269,8 $ 194,7 $ 199,6 $ 172,0 $ 198,1 $ 191,4 $ 283,1 $ 22,14 $ 105,5 $ 87,56 $ 17,09 $ 8,824
period 78 93 91 49 83 10 04 86 74 54 17 1 57 6 0
(000 omitted)
Ratio of expenses to
1.29%A 1.61% 1.73% 1.85% 1.57% 1.46% 1.56% 1.59% 1.51% 1.71% 1.67%K 1.50% 1.90% 2.11% 2.58%A 2.63%
average net assets A,N L A,K A A,N
Ratio of expenses to
1.27% 1.61% 1.73%A 1.84% 1.57% 1.46% 1.56% 1.59% 1.51% 1.71% 1.67% 1.50%A 1.87% 2.10%F 2.53% 2.63%A
A,F
average net assets F A,F A,F
after expense
reductions
Ratio of net investment
1.22% 1.90% 2.03% 1.89% 2.06% 3.22% 3.61% 3.70% 3.23% 3.10% 2.36% 2.77% .62% 1.40% 1.22% 1.11%
A A A A A A
income to average net
assets
Portfolio turnover rate
228%A 142% 228%A 159% 183% 211% 223% 114% 89% 160% 225% 225% 228%A 142% 228%A 159%
Average commission rateQ $.0418 $.0418
</TABLE>
EQUITY INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Years ended November 30 1996P 1995 1994H 1993 1992C 1996P 1995 1994C
Net asset value, beginning
of period $ 19.95 $ 15.96 $ 14.86 $ 12.86 $ 12.37 $ 19.90 $ 15.94 $ 15.21
Income from Investment
Operations
Net investment income .17M .31 .28M .33 .13 .11M .26 .08M
Net realized and unrealized
gain (loss) 1.46 4.26 1.03 1.97 .47 1.46 4.23 .72
Total from investment
operations 1.63 4.57 1.31 2.30 .60 1.57 4.49 .80
Less Distributions
From net investment income (.18) (.30) (.21) (.30) (.11) (.14) (.25) (.07)
From net realized gain (.46) (.28) -- -- -- (.46) (.28) --
Total distributions (.64) (.58) (.21) (.30) (.11) (.60) (.53) (.07)
Net asset value, end of period $ 20.94 $ 19.95 $ 15.96 $ 14.86 $ 12.86 $ 20.87 $ 19.90 $ 15.94
Total returnG 8.37% 29.46% 8.84% 18.03% 4.88% 8.07% 28.95% 5.25%
Net assets, end of period
(000 omitted) $ 1,401,0 $ 880,05 $ 179,50 $ 42,326 $ 1,462 $ 421,76 $ 270,10 $ 35,373
74 4 1 6 1
Ratio of expenses to average
net assets 1.31%A 1.48% 1.67% 1.77% 1.55%A 1.86%A 1.85% 2.24%A
Ratio of expenses to average
net assets after expense 1.29%A,F 1.47%F 1.64%F 1.77% 1.55%A 1.85%A,F 1.84%F 2.18%A,F
reductions
Ratio of net investment income
to average net assets 1.64%A 1.78% 1.69% 2.02% 3.39%A 1.08%A 1.41% 1.15%A
Portfolio turnover rate 126%A 80% 140% 120% 51% 126%A 80% 140%
Average commission
rateQ $.0425 $.0425
</TABLE>
A ANNUALIZED
B AUGUST 20, 1986 (COMMENCEMENT OF SALE OF CLASS T SHARES) TO
SEPTEMBER 30, 1986.
C COMMENCEMENT OF SALE OF EQUITY INCOME CLASS T SHARES SEPTEMBER 10,
1992; COMMENCEMENT OF SALE OF EQUITY INCOME AND STRATEGIC OPPORTUNITIES
CLASS B SHARES JUNE 30, 1994.
D FOR THE THREE MONTHS ENDED DECEMBER 31, 1994.
E YEAR ENDED SEPTEMBER 30.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
G TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS
SHOWN.
H EFFECTIVE OCTOBER 1, 1993 AND DECEMBER 1, 1993, STRATEGIC OPPORTUNITIES
AND EQUITY INCOME, RESPECTIVELY, ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
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
VOLUNTARILY WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%. WITHOUT
THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE BEEN HIGHER.
L INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES.
M NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
N FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT THE CLASS'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
O SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED).
P SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED).
Q FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
INCOME & GROWTH
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T
Years ended
October 31 1996L 1995 1994F 1993 1992 1991 1990 1989 1988 1987B
Net asset value, beginning of
period $ 15.30 $ 14.67 $ 15.91 $ 14.41 $ 14.13 $ 10.41 $ 12.77 $ 11.07 $ 9.44 $ 10.00
Income from Investment
Operations
Net investment
income .26K .59 .38 .48 .50 .51 .56 1.01G .62 .27
Net realized and unrealized
gain (loss) .15 .54 (.79) 2.18 .85 3.74 (1.34) 1.27 1.56 (.63)
Total from investment
operations .41 1.13 (.41) 2.66 1.35 4.25 (.78) 2.28 2.18 (.36)
Less Distributions
From net investment
income (.34) (.50) (.28) (.56) (.46) (.53) (1.06) (.58) (.55) (.20)
In excess of net investment
income -- -- (.02) -- -- -- -- -- -- --
From net realized
gain (.03) -- (.49) (.60) (.61) -- (.52) -- -- --
Return of
capital -- -- (.04) -- -- -- -- -- -- --
Total
distributions (.37) (.50) (.83) (1.16) (1.07) (.53) (1.58) (.58) (.55) (.20)
Net asset value, end
of period $ 15.34 $ 15.30 $ 14.67 $ 15.91 $ 14.41 $ 14.13 $ 10.41 $ 12.77 $ 11.07 $ 9.44
Total
returnE 2.66% 7.85% (2.69)% 19.66% 10.27% 41.73% (7.15)% 21.15% 23.66% (3.90)%
Net assets, end of period (000
omitted) $ 3,240,0 $ 3,441,1 $ 3,128,7 $ 1,654,1 $ 397,67 $ 135,53 $ 60,934 $ 46,139 $ 36,224 $ 34,376
25 41 76 24 2 3
Ratio of expenses to average net
assets 1.32%A 1.47% 1.59% 1.52% 1.60% 1.71% 1.85% 1.91% 2.06% 2.06%A
Ratio of expenses to average net
assets 1.31%A,H 1.46%H 1.58%H 1.51%H 1.60% 1.71% 1.85% 1.91% 2.06% 2.06%A
after expense reductions
Ratio of net investment income to
average 3.32%A 3.99% 3.79% 3.24% 3.97% 4.19% 5.29% 8.80% 5.83% 3.95%A
net assets
Portfolio turnover
rate 318%A 297% 202% 200% 389% 220% 297% 151% 204% 206%A
Average commission
rateM $.0082
</TABLE>
EMERGING MARKETS INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Year ended December 31 1996J 1995 1994C 1996J 1995 1994D
Net asset value, beginning of period $ 9.280 $ 9.520 $ 10.000 $ 9.300 $ 9.520 $ 9.700
Income from Investment Operations
Net investment income .374K .860 .356 .343K .835 .167
Net realized and unrealized gain (loss) .832 (.323) (.073) .831 (.342) .227
Total from investment operations 1.206 .537 .283 1.174 .493 .394
Less Distributions
From net investment income (.376) (.777) (.353) (.344) (.713) (.220)
In excess of net investment income -- -- (.150) -- -- (.094)
From net realized gain - - -- (.010) - - -- (.010)
In excess of net realized gain -- -- (.250) -- -- (.250)
Total distributions (.376) (.777) (.763) (.344) (.713) (.574)
Net asset value, end of period $ 10.110 $ 9.280 $ 9.520 $ 10.130 $ 9.300 $ 9.520
Total returnE 13.23% 6.99% 2.47% 12.84% 6.38% 3.67%
Net assets, end of period (000 omitted) $ 57,013 $ 36,205 $ 30,029 $ 12,637 $ 9,486 $ 5,034
Ratio of expenses to average net assets 1.50%A,I 1.50%I 1.50%A,I 2.15%A,I 2.25%I 2.25%A,I
Ratio of net investment income to average net assets 7.80%A 9.32% 6.60%A 7.14%A 8.48% 5.86%A
Portfolio turnover rate 433%A 305% 354%A 433%A 305% 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 EMERGING MARKETS INCOME CLASS B SHARES JUNE 30,
1994.
E TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
F EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $ .26 PER SHARE.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
I 1.FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
J SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED).
K NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
L SIX MONTHS ENDED APRIL 30, 1996
M FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
HIGH YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Class T Class B
Data and Ratios
Years ended October 31
1996I 1995 1994D 1993 1992 1991 1990 1989 1988 1987B 1996I 1995 1994C
Net asset value,
$ 11.910 $ 11.220 $ 12.010 $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090 $ 10.000 $ 11.890 $ 11.210 $ 11.300
beginning of period
Income from Investment
Operations
Net investment
.562G .930G .848 .980 1.146 1.115 1.144 1.237 1.165 .878 .518G .794G .223
income
Net realized and
.181 .680 (.537) 1.153 .975 1.948 (.820) (.890) .770 (.910) .174 .721 (.118)
unrealized
gain (loss)
Total from investment
.743 1.610 .311 2.133 2.121 3.063 .324 .347 1.935 (.032) .692 1.515 .105
operations
Less Distributions
From net investment
(.593) (.920) (.851) (.963) (1.171) (1.093) (1.144) (1.237) (1.165) (.878) (.552) (.835) (.195)
income
From net realized gain
-- -- (.250) (.230) -- -- -- -- -- -- -- -- --
Total distributions
(.593) (.920) (1.101) (1.193) (1.171) (1.093) (1.144) (1.237) (1.165) (.878) (.552) (.835) (.195)
Net asset value, end of
$ 12.060 $ 11.910 $ 11.220 $ 12.010 $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090 $ 12.030 $ 11.890 $ 11.210
period
Total returnE
6.37% 15.05% 2.64% 20.47% 21.96% 39.67% 3.58% 3.34% 22.14% (.81)% 5.94% 14.12% .9 3 %
Net assets, end of
$ 1,442,2 $ 1,204, $ 679,62 $ 485,55 $ 136,31 $ 38,681 $ 15,134 $ 13,315 $ 11,900 $ 9,077 $ 253,49 $ 155,73 $ 16,959
period
04 495 3 9 6 6 0
(000 omitted)
Ratio of expenses to
1.12%A 1.15% 1.20% 1.11% 1.10%F 1.10%F 1.10%F 1.10%F 1.10%F 1.24%A 1.81%A 2.01% 2.20%A
average net assets ,F
Ratio of expenses to
1.11%A,I 1.15% 1.20% 1.11% 1.10% 1.10% 1.10% 1.10% 1.10% 1.24% 1.81%A/r>
2.01% 2.20%
average net assets
after expense
reductions
Ratio of net investment
9.47%A 8.32% 6.92% 8.09% 9.95% 12.20% 12.72% 12.98% 11.86% 10.74%A 8.77%A 7.46% 5.92%A
income to average net
assets
Portfolio turnover rate
119%A 112% 118% 79% 100% 103% 90% 131% 135% 166%A 119%A 112% 118%
Average commission
$.0478 $.0478
rateK
</TABLE>
STRATEGIC INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Year ended December 31 1996H 1995 1994 C 1996H 1995 1994 C
Net asset value, beginning of period $ 11.000 $ 9.920 $ 10.000 $ 11.010 $ 9.910 $ 10.000
Income from Investment Operations
Net investment income .398G .885 .064G .363G .820 .072G
Net realized and unrealized gain (loss) (.004) 1.231 (.046) (.007) 1.237 (.078)
Total from investment operations .394 2.116 .018 .356 2.057 (.006)
Less Distributions
From net investment income (.384) (.806) (.098) (.346) (.727) (.084)
From net realized gain (.060) (.230) -- (.060) (.230) --
Total distributions (.444) (1.036) (.098) (.406) (.957) (.084)
Net asset value, end of period $ 10.950 $ 11.000 $ 9.920 $ 10.960 $ 11.010 $ 9.910
Total returnE 3.64% 22.02% .17% 3.28% 21.35% (.06)%
Net assets, end of period (000 omitted) $ 72,587 $ 52,626 $ 10,687 $ 29,608 $ 26,654 $ 9,379
Ratio of expenses to average net assets 1.23%A 1.35%F 1.35%A,F 1.90%A 2.10%F 2.10%A,F
Ratio of net investment income to average
net assets 7.34%A 7.28% 5.80%A 6.67%A 6.53% 5.06%A
Portfolio turnover rate 138%A 193% 104%A 138%A 193% 104%A
</TABLE>
A ANNUALIZED
B JANUARY 5, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF HIGH YIELD CLASS B SHARES JUNE 30, 1994;
COMMENCEMENT OF SALE OF STRATEGIC INCOME CLASS T & CLASS B SHARES
OCTOBER 31, 1994.
D EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
F FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
H SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED).
I SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
J FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
K FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
GOVERNMENT INVESTMENT
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data Class T Class B
and Ratios
Years ended October 31
1996G 1995 1994E 1993 1992 1991 1990 1989 1988 1987B 1996G 1995 1994C
Net asset value, beginning
$ 9.670 $ 8.960 $ 10.140 $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200 $ 10.000 $ 9.670 $ 8.950 $ 9.100
of period
Income from Investment
Operations
Net investment income
.300I .594 .515 .567 .666 .700 .735 .773 .769 .614 .263I .542 .144
Net realized and
(.323) .701 (1.031) .601 .125 .419 (.160) .050 .060 (.800) (.328) .693 (.137)
unrealized gain (loss)
Total from investment
(.023) 1.295 (.516) 1.168 .791 1.119 .575 .823 .829 (.186) (.065) 1.235 .007
operations
Less Distributions
From net investment
(.297) (.585) (.504) (.558) (.651) (.679) (.735) (.773) (.769) (.614) (.265) (.515) (.157)
income
From net realized gain
-- -- (.130) (.200) -- -- -- -- -- -- -- -- --
In excess of net realized
-- -- (.030) -- -- -- -- -- -- -- -- -- --
gain
Total distributions
(.297) (.585) (.664) (.758) (.651) (.679) (.735) (.773) (.769) (.614) (.265) (.515) (.157)
Net asset value, end of
$ 9.350 $ 9.670 $ 8.960 $ 10.140 $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200 $ 9.340 $ 9.670 $ 8.950
period
Total returnD
(.29)% 14.91% (5.27)% 12.53% 8.49% 12.65% 6.48% 9.37% 9.34% (1.84)% (.72)% 14.19% .10%
Net assets, end of period
$ 236,47 $ 208,62 $ 114,45 $ 69,876 $ 23,281 $ 13,058 $ 9,822 $ 8,203 $ 6,590 $ 4,584 $ 14,869 $ 11,766 $ 2,062
(000 omitted)
6 0 3
Ratio of expenses to
1.00%A .89%F .74%F .68%F 1.10%F 1.10%F 1.10%F 1.10%F 1.10%F 1.29% 1.69%, 1.65% 1.70%A,F
average net assets A,F F
Ratio of expenses to
.99%A,J .89% .74% .68% 1.10% 1.10% 1.10% 1.10% 1.10% 1.29% A 1.69%A 1.65% 1.70%A
average net assets after
expense reductions
Ratio of net investment
6.21%A 6.34% 6.18% 6.11% 6.98% 7.47% 8.04% 8.45% 8.30% 8.12%A 5.51%A 5.58% 5.22%A
income to average net
assets
Portfolio turnover rate
136%A 261% 313% 333% 315% 54% 31% 42% 44% 32%A 136%A 261% 313%
</TABLE>
INTERMEDIATE BOND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios
Class T Class B
Years ended November 30
1996H 1995 1994E 1993 1992C 1996H 1995 1994C
Net asset value, beginning of period
$ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960 $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income
.345I .649 .609 .785 .170 .309I .579 .204
Net realized and unrealized gain (loss)
(.379) .491 (.876) .511 (.320) (.388) .483 (.178)
Total from investment operations
(.034) 1.140 (.267) 1.296 (.150) (.079) 1.062 .026
Less Distributions
From net investment income
(.346) (.640) (.555) (.796) (.170) (.311) (.562) (.187)
Return of capital
-- -- (.058) -- -- -- -- (.019)
Total distributions
(.346) (.640) (.613) (.796) (.170) (.311) (.562) (.206)
Net asset value, end of period
$ 10.380 $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.360 $ 10.750 $ 10.250
Total returnD
(.35)% 11.43% (2.44)% 12.50% (1.37)% (.77)% 10.62% .24%
Net assets, end of period (000 omitted)
$ 268,53 $ 228,43 $ 141,86 $ 59,184 $ 2,583 $ 18,784 $ 15,830 $ 3,156
4 9 6
Ratio of expenses to average net assets
.96%A .94%F 1.02%F 1.23% .82%A 1.67%A,F 1.70%F 1.65%A,F
Ratio of expenses to average net assets after expense
.95%A,J .94% 1.02% 1.23% .82%A/r> 1.67%Ar></r>
1.70% 1.65%A
reductions
Ratio of net investment income to average net assets
6.47%A 6.20% 6.04% 6.81% 7.67%A 5.76%A 5.44% 5.42%A
Portfolio turnover rate
236%A 189% 68% 59% 7% 236%A 189% 68%
</TABLE>
A ANNUALIZED
B JANUARY 7, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF INTERMEDIATE BOND CLASS T SHARES SEPTEMBER
10, 1992; COMMENCEMENT OF SALE OF GOVERNMENT INVESTMENT AND INTERMEDIATE
BOND CLASS B SHARES JUNE 30, 1994.
D TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
E EFFECTIVE NOVEMBER 1, 1993 AND DECEMBER 1, 1993, GOVERNMENT INVESTMENT
AND INTERMEDIATE BOND, RESPECTIVELY, ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
H SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED).
I NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
J FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
SHORT FIXED-INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios
Class T
Years ended October 31
1996H 1995 1994E,G 1993 1992 1991 1990 1989 1988 1987B
Net asset value, beginning of period
$ 9.470 $ 9.480 $ 10.090 $ 9.950 $ 9.870 $ 9.620 $ 9.950 $ 9.940 $ 10.060 $ 10.000
Income from Investment Operations
.298I .403 .479 .732 .830 .848 .868 .832 .852 .101
Net investment income
Net realized and unrealized gain (loss)
(.131) .148 (.501) .146 .071 .270 (.330) .010 (.120) .060
Total from investment operations
.167 .551 (.022) .878 .901 1.118 .538 .842 .732 .161
Less Distributions
(.297) (.407) (.464) (.738) (.821) (.868) (.868) (.832) (.852) (.101)
From net investment income
In excess of net investment income
-- -- (.044) -- -- -- -- -- -- --
Return of capital
-- (.154) (.080) -- -- -- -- -- -- --
Total Distributions
(.297) (.561) (.588) (.738) (.821) (.868) (.868) (.832) (.852) (.101)
Net asset value, end of period
$ 9.340 $ 9.470 $ 9.480 $ 10.090 $ 9.950 $ 9.870 $ 9.620 $ 9.950 $ 9.940 $ 10.060
Total returnD
1.77% 6.05% (.22)% 9.13% 9.44% 12.19% 5.59% 8.89% 7.56% 1.61%
Net assets, end of period (000 omitted)
$ 486,72 $ 546,54 $ 787,92 $ 654,20 $ 170,55 $ 25,244 $ 13,062 $ 12,394 $ 13,433 $ 3,252
5 6 6 2 8
Ratio of expenses to average net assets
.87%A .89% .97% .95% .90%F .90%F .90%F .90%F .90%F .90%A,F
Ratio of net investment income to average
6.33%A 6.05% 5.91% 6.77% 7.59% 8.50% 8.86% 8.45% 8.39% 7.65%A
net assets
Portfolio turnover rate
141%A 179% 108% 58% 57% 127% 144% 157% 178% 119%A
</TABLE>
HIGH INCOME MUNICIPAL
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data Class T Class B
and Ratios
Years ended October 31
1996H 1995 1994E 1993 1992 1991 1990 1989 1988 1987B 1996H 1995 1994C
Net asset value, beginning
$ 11.880 $ 11.220 $ 12.720 $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850 $ 10.000 $ 11.860 $ 11.210 $ 11.610
of period
Income from Investment
Operations
Net interest income
.327 .700 .689 .710 .774 .803 .811 .800 .750 .092 .286 .612 .188
Net realized and
(.250) .660 (1.430) 1.100 .250 .660 .150 .410 .610 (.150) (.250) .650 (.400)
unrealized gain (loss)
Total from investment
.077 1.360 (.741) 1.810 1.024 1.463 .961 1.210 1.360 (.058) .036 1.262 (.212)
operations
Less Distributions
From net interest income
(.327) (.700) (.689) (.710) (.774) (.803) (.811) (.800) (.750) (.092) (.286) (.612) (.188)
From net realized gain
-- -- (.060) (.030) (.010) (.120) (.100) (.050) -- -- -- -- --
In excess of net realized
-- -- (.010) -- -- -- -- -- -- -- -- -- --
gain
Total distributions
(.327) (.700) (.759) (.740) (.784) (.923) (.911) (.850) (.750) (.092) (.286) (.612) (.188)
Net asset value, end of
$ 11.630 $ 11.880 $ 11.220 $ 12.720 $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850 $ 11.610 $ 11.860 $ 11.210
period
Total return D
.60% 12.50% (6.03)% 15.95% 9.21% 14.02% 9.28% 12.05% 14.22% (.58)% .26% 11.57% (1.86)%
Net assets, end of period
$ 534,26 $ 565,13 $ 544,42 $ 497,57 $ 156,65 $ 67,135 $ 22,702 $ 6,669 $ 3,290 $ 1,275 $ 37,437 $ 32,395 $ 9,968
(000 omitted)
8 1 2 5 9
Ratio of expenses to
.90%A .91% .89% .92% .90%F .90%F .90%F .90%F .89%F .80%A,F 1.61%A 1.86%F 2.09%A
average net assets
Ratio of net interest
5.51%A 6.06% 5.78% 5.59% 6.59% 7.08% 7.37% 7.60% 7.33% 7.24%A 4.83%A 5.18% 4.58%A
income to average net
assets
Portfolio turnover rate
57%A 37% 38% 27% 13% 10% 11% 27% 19% 0% 57%A 37% 38%
</TABLE>
A ANNUALIZED
B SEPTEMBER 16, 1987 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1987.
C COMMENCEMENT OF SALE OF HIGH INCOME MUNICIPAL CLASS B SHARES JUNE 30,
1994.
D TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
E EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G AMOUNTS HAVE BEEN ADJUSTED TO CONFORM WITH PRESENT PERIOD ACCOUNTING
POLICIES.
H SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
I NET INVESTMENT INCOME HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
INTERMEDIATE MUNICIPAL INCOME
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Years ended November 30
1996G 1995 1994D 1993 1992C 1996G 1995 1994C
Net asset value, beginning of period
$ 10.380 $ 9.400 $ 10.46 $ 11.08 $ 11.01 $ 10.380 $ 9.400 $ 9.890
0 0 0
Income from Investment Operations
Net interest income
.229 .451 .455 .508 .131 .196 .373 .155
Net realized and unrealized gain (loss)
(.260) .980 (1.040 .260 .070 (.270) .980 (.490)
)
Total from investment operations
(.031) 1.431 (.585) .768 .201 (.074) 1.353 (.335)
Less Distributions
From net interest income
(.229) (.451) (.455) (.508) (.131) (.196) (.373) (.155)
From net realized gain
-- -- -- (.880) -- -- -- --
In excess of net realized gain
-- -- (.020) -- -- -- -- --
Total distributions
(.229) (.451) (.475) (1.388 (.131) (.196) (.373) (.155)
)
Net asset value, end of period
$ 10.120 $ 10.38 $ 9.400 $ 10.4 $ 11.08 $ 10.110 $ 10.38 $ 9.400
0 60 0 0
Total returnE
(.31)% 15.49 (5.78) 7.72% 1.37% (.73)% 14.60 (3.44)
% % % %
Net assets, end of period (000 omitted)
$ 61,575 $ 62,85 $ 57,38 $ 39,8 $ 1,75 $ 7,286 $ 6,226 $ 1,682
2 2 00 2
Ratio of expenses to average net assets
1.00%A,F .94%F .90%F .90%F 1.04% 1.66%A,F 1.68%F 1.65%
A,F A,F
Ratio of expenses to average net assets after expense reductions
.99%A,H .94% .90% .90% 1.04%A 1.66%A 1.68% 1.65%A
Ratio of net interest income to average net assets
4.34%A 4.56% 4.49% 4.76% 5.65%A 3.72%A 3.71% 3.74%A
Portfolio turnover rate
33%A 53% 53% 46% 36% 33%A 53% 53%
</TABLE>
SHORT-INTERMEDIATE MUNICIPAL INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Selected Per-Share Data and Ratios Class T
Years ended November 30 1996G 1995 1994B
Net asset value, beginning of period $ 10.240 $ 9.770 $ 10.000
Income from Investment Operations .202 .430 .259
Net interest income
Net realized and unrealized gain (loss) (.130) .470 (.230)
Total from investment operations .072 .900 .029
Less Distributions (.202) (.430) (.259)
From net interest income
From net realized gain (.030) -- --
Total distributions (.232) (.430) (.259)
Net asset value, end of period $ 10.08 $ 10.24 $ 9.77
Total returnE .70% 9.38% .27%
Net assets, end of period (000 omitted) $ 30,296 $ 29,274 $ 16,563
Ratio of expenses to average net assets .90%A,F .82%F .75% A,F
Ratio of expenses to average net assets after expense reductions .89%A,H .82% .75%A
Ratio of net interest income to average net assets 3.96%A 4.25% 3.74%A
Portfolio turnover rate 95%A 80% 111%A
</TABLE>
A ANNUALIZED
B MARCH 16, 1994 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1994.
C COMMENCEMENT OF SALE OF INTERMEDIATE MUNICIPAL INCOME CLASS T
SHARES SEPTEMBER 10, 1992; COMMENCEMENT OF SALE OF INTERMEDIATE MUNICIPAL
INCOME CLASS B SHARES JUNE 30, 1994.
D EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
F FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED).
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
CALIFORNIA MUNICIPAL INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Years ended October 31 1996F 1996F
Net asset value, beginning of period $ 10.000 $ 10.000
Income from Investment Operations
Net interest income .064 .056
Net realized and unrealized gain (loss) (.330) (.340)
Total from investment operations (.266) (.284)
Less Distributions
From net interest income (.064) (.056)
Net asset value, end of period $ 9.670 $ 9.660
Total returnC (2.67)% (2.84)%
Net assets, end of period (000 omitted) $ 618 $ 282
Ratio of expenses to average net assets 1.00%A, 1.65%
D A,D
Ratio of net interest income to average net assets 2.95%A 2.66%
A
Portfolio turnover rate 3%A 3%
A
</TABLE>
NEW YORK MUNICIPAL INCOME (FORMERLY NEW YORK TAX-FREE)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Selected Per-Share Data and Ratios Class T Class B
Years ended October 31 1996G 1995B 1996G 1995B
Net asset value, beginning of period $ 10.400 $ 10.000 $ 10.390 $ 10.000
Income from Investment Operations
Net interest income .219 .084 .184 .074
Net realized and unrealized gain (loss) (.140) .400 (.140) .390
Total from investment operations .079 .484 .044 .464
Less Distributions
From net interest income (.219) (.084) (.184) (.074)
Net asset value, end of period $ 10.260 $ 10.400 $ 10.250 $ 10.390
Total return C .73% 4.85% .39% 4.65%
Net assets, end of period (000 omitted) $ 3,676 $ 2,033 $ 2,035 $ 1,161
Ratio of expenses to average net assets 1.00%A, 1.00% 1.68% 1.75%
D A,D A,D A,D
Ratio of expenses to average net assets after expense
reductions .95%A, 1.00% 1.61% 1.75%
E A A,E A
Ratio of net interest income to average net assets 4.28%A 4.16% 3.61% 3.52%
A A A
Portfolio turnover rate 22%A 0% 22% 0%
A
</TABLE>
A ANNUALIZED
B AUGUST 21, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1995 .
C TOTAL RETURNS DO NOT INCLUDE THE EFFECTS OF SALES CHARGES AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURN WOULD HAVE
BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD
SHOWN.
D FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE CLASS'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
F FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1996
(UNAUDITED).
G SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED).
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
For Overseas, Natural Resources , Growth Opportunities, Income &
Growth, High Yield, Government Investment, Short Fixed-Income, High Income
Municipal, California Municipal Income, and New York Municipal Income the
fiscal year runs from November 1 to October 31. For Mid Cap, Equity Growth,
Large Cap, Equity Income, Intermediate Bond, Intermediate Municipal Income
and Short-Intermediate Municipal Income the fiscal year runs from December
1 to November 30. For Strategic Income, Strategic Opportunities and
Emerging Markets Income the fiscal year runs from January 1 to December 31.
The tables below show each class's performance history for the
semi-annual period ended 1996, as indicated . Class A of each fund is
expected to commence operations on or about August 30, 1996. For
additional charts presenting each class's calendar year performance, see
Appendix B, beginning on page .
GROWTH FUNDS - CLASS T
Average Annual Total Return E Cumulative Total Return E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Years/ Past 6 Past 1 Past 5 10 Years/
year years Life of fund+ months year years Life of fund+
OVERSEAS - CLASS T [B]
13.07 10.93 8.17 % 10.47 13.07 67.95 60.53
% % % % % %
OVERSEAS - CLASS T (LOAD ADJ.) [A][B]
9.12 % 10.14 7.53 % 6.61% 9.12 % 62.08 54.91
% % %
MID CAP - CLASS T [C]
n/a n/a n/a n/a n/a n/a 12.70
%
MID CAP - CLASS T (LOAD ADJ.) [A][C]
n/a n/a n/a n/a n/a n/a 8.76%
EQUITY GROWTH - CLASS T [C]
34.47 17.31 17.74 10.37 34.47 122.1 411.8
% % % % % 6 % 9 %
EQUITY GROWTH - CLASS T (LOAD ADJ.) [A][C]
29.76 16.48 17.32 6.50% 29.76 114.3 393.9
% % % % 9 % 7 %
NATURAL RESOURCES - CLASS T [B]
34.55 1 7.61 1 7.40 26.30 34.55 1 25.0 281.3
% % % % % 2 % 7 %
NATURAL RESOURCES - CLASS T (LOAD ADJ.)
29.84 1 6.78 1 6.90 21.88 29.84 117.1 268.0
[A][B] % % % % % 5 % 2 %
GROWTH OPPORTUNITIES - CLASS T [B]
24.21 17.13 20.79 8.04% 24.21 120.4 393.9
% % % % 3% 4%
GROWTH OPPORTUNITIES - CLASS T
19.86 16.29 20.28 4.26% 19.86 112.7 376.6
(LOAD ADJ.) [A][B]
% % % % 1% 5%
STRATEGIC OPPORTUNITIES - CLASS T [D]
15.82 13.34 11.68 0.01% 15.82 87.04 201.7
% % % % % 2%
STRATEGIC OPPORTUNITIES - CLASS T
11.76 12.54 11.28 -3.49 11.76 80.49 191.1
(LOAD ADJ.)[A][D]
% % % % % % 6%
LARGE CAP - CLASS T [C]
n/a n/a n/a n/a n/a n/a 3.40%
LARGE CAP - CLASS T (LOAD ADJ.)[A][C]
n/a n/a n/a n/a n/a n/a -0.22
%
EQUITY INCOME - CLASS T [C]
22.24 16.75 12.61 8.37% 22.24 116.9 227.9
% % % % 6% 1%
EQUITY INCOME - CLASS T (LOAD ADJ.)[A][C]
17.96 15.93 12.21 4.58% 17.96 109.3 216.4
% % % % 6% 4%
INCOME & GROWTH - CLASS T [B]
7.58% 9.97% 11.21 2.66% 7.58% 60.80 169.3
% % 5%
INCOME & GROWTH - CLASS T (LOAD
3.82% 9.18% 10.79 -0.93 3.82% 55.17 159.9
ADJ.)[A][B] % % % 3%
</TABLE>
TAXABLE INCOME FUNDS - CLASS T
Average Annual Total Return E Cumulative Total Return E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Years/ Past 6 Past 1 Past 5 10 Years/
year years Life of fund+ months year years Life of fund+
EMERGING MARKETS INCOME - CLASS T [D]
31.21 n/a 9.80% 13.23 31.21 n/a 24.13
% % % %
EMERGING MARKETS INCOME - CLASS T
26.62 n/a 8.12% 9.27% 26.62 n/a 19.79
(LOAD ADJ.)[A][D]
% % %
HIGH YIELD - CLASS T [B]
14.65 16.20 13.82 6.37% 14.65 111.8 234.2
% % % % 6% 9%
HIGH YIELD - CLASS T (LOAD ADJ.)[A][B]
10.64 15.38 13.38 2.65% 10.64 104.4 222.5
% % % % 5% 9%
</TABLE>
TAXABLE INCOME FUNDS - CLASS T (CONTINUED)
Average Annual Total Return E Cumulative Total Return E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
STRATEGIC INCOME - CLASS T [D]
11.30 n/a 15.23 3.64% 11.30 n/a 26.68
% % % %
STRATEGIC INCOME - CLASS T (LOAD
7.40% n/a 12.80 0.01% 7.40% n/a 22.25
ADJ.)[A][D] % %
GOVERNMENT INVESTMENT - CLASS T [B]
7.62% 7.01% 6.92% -0.29 7.62% 40.35 86.56
% % %
GOVERNMENT INVESTMENT - CLASS T
3.86% 6.25% 6.51% -3.78 3.86% 35.44 80.03
(LOAD ADJ.) [A][B] % % %
INTERMEDIATE BOND - CLASS T [C]
3.93% 7.39% 7.85% -0.35 3.93% 42.81 112.8
% % 8%
INTERMEDIATE BOND - CLASS T (LOAD
1.07% 6.79% 7.55% -3.09 1.07% 38.89 107.0
ADJ.)[A][C] % % 3%
SHORT FIXED-INCOME - CLASS T [B]
6.47% 6.43% 7.14% 1.77% 6.47% 36.55 81.32
% %
SHORT FIXED-INCOME - CLASS T
4.87% 6.11% 6.95% 0.24% 4.87% 34.50 78.60
(LOAD ADJ.)[A][B] % %
</TABLE>
MUNICIPAL FUNDS - CLASS T
Average Annual Total Return E Cumulative Total Return E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
HIGH INCOME MUNICIPAL - CLASS T [B]
6.63% 7.40% 9.19% 0.60% 6.63% 42.88 113.5
% 2%
HIGH INCOME MUNICIPAL - CLASS T
2.90% 6.64% 8.74% -2.92 2.90% 37.88 106.0
(LOAD ADJ.)[A][B] % % 4%
INTERMEDIATE MUNICIPAL INCOME - CLASS
4.06% 5.74% 6.43% -0.31 4.06% 32.22 86.43
T [C] % % %
INTERMEDIATE MUNICIPAL INCOME - CLASS
1.20% 5.16% 6.13% -3.05 1.20% 28.58 81.31
T % % %
(LOAD ADJ.)[A][C]
SHORT-INTERMEDIATE MUNICIPAL INCOME -
4.13% n/a 4.59% 0.70% 4.13% n/a 10.45
CLASS T [C] %
SHORT-INTERMEDIATE MUNICIPAL INCOME -
2.57% n/a 3.88% -0.81 2.57% n/a 8.79%
CLASS T (LOAD ADJ.)[A][C] %
</TABLE>
STATE MUNICIPAL FUNDS - CLASS T
Average Annual Total Return E Cumulative Total Return E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
CALIFORNIA MUNICIPAL INCOME - CLASS T
n/a n/a n/a n/a n/a n/a -2.67
[B] %
CALIFORNIA MUNICIPAL INCOME - CLASS T
n/a n/a n/a n/a n/a n/a -6.07
(LOAD ADJ.)[A][B] %
NEW YORK MUNICIPAL INCOME - CLASS T
n/a n/a n/a 0.73% n/a n/a 5.62%
[B]
NEW YORK MUNICIPAL INCOME - CLASS T
n/a n/a n/a -2.79 n/a n/a 1.92%
(LOAD ADJ.)[A][B] %
</TABLE>
GROWTH FUNDS - CLASS B
Average Annual Total Return E Cumulative Total Return E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
OVERSEAS - CLASS B [B]
12.61 10.84 8.10% 10.02 12.61 67.27 59.88
% % % % % %
OVERSEAS - CLASS B (LOAD ADJ.)[A][B]
8.61% 10.70 8.10% 6.02% 8.61% 66.27 59.88
% % %
MID CAP - CLASS B [C]
n/a n/a n/a n/a n/a n/a 12.40
%
MID CAP - CLASS B (LOAD ADJ.)[A][C]
n/a n/a n/a n/a n/a n/a 8.40%
NATURAL RESOURCES - CLASS B [B]
33.76 17.47 17.32 25.69 33.76 123.7 279.1
% % % % % 0% 2%
NATURAL RESOURCES - CLASS B (LOAD
29.76 17.37 17.32 21.69 29.76 122.7 279.1
ADJ.)[A][B]
% % % % % 0% 2%
STRATEGIC OPPORTUNITIES - CLASS B [D]
15.14 13.13 11.57 -0.28 15.14 85.31 198.9
% % % % % % 3%
STRATEGIC OPPORTUNITIES - CLASS B
11.14 13.01 11.57 -4.20 11.14 84.31 198.9
(LOAD ADJ.) [A][D]
% % % % % % 3%
LARGE CAP - CLASS B [C]
n/a n/a n/a n/a n/a n/a 3.30%
LARGE CAP - CLASS B (LOAD ADJ.)[A][C]
n/a n/a n/a n/a n/a n/a -0.70
%
EQUITY INCOME - CLASS B [C]
21.68 16.58 12.53 8.07% 21.68 115.3 225.5
% % % % 6% 0%
EQUITY INCOME - CLASS B (LOAD ADJ.)[A][C]
17.68 16.47 12.53 4.07% 17.68 114.3 225.5
% % % % 6% 0%
</TABLE>
TAXABLE INCOME FUNDS - CLASS B
Average Annual Total ReturnE Cumulative Total ReturnE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
EMERGING MARKETS INCOME - CLASS B [D]
30.22 n/a 9.12% 12.84 30.22 n/a 22.37
% % % %
EMERGING MARKETS INCOME - CLASS B
26.22 n/a 7.96% 8.84% 26.22 n/a 19.37
(LOAD ADJ.)[A][D]
% % %
HIGH YIELD - CLASS B [B]
13.78 15.80 13.60 5.94% 13.78 108.2 228.5
% % % % 2% 4%
HIGH YIELD - CLASS B (LOAD ADJ.)[A][B]
9.78% 15.69 13.60 1.94% 9.78% 107.2 228.5
% % 2% 4%
STRATEGIC INCOME - CLASS B [D]
10.59 n/a 14.45 3.28% 10.59 n/a 25.25
% % % %
STRATEGIC INCOME - CLASS B (LOAD
6.59% n/a 12.80 -0.70 6.59% n/a 22.25
ADJ.)[A][D] % % %
GOVERNMENT INVESTMENT - CLASS B [B]
6.86% 6.69% 6.75% -0.72 6.86% 38.26 83.79
% % %
GOVERNMENT INVESTMENT - CLASS B
2.86% 6.54% 6.75% -4.59 2.86% 37.26 83.79
(LOAD ADJ.)[A][B] % % %
INTERMEDIATE BOND - CLASS B[C]
3.13% 7.03% 7.67% -0.77 3.13% 40.48 109.4
% % 0%
INTERMEDIATE BOND - CLASS B (LOAD
0.21% 7.03% 7.67% -3.66 0.21% 40.48 109.4
ADJ.)[A][C] % % 0%
</TABLE>
MUNICIPAL FUNDS - CLASS B
Average Annual Total ReturnE Cumulative Total ReturnE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
HIGH INCOME MUNICIPAL - CLASS B [B]
5.88% 7.04% 8.98% 0.26% 5.88% 40.53 110.0
% 0%
HIGH INCOME MUNICIPAL - CLASS B
1.88% 6.89% 8.98% -3.65 1.88% 39.53 110.0
(LOAD ADJ.)[A][B] % % 0%
</TABLE>
MUNICIPAL FUNDS - CLASS B (CONTINUED)
Average Annual Total ReturnE Cumulative Total ReturnE
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
INTERMEDIATE MUNICIPAL INCOME - CLASS
3.24% 5.41% 6.26% -0.73 3.24% 30.14 83.51
B [C] % % %
INTERMEDIATE MUNICIPAL INCOME - CLASS
0.25% 5.41% 6.26% -3.65 0.25% 30.14 83.51
B % % %
(LOAD ADJ.)[A][C]
</TABLE>
STATE MUNICIPAL FUNDS - CLASS B
Average Annual Total ReturnE Cumulative Total ReturnE
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
CALIFORNIA MUNICIPAL INCOME - CLASS B
n/a n/a n/a n/a n/a n/a -2.84
[B] %
CALIFORNIA MUNICIPAL INCOME - CLASS B
n/a n/a n/a n/a n/a n/a -6.71
(LOAD ADJ.)[A][B] %
NEW YORK MUNICIPAL INCOME - CLASS B
n/a n/a n/a 0.39% n/a n/a 5.06%
[B]
NEW YORK MUNICIPAL INCOME - CLASS B
n/a n/a n/a -3.55 n/a n/a 1.06%
(LOAD ADJ.)[A][B] %
</TABLE>
+ LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (APRIL 23, 1990
FOR OVERSEAS; DECEMBER 29, 1987 FOR NATURAL RESOURCES ; NOVEMBER 18,
1987 FOR GROWTH OPPORTUNITIES; JANUARY 6, 1987 FOR INCOME & GROWTH; 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; MARCH 16, 1994 FOR SHORT-INTERMEDIATE MUNICIPAL INCOME; AND
AUGUST 21, 1995 FOR NEW YORK MUNICIPAL INCOME AND FEBRUARY 20, 1996 FOR
MID CAP, LARGE CAP, AND CALIFORNIA MUNICIPAL INCOME ) THROUGH THE
SEMI-ANNUAL PERIODS ENDED 1996 .
[ A ] LOAD ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING
CLASS T 'S MAXIMUM 3.50% FRONT-END SALES CHARGE FOR THE EQUITY FUNDS
AND BOND FUNDS; 2.75% FOR THE INTERMEDIATE-TERM BOND FUNDS; AND 1.50% FOR
THE SHORT-TERM BOND FUNDS.
LOAD ADJUSTED RETURNS FOR CLASS B SHARES OF THE EQUITY FUNDS AND BOND
FUNDS REFLECT CONTINGENT DEFERRED SALES CHARGES (CDSC) FOR THE PERIODS OF:
ONE YEAR OR LESS, 4%; GREATER THAN ONE YEAR TO THREE YEARS, 3%; GREATER
THAN THREE TO FOUR YEARS, 2%; GREATER THAN FOUR TO FIVE YEARS, 1%; GREATER
THAN FIVE YEARS, 0%. CLASS B SHARE LOAD ADJUSTED RETURNS FOR THE
INTERMEDIATE-TERM BOND FUNDS REFLECT CDSCS FOR THE PERIODS OF: ONE YEAR OR
LESS, 3%; GREATER THAN ONE YEAR TO TWO YEARS, 2%; GREATER THAN TWO TO THREE
YEARS, 1%; GREATER THAN THREE YEARS, 0%.
[ B ] PERIOD ENDED APRIL 30, 1996
[ C ] PERIOD ENDED MAY 31, 1996
[ D ] PERIOD ENDED JUNE 30, 1996
[ E ] INITIAL OFFERING OF CLASS T SHARES FOR EQUITY GROWTH,
EQUITY INCOME, INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME TOOK
PLACE ON SEPTEMBER 10, 1992, AND BEAR A 12B-1 FEE (AT THEN CURRENTLY
APPLICABLE RATES FOR EQUITY GROWTH AND EQUITY INCOME OF 0.65%, AND FOR
INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL INCOME OF 0.25%) WHICH IS NOT
REFLECTED IN PRIOR DATE RETURNS. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE
THOSE OF INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND WHICH DOES
NOT BEAR A 12B-1 FEE. CLASS T SHARE RETURNS WOULD HAVE BEEN LOWER
HAD ITS 12B-1 FEE BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS T SHARES FOR STRATEGIC OPPORTUNITIES TOOK
PLACE ON AUGUST 20, 1986, AND BEAR A 12B-1 FEE (AT A THEN CURRENTLY
APPLICABLE RATE OF 0.65%) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO AUGUST 20, 1986 ARE THOSE OF INITIAL CLASS, THE ORIGINAL
CLASS OF THE FUND WHICH DOES NOT BEAR A 12B-1 FEE. CLASS T SHARE
RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEES BEEN REFLECTED IN PRIOR
DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR EQUITY INCOME, INTERMEDIATE BOND,
AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JUNE 30, 1994, AND BEAR A
12B-1 AND SHAREHOLDER SERVICING FEE (AT A THEN CURRENTLY APPLICABLE
COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JUNE 30, 1994, AND SEPTEMBER 10, 1992, ARE THOSE OF
CLASS T AND INSTITUTIONAL CLASS SHARES, RESPECTIVELY. CLASS
T RETURNS INCLUDE A THEN CURRENTLY APPLICABLE 12B-1 FEE OF 0.65% FOR
EQUITY INCOME, AND 0.25% FOR INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL
INCOME. INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, DOES NOT
BEAR A 12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS
12B-1 AND SHAREHOLDER SERVICING FEES BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR STRATEGIC OPPORTUNITIES TOOK PLACE
ON JUNE 30, 1994, AND BEAR A 12B-1 AND SHAREHOLDER SERVICING FEE (AT A THEN
CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE 30, 1994, AND AUGUST 20, 1986,
ARE THOSE OF CLASS T AND INITIAL CLASS SHARES, RESPECTIVELY.
CLASS T RETURNS INCLUDE A THEN APPLICABLE 12B-1 FEE OF 0.65%.
INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, DOES NOT BEAR A 12B-1 FEE.
CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE AND
SHAREHOLDER SERVICING FEE BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR EMERGING MARKETS INCOME, HIGH
YIELD, GOVERNMENT INVESTMENT, AND HIGH INCOME MUNICIPAL TOOK PLACE ON JUNE
30, 1994, AND BEAR A 12B-1 AND SHAREHOLDER SERVICING FEE (AT A THEN
CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE 30, 1994, ARE THOSE OF CLASS
T SHARES, THE ORIGINAL CLASS OF THESE FUNDS AND INCLUDE THEN APPLICABLE
CLASS T 12B-1 FEES OF 0.25%. CLASS B RETURNS WOULD HAVE BEEN LOWER
HAD ITS 12B-1 AND SHAREHOLDER SERVICING FEE BEEN REFLECTED IN PRIOR DATE
RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR OVERSEAS AND NATURAL
RESOURCES TOOK PLACE ON JULY 3, 1995, AND BEAR A 12B-1 AND SHAREHOLDER
SERVICING FEE (AT A THEN CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH
IS NOT REFLECTED IN PRIOR DATE RETURNS. RETURNS PRIOR TO JULY 3, 1995 ARE
THOSE OF CLASS T SHARES, THE ORIGINAL CLASS OF THESE FUNDS AND
INCLUDE THEN APPLICABLE CLASS T 12B-1 FEES OF 0.65%. CLASS B SHARE
RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEES BEEN REFLECTED IN PRIOR
DATE RETURNS.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
If FMR had not reimbursed certain fund expenses during these periods, total
returns would have been lower.
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.
THE COMPETITIVE FUNDS AVERAGE is each fund's applicable Lipper Funds
Average, which reflects the performance of mutual funds with similar
objectives. Each fund's applicable average assumes reinvestment of
distributions, and is published by Lipper Analytical Services, Inc.
S&P 500 is the Standard & Poor's Composite Index of 500 stocks (S&P
500(registered trademark)), a widely recognized, unmanaged index of common
stock prices. The S&P 500 figures assume reinvestment of all dividends paid
by stocks included in the index. They do not, however, include any
allowance for brokerage commissions or other fees you would pay if you
actually invested in those stocks.
SALOMON BROTHERS TREASURY/AGENCY INDEX is a market capitalization weighted
index which represents the Treasury and Agency components of the Solomon
Brothers Broad Investment-Grade Bond Index comprised of U.S. Treasury and
U.S. Government agency securities with fixed-rate coupons.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX (INTERMEDIATE) is comprised
of public obligations issued by the U.S. Treasury, U.S. Government agencies
and quasi federal corporations and publicly issued, investment grade
dollar-denominated corporate debt. The index includes issues with
maturities of up to ten years.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST
INDEX (EAFE INDEX) is a unmanaged index of over 1,000 foreign stock prices.
The EAFE Index may be compiled in two ways: a capitalization weighted
(cap-weighted) version and a gross domestic product weighted (GDP-weighted)
version.
Each class of each of the Equity Funds may quote its adjusted net asset
value 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.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. Equity Growth, Mid Cap and Large
Cap are diversified funds 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. Intermediate Bond is a diversified fund of Fidelity Advisor
Series IV, a Massachusetts business trust organized on May 6, 1983.
Natural Resources and High Income Municipal are diversified funds
and New York Municipal Income and California Municipal Income are
non-diversified funds of Fidelity Advisor Series V, a Massachusetts
business trust organized on April 24, 1986. Intermediate Municipal Income
is a diversified fund and Short-Intermediate Municipal Income 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.
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, Mid Cap, Equity Growth, Strategic Opportunities, Large Cap,
Emerging Markets Income, and Strategic Income, you are entitled to one vote
for each share you own. For shareholders of Natural Resources ,
Growth Opportunities, Equity Income, Income & Growth, High Yield,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Intermediate Municipal Income, Short- Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income 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 investments with the assistance
of foreign affiliates for all funds except Government Investment, High
Income Municipal, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income.
As of June 30 , 1996, FMR advised funds having approximately
2 6 million shareholder accounts with a total value of more than
$3 9 4 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.
John H. Carlson is manager of Advisor Emerging Markets Income, which he has
managed since joining Fidelity in June 1995. Mr. Carlson is also lead
manager of Advisor Strategic Income, which he has managed since August
1995, and is manager of the fund's emerging market investments. Mr. Carlson
also manages New Markets Income. Previously, he was executive director of
emerging markets at Lehman Brothers International, London. From 1990 to
1992, Mr. Carlson was executive vice president of capital markets for Daiwa
Securities America.
C. Robert Chow is manager of Advisor Equity Income, which he has managed
since March 1996. Previously, he managed Select Paper and Forest Products,
Select Computers, and Select Insurance. In addition, he was an equity
analyst covering consumer finance and household products. Mr. Chow joined
Fidelity in 1989.
Bettina E. Doulton is lead manager and vice president of Advisor Income &
Growth, which she has managed since March 1996. Ms. Doulton also manages
Advisor Annuity Income & Growth, and Puritan(registered trademark).
Previously, she managed Advisor Equity Income, VIP Equity-Income, Value,
Select Automotive, and was an assistant to Peter Lynch on
Magellan(registered trademark). Ms. Doulton also served as an analyst
following the automotive and tire industry as well as the gaming and
lodging industry. Ms. Doulton joined Fidelity in 1986.
Stephen DuFour is manager of Advisor Natural Resources, which he has
managed since August 1996. He also manages several other Fidelity funds.
Previously, Mr. DuFour managed other funds and was an analyst. Prior to
joining Fidelity in 1992, Mr. DuFour earned an MBA in finance from the
University of Chicago.
Margaret L. Eagle is vice president and manager of Advisor High Yield,
which she has managed since it began in January 1987, and has been manager
of Advisor Strategic Income's high yield investments since January 1996.
Previously, she managed Spartan High Income, High Income (now Capital &
Income), and several pension fund accounts. She also managed the bond
portion of Puritan(registered trademark). Ms. Eagle joined Fidelity in
1980.
Kevin E. Grant is vice president of Advisor Income & Growth and has been
manager of its fixed-income investments since March 1996. Mr. Grant is also
vice president and manager of Advisor Intermediate Bond, and manager of
Advisor Strategic Income's U.S. government and domestic investment-grade
investments. In addition, he manages the fixed-income investments of
Puritan. Mr. Grant also manages Advisor World Limited Term Bond, Spartan
Ginnie Mae, Ginnie Mae, and Mortgage Securities. Previously, he was vice
president and chief strategist for mortgage-backed securities at Morgan
Stanley and an investment director at Aetna. Mr. Grant joined Fidelity in
1993.
Lawrence Greenberg is vice president and manager of Advisor Equity Growth,
which he has managed since June 1996. Mr. Greenberg also manages
VIP:Growth, Growth Company, and Emerging Growth. Mr. Greenberg joined
Fidelity in 1986.
Robert C. 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,
Spartan Ginnie Mae and Mortgage Securities. Mr. Ives joined Fidelity in
1991, and received an M.B.A. from the University of Chicago.
Jonathan M. Kelly has been manager of Advisor Strategic Income's foreign
bond investments in developed markets since January 1996. Previously, he
managed Advisor Emerging Markets Income, and New Markets Income. Mr. Kelly
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.
Harris B. Leviton is vice president and manager of Advisor Strategic
Opportunities, which he has managed since March 1996. Previously, he
managed Retirement Growth, Select Electronics, and Convertible Securities.
Mr. Leviton joined Fidelity in 1986.
Norman U. Lind is vice president and manager of Advisor Short-Intermediate
Municipal Income, which he has managed since October 1995, and is manager
of Advisor New York Municipal Income, which he has managed since August
1995. Mr. Lind also manages New York Tax-Free Insured, New York Tax-Free
High Yield, Spartan New York Municipal High Yield, Spartan Intermediate
Municipal, Spartan Short-Intermediate Municipal, and Spartan New York
Intermediate Municipal. Previously, he served as the leader of the
municipal bond research group. Mr. Lind joined Fidelity in 1986.
Richard Mace, Jr. is vice president and manager of Advisor Overseas,
which he has managed since March 1996. Mr. Mace also manages International
Value, Global Balanced, Overseas, Advisor Annuity Overseas, and VIP
Overseas. Previously, he managed International Growth & Income, Select
Transportation, Select Industrial Materials, and Select Chemicals.
Additionally, between 1992 and 1993, he co-managed Equity-Income and Global
Balanced. Mr. Mace joined Fidelity in 1987.
Charles S. Morrison is manager of Advisor Short Fixed-Income, which he has
managed since February 1995. Mr. Morrison also manages Spartan Short-Term
Income, Short-Term Bond, and Short-Term World Income. Mr. Morrison is vice
president of Fidelity Management Trust Company. Mr. Morrison joined
Fidelity in 1987.
David L. Murphy is manager of Advisor Intermediate Municipal Income, which
he has managed since March 1995. Mr. Murphy also manages High Yield
Tax-Free, Spartan Municipal Income, and Limited Term Municipals.
Previously, he managed Advisor Short- Intermediate Municipal Income,
Spartan Short-Intermediate Municipal, Spartan Intermediate Municipal,
Spartan New Jersey Municipal High-Yield, and Spartan New York Intermediate
Municipal. Mr. Murphy joined Fidelity in 1989.
Tanya M. Roy is manager of Advisor High Income Municipal, which she has
managed since August 1995. Ms. Roy also manages Aggressive Tax-Free and
Spartan Aggressive Municipal. Previously, she managed Municipal Bond and
was a municipal bond analyst. Ms. Roy joined Fidelity in 1989.
Jonathan D. Short is manager of Advisor California Municipal Income, which
he has managed since February 1996. Mr. Short also manages Minnesota
Municipal Income, Spartan Arizona Municipal Income, California Municipal
Income, California Insured Municipal Income, Spartan California Municipal
High Yield, and Spartan California Intermediate Municipal. Previously, he
was a municipal bond analyst. Mr. Short joined Fidelity in 1990, after
receiving his M.B.A. from the Massachusetts Institute of Technology.
Thomas Sprague is manager of Advisor Large Cap, which he has managed
since March 1996. Mr. Sprague also manages Large Cap Stock, Trust Earnings
Growth, and Advisor World U.S. Large Cap. Previously, he managed Select
Environmental Services, Select Electronics, Select Software, and Select
Computer Services. Mr. Sprague joined Fidelity in 1989.
Jennifer S. Uhrig is manager of Advisor Mid Cap, which she has managed
since February 1996. Ms. Uhrig also manages Mid Cap Stock. Previously, she
managed Select Retailing, Select Developing Communications, and Select
Telecommunications. Ms. Uhrig joined Fidelity in 1987.
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. and leader of the growth group. Mr. Vanderheiden joined Fidelity in
1971.
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 certain
transfer agent servicing functions for Class A, Class T and Class B
shares of each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant owners
of a class of shares of common stock representing approximately 49% of the
voting power of FMR Corp. Under the Investment Company Act of 1940 (the
1940 Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
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,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income and New York Municipal Income, although it
employs FIIOC to perform these functions for Class A, Class T and
Class B 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 Growth, Natural Resources , Growth Opportunities, Strategic
Opportunities, Equity Income, Income & Growth and High Yield to reduce
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
EACH FUND'S INVESTMENT APPROACH
The value of each fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions.
The value of bonds fluctuates based on changes in interest rates, market
conditions, other economic and political news, and on their quality and
maturity. 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.
The total return from a bond is a combination of income and price gains or
losses. While income is the most important component of bond returns over
time, a fund's emphasis on income does not mean that the fund invests only
in the highest-yielding bonds available, or that it can avoid risks to
principal. In selecting investments for each fund, FMR considers a bond's
income potential together with its potential for price gains or losses. FMR
focuses on assembling a portfolio of income-producing securities that it
believes will provide the best tradeoff between risk and return within the
range of securities that are eligible investments for a fund.
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 funds that invest in 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 portion of the funds'
risks, but there is no guarantee that these strategies will work as FMR
intends. It is important to note that neither the funds nor their yields
are guaranteed by the U.S. Government. 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 each of High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income may invest up to 100% 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.
MID CAP FUND seeks long-term growth of capital.
The fund seeks long-term growth of capital by investing primarily in equity
securities of companies with medium market capitalizations. FMR normally
invests at least 65% of the fund's total assets in these securities. The
fund has the flexibility, however, to invest the balance in other market
capitalizations and security types.
Medium market capitalization companies are those whose market
capitalization falls within the capitalization range of the S&P MidCap 400
at the time of the fund's investment. The S&P MidCap 400 Index is an
unmanaged index of medium-capitalization stocks. Companies whose
capitalization falls outside this range after purchase continue to be
considered medium-capitalized for purposes of the 65% policy. As of
December 31, 1995, the S&P MidCap 400 included companies with
capitalizations of between $107 million and $7.8 billion.
Investing in medium capitalization stocks may involve greater risk than
investing in large capitalization stocks, since they can be subject to more
abrupt or erratic movements. However, they tend to involve less risk than
stocks of small capitalization companies.
EQUITY 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. The S&P 500 is a
registered trademark of Standard & Poor's. 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.
NATURAL 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. These may include companies 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. FMR will seek securities whose prices directly
reflect positive changes in the value of an underlying natural resource or
whose issuers will benefit from particular phases in the overall economic
cycle. Accordingly, the fund may shift its emphasis from one natural
resource industry to another depending on 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.
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."
The fund, under normal conditions, 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.
LARGE CAP FUND seeks long term growth of capital.
The fund seeks long-term growth of capital by investing primarily in equity
securities of companies with large market capitalizations. FMR normally
invests at least 65% of the fund's total assets in these securities. The
fund has the flexibility, however, to invest the balance in other market
capitalizations and security types.
FMR defines large market capitalization companies as those with market
capitalizations of $1 billion or more at the time of the fund's investment.
Companies whose capitalization falls below this level after purchase
continue to be considered large-capitalized for purposes of the 65% policy.
Companies with large market capitalizations typically have a large number
of publicly held shares and a high trading volume, resulting in a high
degree of liquidity. These tend to be quality companies with strong
management organizations. However, large capitalization companies may have
less growth potential than smaller companies and may be able to react less
quickly to changes in the marketplace.
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.
FMR manages the fund to maintain a balance between stocks and bonds. When
FMR's outlook is neutral, it will invest approximately 60% of the fund's
assets in stocks and other equity securities and the remainder in bonds and
other fixed-income securities. FMR may vary from this target if it believes
stocks or bonds offer more favorable opportunities, but will always invest
at least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
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. The fund may invest in
securities of any maturity. 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 high yielding, 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 four
general investment categories: high yield securities, U.S. Government and
investment grade securities, emerging market securities, and foreign
developed market securities. The fund's neutral mix, or the benchmark for
its combination of investments in each category over time, is approximately
40% high yield, 30% U.S. Government and investment-grade, 15% emerging
markets and 15% foreign developed markets.
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. In normal market environments,
FMR expects the fund's asset allocation to approximate the neutral mix
within a range of plus or minus 10% of assets per category. There are no
absolute limits on the percent of assets invested in each category,
however, and FMR reserves the right to change the neutral mix from time to
time.
The HIGH YIELD category includes high-yielding, lower-quality debt
securities consisting mainly of U.S. securities of a quality grade lower
than BBB. The U.S. GOVERNMENT AND INVESTMENT-GRADE category includes
mortgage securities, U.S. Government securities, government agency
securities and other U.S. dollar-denominated securities of investment-grade
quality. The EMERGING MARKET category includes corporate and governmental
debt securities of issuers located in emerging markets. The FOREIGN
DEVELOPED MARKET category includes corporate and governmental debt
securities of issuers located in developed foreign markets. These
investment categories are only general guidelines, and FMR may use its
judgment as to which category an investment falls within. The fund may also
make investments that do not fall within these categories.
By allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant risks of each
investment category through diversification. Diversification, when
successful, can mean higher returns with decreased volatility. However,
each of the fund's four investment categories may experience periods of
volatile returns, and it is possible for all investment categories to
decline at the same time.
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 normally invests only in U.S. Government securities, repurchase
agreements and other instruments related to U.S. Government securities.
Under normal conditions, the fund will invest at least 65% of its total
assets in U.S. Government securities and repurchase agreements for U.S.
Government securities. Other instruments may include futures or options on
U.S. Government securities or interests in U.S. Government securities that
have been repackaged by dealers or other third parties.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between five and twelve
years. As of the fiscal year ended October 31, 1995, the fund's
dollar-weighted average maturity was 9.1 years.
INTERMEDIATE 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.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between three and ten years
under normal conditions. In determining a security's maturity for purposes
of calculating the fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially shorter
than its stated final maturity. As of the fiscal year ended November 30,
1995, the fund's dollar-weighted average maturity was 5.0 years.
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.
The fund, under normal conditions, will invest at least 65% of its total
assets 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.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of three years or less under
normal conditions. In determining a security's maturity for purposes of
calculating the fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially shorter
than its stated final maturity. As of the fiscal year ended October 31,
1995, the fund's dollar-weighted average maturity was 2.1 years.
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 at least 80% of its net assets 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 total assets in tax-free 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 conditions, invest up to 100% of its assets in
municipal securities 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. Although the fund can invest in securities of
any maturity, FMR seeks to manage the fund so that it generally reacts to
changes in interest rates similarly to municipal bonds of comparable
quality with maturities between 12 and 20 years. As of the fiscal year
ended October 31, 1995, the fund's dollar-weighted average maturity was
18.4 years.
INTERMEDIATE MUNICIPAL INCOME FUND seeks the highest level of income exempt
from federal taxes that can be obtained consistent with the preservation of
capital.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal income tax. The fund normally invests
in municipal obligations rated investment-grade or higher. The fund may
also invest more than 25% of its total assets in tax-free 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 conditions, invest up to 100% of its assets in
municipal securities subject to the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between three and ten years
under normal conditions. FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between seven and ten years. As of the fiscal year ended
November 30, 1995, the fund's dollar-weighted average maturity was 8.6
years.
SHORT-INTERMEDIATE MUNICIPAL INCOME 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
invests at least 80% of its net assets in securities whose interest is free
from federal income tax. The fund may, under normal conditions, invest up
to 100% of its 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 tax-free 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.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between two and five years
under normal conditions. As of the fiscal year ended November 30, 1995, the
fund's dollar-weighted average maturity was 3.4 years.
CALIFORNIA MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and California state personal income tax by
investing primarily in municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and California income taxes. The fund
normally invests in municipal securities of investment-grade quality. The
fund may, under normal conditions, invest up to 100% of its assets in
municipal securities subject to the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and eighteen
years.
The performance of California Municipal Income is affected by the economic
and political conditions within the state of California. California
suffered a severe economic recession between 1990- 1993, which resulted in
broad-based revenue shortfalls for the State and many local governments.
California's fiscal condition has improved as its economy has been in a
sustained recovery since 1994. During the recession, the State
substantially reduced local assistance, and further reductions could
adversely affect the financial condition of cities, counties and other
government agencies facing constraints in their own revenue collections.
California's long-term credit rating has been reduced in the past several
years. California voters in the past have passed amendments to the
California Constitution and other measures that limit the taxing and
spending authority of California governmental entities, and future voter
initiatives could result in adverse consequences affecting California
municipal bonds.
NEW YORK MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and New York State and City personal income taxes
by investing primarily in municipal securities.
The fund normally invests at least 80% of its net assets in securities
whose interest is free from federal and New York State and City personal
income taxes. The fund normally invests in municipal securities of
investment-grade quality. The fund may, under normal conditions, invest up
to 100% of its assets in municipal securities subject to the federal
alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and eighteen
years. As of the fiscal year ended October 31, 1995, the fund's
dollar-weighted average maturity was 16.5 years.
The performance of New York Municipal Income Fund is affected by the
economic and political conditions within the state of New York. Both New
York City and State have recently experienced significant financial
difficulty, and both the City's and the State's credit ratings are among
the lowest in the country.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to its investment strategy.
Each of the Equity Funds and High Yield reserves the right to invest
without limitation in preferred stocks and investment-grade debt
instruments for temporary, defensive purposes.
Each of Emerging Markets Income, Strategic Income, Government Investment,
Intermediate Bond, and Short Fixed-Income reserves the right to invest
without limitation in investment-grade money market or short-term debt
instruments for temporary, defensive purposes.
High Income Municipal, Intermediate Municipal Income, and
Short-Intermediate Municipal Income do not expect to invest in federally
taxable obligations. California Municipal Income and New York Municipal
Income do not expect to invest in federally or state taxable obligations.
Each of High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income, 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 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, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Current holdings and recent investment strategies are described in each
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,
Mid Cap, Natural Resources , Growth Opportunities, Large Cap, Equity
Income, Income & Growth, High Yield, Government Investment, Intermediate
Bond, Short Fixed-Income, High Income Municipal, and Intermediate Municipal
Income may not purchase more than 10% of the outstanding voting securities
of a single issuer.
With respect to 100% of its total assets, each of Equity 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. In
general, bond prices rise when interest rates fall, and vice versa. 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"), and
tax-exempt lower-quality debt securities (sometimes called "municipal junk
bonds") are considered to have speculative characteristics, and involve
greater risk of default or price changes due to changes in the issuer's
creditworthiness, or they may already be in default. The market prices of
these securities may fluctuate more than higher-quality securities and may
decline significantly in periods of general or regional economic
difficulty.
The table on the following page 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 the fiscal year ended 1995, 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 YEAR ENDED 1995 DEBT HOLDINGS, BY RATING
(AS A % OF INVESTMENTS IN EACH RATING CATEGORY) (AS A % OF INVESTMENTS IN
EACH RATING CATEGORY)
INVESTMENT GRADE* LOWER QUALITY*
STANDARD & POOR'S AAA, AA, A BBB BB B CCC CC,C D NR
EQUITY FUNDS:
Overseas .20 -- .03 -- -- -- -- .21
Equity Growth -- -- .01 -- -- -- -- --
Natural Resources -- -- -- -- -- -- -- --
Growth Opportunities 10.06 -- -- -- -- -- -- .02
Strategic Opportunities 21.71 -- .14 .08 -- -- .07 .25
Equity Income 3.48 .05 .48 .68 -- -- -- .36
Income & Growth 27.45 2.37 1.18 2.01 .28 -- -- 6.07
TAXABLE INCOME FUNDS:
Emerging Markets Income .47 1.22 17.36 10.16 -- -- -- 48.37
High Yield -- .10 8.30 42.90 8.20 -- 3.17 16.45
Strategic Income 37.14 .91 9.65 22.37 1.74 -- .48 12.76
Government Investment 95.23 -- -- -- -- -- -- .57
Intermediate Bond 75.68 .34 -- -- -- -- -- .73
Short Fixed-Income 58.35 15.64 6.44 .16 -- -- -- 6.64
MUNICIPAL FUNDS:
High Income Municipal 22.70 21.95 8.74 1.47 .11 -- .07 40.22
Intermediate Municipal Income 76.01 1.21 -- -- -- -- -- 12.08
Short Intermediate Municipal Income 61.70 1.20 8.10 -- -- -- -- 22.02
New York Municipal Income 58.20 23.40 -- -- -- -- -- --
MOODY'S INVESTORS SERVICE, INC. Aaa, Aa, A Baa Ba B Caa Ca C NR
EQUITY FUNDS:
Overseas .20 -- -- .24 -- -- -- --
Equity Growth -- -- .01 -- -- -- -- --
Natural Resources -- -- -- -- -- -- -- --
Growth Opportunities 10.07 -- -- -- -- -- -- .02
Strategic Opportunities 21.71 -- .22 -- .07 -- -- .25
Equity Income 3.49 .12 .09 1.05 -- -- -- .31
Income & Growth 29.21 2.14 1.51 2.74 .17 .05 -- 3.54
TAXABLE INCOME FUNDS:
Emerging Markets Income .39 1.23 9.20 28.93 -- -- -- 37.82
High Yield -- -- 3.45 48.11 10.66 1.61 .11 15.16
Strategic Income 38.07 .77 5.47 29.10 1.43 -- -- 10.21
Government Investment 95.81 -- -- -- -- -- -- --
Intermediate Bond 76.04 .26 -- -- -- -- -- .45
Short Fixed-Income 58.09 14.70 6.82 .38 -- -- -- 7.25
MUNICIPAL FUNDS:
High Income Municipal 20.13 25.39 11.11 .52 .51 -- -- 37.60
Intermediate Municipal Income 85.93 1.38 -- -- -- -- -- 1.99
Short Intermediate Municipal Income 80.73 8.23 .73 -- -- -- -- 3.32
New York Municipal Income 57.70 26.50 -- -- -- -- -- --
(AS A % OF INVESTMENTS)
SECURITIES NOT Emerging High Short-Inter
mediate
RATED BY Growth Strategic Equity Income Markets High Strategic
Intermediate Short Income Municipal
MOODY'S OR S&P(dagger) Opportunities Opportunities Income & Growth Income
Yield Income Bond Fixed-Income Municip
al Income
Investment Grade (double dagger) -- -- -- .05 .65 -- .03 .04 2.16 2.85 .19
Lower Quality(double dagger) .02 .25 .31 2.35 34.10 12.37 7.09 -- 1.17
26.49 --
Total .02 .25 .31 2.40 34.75 12.37 7.12 .04 3.33 29.34 .19
* FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
(dagger) THE DOLLAR-WEIGHTED AVERAGE PERCENTAGES REFLECTED IN THIS TABLE
MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
(double dagger) AS DETERMINED BY FMR
RESTRICTIONS: For all of the Equity Funds, 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 Investor Service (Moody's) or rated in the
equivalent categories by Standard & Poor's (S&P), or is unrated but judged
to be of equivalent quality by FMR.
Natural Resources currently intends to limit its investment in lower than
Baa-quality debt securities to less than 35% of its assets and currently
intends to limit its investments in debt securities to Caa-quality and
above.
Each of Overseas, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Equity Income, and Income & Growth currently
intends to limit its investments in lower than Baa-quality debt securities
to less than 35% of its assets.
Each of Short Fixed-Income, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income normally invests only in investment-grade securities,
but reserves the right to invest up to 5% of its assets in below
investment-grade securities. A security is considered to be
investment-grade if it is rated investment-grade by Moody's, S&P, Duff &
Phelps Credit Rating Co. (Duff & Phelps), or Fitch Investors Service, L.P.
(Fitch), or is unrated but judged by FMR to be of equivalent quality.
Intermediate Bond invests only in investment-grade securities, and will
limit its investments in medium quality securities to 5% of its assets. A
security is considered to be investment-grade or medium quality if it is
rated investment-grade or medium quality, respectively, by Moody's, S&P,
Duff & Phelps, or Fitch, or is unrated but judged by FMR to be of
equivalent quality.
High Income Municipal does not currently intend to invest more than 10% of
its total assets in bonds that are in default.
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. 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 of
municipal securities holders. A fund may own a municipal security directly
or through a participation interest.
CREDIT SUPPORT. Issuers may employ various forms of credit enhancement,
including letters of credit, guarantees, or insurance from a bank,
insurance company, or other entity. These arrangements expose the fund to
the credit risk of the entity. In the case of foreign entities, extensive
public information about the entity may not be available and the entity may
be subject to unfavorable political, economic, or governmental developments
which might affect its ability to honor its commitment.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of California or New York or its counties, municipalities,
authorities, or other subdivisions. The ability of issuers to repay their
debt can be affected by many factors that impact the economic vitality of
either the state or a region within the state.
Other state municipal securities 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. The economy
of Puerto Rico is closely linked to the U.S. economy and will depend on the
strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives.
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 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 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 have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security'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.
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 fund (except Overseas, Emerging Markets Income, High
Yield, and Strategic Income) may not purchase a security if, as a result,
more than 10% of its 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 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.
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 total assets each of Equity
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in the securities of any one issuer.
With respect to 75% of its total assets each of Overseas, Mid Cap,
Natural Resources , Growth Opportunities, Large Cap, Equity Income,
Income & Growth, High Yield, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal, and Intermediate Municipal
Income may not purchase a security if, as a result, more than 5% would be
invested in the securities of any one issuer.
Emerging Markets Income, Strategic Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income 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 one issuer and, with respect to 50% of total assets,
does not invest more than 5% of its total assets in any one issuer.
A fund may not invest more than 25% of its total assets in any one
industry.
These limitations do not apply to U.S. Government securities.
Each of High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income may invest more than 25% of its total assets in
tax-free securities that finance similar types of projects.
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 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets; however, High Income Municipal, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income 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.
MID CAP FUND seeks long-term growth of capital.
EQUITY GROWTH FUND 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.
NATURAL 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 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.
LARGE CAP FUND seeks long-term growth of capital.
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.
INTERMEDIATE 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. The fund normally invests at least 80% of its net
assets in municipal obligations whose interest is free from federal income
tax.
INTERMEDIATE MUNICIPAL INCOME 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 invests at least 80% of its net
assets in securities whose interest is free from federal income tax.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks as high a level of current
income, exempt from federal income tax, as is consistent with preservation
of capital. The fund normally invests at least 80% of its net assets in
municipal obligations whose interest is free from federal income tax.
CALIFORNIA MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and California state personal income tax by
investing primarily in municipal securities. The fund normally invests at
least 80% of its net assets in securities whose interest is free from
federal and California income taxes.
NEW YORK MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and New York State and City personal income taxes
by investing primarily in municipal securities. The fund normally invests
at least 80% of its net assets in securities whose interest is free from
federal and New York State and City personal income taxes.
With respect to 75% of its total assets, each of Overseas, Mid Cap,
Natural Resources , Growth Opportunities, Large Cap, Equity Income,
Income & Growth, High Yield, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal and Intermediate Municipal Income
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 total
assets, each of Equity 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, Mid Cap,
Natural Resources , Growth Opportunities, Large Cap, Equity Income,
Income & Growth, High Yield, Government Investment, Intermediate Bond,
Short Fixed-Income, High Income Municipal, and Intermediate Municipal
Income may not purchase more than 10% of the outstanding voting securities
of a single issuer. With respect to 100% of its total assets, each of
Equity Growth and Strategic Opportunities may not purchase more than 10% of
the outstanding voting securities of a single issuer.
Each fund may not invest more than 25% of its total assets in any one
industry.
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 that
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 a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Equity Income
pays FMR a monthly management fee at an annual rate of 0.50% of its average
net assets. The fee for Mid Cap, Equity Growth, Natural Resources ,
Large Cap, Income & Growth, Emerging Markets Income, High Yield, Strategic
Income, Government Investment, Intermediate Bond, Short Fixed-Income, High
Income Municipal, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income 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
capitalization-weighted Morgan Stanley Capital International Europe,
Australasia, and 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, Mid Cap, Equity Growth, Natural
Resources , Growth Opportunities, Strategic Opportunities, Large Cap,
and Income & Growth, 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, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income, 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 Overseas, Growth Opportunities and Strategic Opportunities and
the least of the results obtained will be used in calculating the
performance adjustment.
The following table states the management fee for each fund for its most
recent fiscal year end.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Group Individual Total
Fee Rate Fund Fee Manageme
Rate nt Fee
Overseas [A] 0.31% 0.45% 0.81%[ E ]
Mid Cap [B] 0.31% 0.30% 0.61%
Equity Growth 0.31% 0.30%[C 0.61%[C]
]
Natural Resources 0.31% 0. 45 % [D 0.76 %[ D]
] [E ]
Growth Opportunities [A] 0.31% 0.30% 0.69%
Strategic Opportunities [A] 0.31% 0.30% 0.62%
Large Cap [B] 0.31% 0.30% 0.61%
Equity Income n/a n/a 0.50%
Income & Growth 0.31% 0. 20 % [F] 0. 51 % [F]
Emerging Markets Income 0.15% 0.55% 0.70%
High Yield 0.15% 0.45% 0.60%
Strategic Income 0.15% 0.45% 0.60%
Government Investment 0.15% 0.30% 0.45%
Intermediate Bond 0.15% 0.30% 0.45%
Short Fixed-Income 0.15% 0.30% 0.45%
High Income Municipal 0.15% 0.25% 0.40%
Intermediate Municipal Income 0.15% 0.25% 0.40%
Short-Intermediate Municipal Income 0.15% 0.25% 0.40%
California Municipal Income [B] 0.15% 0.25% 0.40%
New York Municipal Income [B] 0.15% 0.25% 0.40%
</TABLE>
[A] THE BASIC FEE RATE FOR THE FISCAL YEAR ENDED 1995 WAS 0.76% FOR
OVERSEAS, 0.61% FOR GROWTH OPPORTUNITIES AND 0.61% FOR STRATEGIC
OPPORTUNITIES.
[B] ESTIMATED
[C] 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 WAS NOT IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN 0.64%.
[D] EFFECTIVE SEPTEMBER 1, 1996, FMR VOLUNTARILY AGREED TO REDUCE THE
FUND'S INDIVIDUAL FUND FEE RATE FROM 0.45% TO 0.30%. IF THIS REDUCTION WERE
IN EFFECT, THE TOTAL FEE WOULD HAVE BEEN 0.61%.
[ E ] THIS RATE WAS HIGHER THAN THAT OF MOST OTHER MUTUAL FUNDS, BUT
NOT NECESSARILY HIGHER THAN THOSE OF A TYPICAL INTERNATIONAL FUND, DUE TO
THE GREATER COMPLEXITY, EXPENSE AND COMMITMENT OF RESOURCES INVOLVED IN
INTERNATIONAL INVESTING.
[F] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO REDUCE THE
FUND'S INDIVIDUAL FUND FEE RATE FROM 0.20% TO 0.15%. IF THIS REDUCTION WERE
IN EFFECT, THE TOTAL FEE WOULD HAVE BEEN 0.46%.
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 the fiscal year ended 1995, FMR, on behalf of each fund with
sub-advisory agreements paid FMR U.K., FMR Far East, FIJ, and FIIA fees
equal to less than 0.01% of each fund's average net assets.
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 Bank & Trust Company (State Street) performs certain
transfer agency, dividend disbursing and shareholder services for Class
T of the Equity Funds, Emerging Markets Income, High Yield, Strategic
Income, Government Investment, Intermediate Bond, and Short Fixed-Income.
FIIOC performs certain transfer agency and dividend disbursing and
shareholder services for Class A of the Equity Funds, Emerging Markets
Income, High Yield, Strategic Income, Government Investment, Intermediate
Bond, and Short Fixed-Income, and for Class B of Overseas, Mid Cap,
Natural Resources , Strategic Opportunities, Large Cap, Equity
Income, Emerging Markets Income, High Yield, Strategic Income, Government
Investment and Intermediate Bond Fund. FSC calculates the NAV and dividends
for each class of the Equity Funds, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Intermediate Bond, and Short
Fixed-Income, and maintains the general accounting records and
administers the securities lending program for each fund. State Street's
address is P.O. Box 8302, Boston, Massachusetts 02266-8302.
For the fiscal year ended 1995, transfer agent and pricing and bookkeeping
fees paid (as a percentage of average net assets) amounted to the
following. The amounts disclosed are before reimbursements, if any.
Class T Class B to Each Fund
to State FIIOC to FSC
Street
Overseas 0.30% 0.25%[A 0.05%
]
Equity Growth 0.22% * 0.03%
Natural Resources 0.31% 0.25%[A 0.06%
]
Growth Opportunities 0.20% * 0.01%
Strategic Opportunities 0.24% 0.27% 0.06%
Equity Income 0.23% 0.25% 0.05%
Income & Growth 0.20% * 0.02%
Emerging Markets Income 0.36% 0.41% 0.11%
High Yield 0.22% 0.23% 0.03%
Strategic Income 0.24% 0.20% 0.10%
Government Investment 0.28% 0.24% 0.04%
Intermediate Bond 0.21% 0.26% 0.04%
Short Fixed-Income 0.22% * 0.04%
* FUND DOES NOT OFFER CLASS B SHARES.
[A] B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
State Street has entered into sub-arrangements pursuant to which FIIOC
performs certain transfer agency, dividend disbursing and shareholder
services for Class T shares. State Street pays FIIOC a portion of
its fee for Class T accounts for which FIIOC provides limited
services, or its full fee for Class T accounts that FIIOC maintains
on its behalf.
UMB has entered into a sub-arrangement with FIIOC. FIIOC performs transfer
agency, dividend disbursing and shareholder services for Class A, Class
T and Class B shares of High Income Municipal, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income. UMB has also entered into a sub-arrangement
with FSC. FSC calculates the NAV and dividends for each class of High
Income Municipal, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income and New York Municipal
Income, and maintains each fund's general accounting records. All of the
fees are paid to FIIOC and FSC by UMB, which is reimbursed by the
applicable class or the fund, as appropriate, for such payments.
For the fiscal year ended 1995, transfer agent and pricing and bookkeeping
fees paid (as a percentage of average net assets) amounted to the
following. The amounts disclosed are before reimbursements, if any.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
UMB to UMB to UMB to
FIIOC on FIIOC on FSC on
behalf of behalf of behalf of
Class T Class B each fund
High Income Municipal 0.19% 0.19% 0.04%
Intermediate Municipal Income 0.19% 0.19% 0.07%
Short-Intermediate Municipal Income 0.20% * 0.24%
New York Municipal Income[A] 0.19% 0.19% 0.05%
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
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. Class A of the Equity
Funds 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 the Bond Funds, the Intermediate-Term Bond
Funds, and the Short-Term Bond Funds may pay FDC a distribution fee at an
annual rate of 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 the Equity Funds currently pays FDC monthly at an annual
rate of 0.25% of its average net assets throughout the month; Class A of
the Bond Funds, the Intermediate-Term Bond Funds, and the Short-Term Bond
Funds currently pays FDC monthly at an annual rate of 0.15% of its average
net assets throughout the month. Class A distribution rates may be
increased only when the Trustees believe that it is in the best interests
of Class A shareholders to do so.
The Class A Plans specifically recognize that FMR may make payments from
its management fee revenue, past profits, or other resources to FDC for
expenses incurred in connection with the distribution of Class A shares,
including payments made to investment professionals that provide
shareholder support services or engage in the sale of the funds' Class A
shares. The Board of Trustees of each fund has authorized such payments.
Class T shares of each fund have adopted a DISTRIBUTION AND SERVICE
PLAN. Under the Plans, Class T 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 T shares. Class T
of Mid Cap, Equity Growth, Equity Income, and Large Cap 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 T of Overseas, Natural Resources , Growth Opportunities,
Strategic Opportunities, and Income & Growth may pay FDC a distribution fee
at an annual rate up to 0.65% of its average net assets, or such lesser
amount as the Trustees may determine from time to time. Class T of
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Intermediate Bond, High Income Municipal, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income 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 T of each of the Equity Funds currently pays FDC monthly at an
annual rate of 0.50% of its average net assets throughout the month;
Class T of each of the Bond Funds and the Intermediate-Term Bond
Funds currently pays FDC monthly at an annual rate of 0.25% of its average
net assets throughout the month; and Class T of each of the
Short-Term Bond Funds currently pays FDC monthly at an annual rate of 0.15%
of its average net assets throughout the month. Class T distribution
fee rates may be increased only when the Trustees believe that it is in the
best interests of Class T shareholders to do so.
Up to the full amount of the Class A and Class T distribution
fee s may be reallowed to investment professionals, as compensation
for their services in connection with the distribution of Class A and
Class T shares and for providing support services to Class A and
Class T shareholders, based upon the level of such services provided.
These services may include, without limitation, answering investor
inquiries regarding the funds; providing assistance to investors in
changing dividend options, account designations, and addresses; performing
subaccounting and maintaining Class A and Class T shareholder
accounts; processing purchase and redemption transactions, including
automatic investment and redemption of investor account balances; providing
periodic statements showing an investor's account balance and integrating
other transactions into such statements; and performing other
administrative services in support of the shareholder.
Class B shares of each fund 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. Class B of
each fund may pay FDC a distribution fee at an annual rate of up to 0.75%
of its average net assets, or such lesser amount as the Trustees may
determine from time to time.
Class B of each of Overseas, Mid Cap, Natural Resources , Strategic
Opportunities, Large Cap, and Equity Income currently pays FDC monthly at
an annual rate of 0.75% of its average net assets throughout the month.
Class B of each of the Bond Funds and the Intermediate-Term Bond Funds
currently pays FDC monthly at an annual rate of 0.65% of its average net
assets throughout the month. Class B distribution fee rates for each of the
Bond Funds and Intermediate-Term Bond Funds may be increased only when the
Trustees believe that it is in the best interests of the Class B
shareholders to do so.
In addition, pursuant to each Class B Plan, investment professionals are
compensated at an annual rate of 0.25% of Class B's average net assets
throughout the month for providing personal service to and/or maintenance
of Class B shareholder accounts.
The Class T and Class B Plans specifically recognize that FMR may
make payments from its management fee revenue, past profits, or other
resources to reimburse FDC for expenses incurred in connection with the
distribution of the applicable class's shares, including payments made to
investment professionals that provide shareholder support services or
engage in the sale of the funds' shares. The Board of Trustees of each fund
has authorized such payments.
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 certain funds to reduce the fund's
custodian or transfer agent fees.
The portfolio turnover rates for Mid Cap and Large Cap are not expected to
exceed 200%, and 100% respectively, for the first fiscal period ending
November 30, 1996. The portfolio turnover rate for California Municipal
Income is not expected to exceed 100% for its first fiscal period ending
October 31, 1996.
The portfolio turnover rate for the fiscal year ended 1995 was 47% for
Overseas, 97% for Equity Growth, 161% for Natural Resources , 39% for
Growth Opportunities, 142% for Strategic Opportunities, 80% for Equity
Income, 297% for Income & Growth, 305% for Emerging Markets Income, 112%
for High Yield, 193% for Strategic Income, 261% for Government Investment,
189% for Intermediate Bond, 179% for Short Fixed-Income, 37% for High
Income Municipal, 53% for Intermediate Municipal Income, 80% for
Short-Intermediate Municipal Income, and 0% for New York Municipal Income.
The portfolio turnover rate for New York Municipal Income is not expected
to exceed 100% for the fiscal year ending October 31, 1996. 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
Your investment professional (including broker-dealers) may charge you a
transaction fee with respect to the purchase and sale of fund shares. Read
your investment professional's program materials for any additional service
features or fees that may apply. Certain features of the funds, such as
minimum initial or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed on the right.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, municipal 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.
If you have selected Fidelity Advisor funds as an investment option through
an insurance company group pension program, please contact the provider
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 701/2 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 and
Class T shares of each fund: the offering price and the NAV. If you
pay a front-end sales charge or qualify for a reduction as described on
page , your Class A or Class T share price will be the offering price.
If you qualify for a front-end sales charge waiver as described
on page , your Class T share price will be the NAV. When you
buy Class A or Class T shares at the offering price, the transfer
agent deducts the appropriate sales charge and invests the rest in Class
A or Class T of the fund , as appropriate . 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.
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 three 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 are not available for Class A or Class B shares.
Share certificates are available for Class T 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 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.
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) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund, or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500*
For Fidelity Advisor retirement accounts $500
Through regular investment plans $1,000*
TO ADD TO AN ACCOUNT $250*
For Fidelity Advisor retirement accounts $100
Through regular investment plans $100*
MINIMUM BALANCE $1,000*
For Fidelity Advisor retirement accounts NONE
* ACCOUNT MINIMUMS ARE WAIVED FOR PURCHASES INTO NON-RETIREMENT ACCOUNTS
WITH DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST ACCOUNT.
PURCHASE AMOUNTS OF MORE THAN $100,000 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.
NEW YORK MUNICIPAL INCOME AND CALIFORNIA MUNICIPAL INCOME MAY NOT BE
AVAILABLE FOR SALE IN YOUR STATE. PLEASE CHECK WITH YOUR INVESTMENT
PROFESSIONAL.
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 or, if you
YOUR
INVESTMENT
PROFESSIONAL or, if you are investing through a are investing through a broker-dealer or
broker-dealer or insurance insurance representative, call 1-800-522-7297. If
representative, call 1-800-522-7297. you are investing through a bank representative,
If you are investing through a call 1-800-843-3001.
bank representative, call (small solid bullet) Exchange from the same class of another
1-800-843-3001. Fidelity Advisor fund account with the same
(small solid bullet) Exchange from the
same class of registration, including name, address, and
another Fidelity Advisor fund account taxpayer ID number.
with the same registration, including
name, address, and taxpayer ID
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 complete name
application. Make your check of the fund of your choice and note the applicable
payable to the complete name of the class. Indicate your fund account number on your
fund of your choice and note the check and mail to the address printed on your
applicable class. Mail to the address account statement.
indicated on the application. (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 professional.
check to your investment
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
Fidelity DART Depository
Acct #00159759
FBO: (Account name)
(Account number)
Specify the complete name of the fund of your
choice, 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. If you sell your Class A, Class T, or Class B
shares of Natural Resources after holding them less than 60 days, you will
pay a redemption fee equal to 1.00% of the value of those shares. Natural
Resources will charge a redemption fee on shares purchased on or after
March 1, 1997.
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 shares of the same class of
another Fidelity Advisor fund or shares of other Fidelity funds, which can
be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR ACCOUNT SHARES, leave at least
$1,000 worth of shares in the account to keep it open (account minimums do
not apply to retirement and Fidelity Defined Trust accounts.)
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service 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 account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, 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 purchased 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
P.O. Box 770002
Cincinnati, OH 45277-0081
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 Municipal Income, 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.
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE All account types except retirement (small solid bullet) Maximum check request: $100,000.
YOUR INVESTMENT
PROFESSIONAL
(phone_graphic) All account types (small solid bullet) You may exchange to the same class of other
Fidelity Advisor funds or to other Fidelity funds if
both accounts are registered with the same
name(s), address, and taxpayer ID number.
Mail or in Person
(mail_graphic)
(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of instruction must be signed by all
Sole Proprietorship, UGMA, UTMA persons required to sign for transactions, exactly
as their names appear on the account and sent to
your investment professional.
(small solid bullet) The account owner should complete a retirement
Retirement account 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 (small solid bullet) The trustee must sign the letter indicating capacity
as trustee. If the trustee's name is not in the
account registration, provide a copy of the trust
document certified within the last 60 days.
Business or Organization (small solid bullet) At least one person authorized by corporate
resolution to act on the account must sign the
letter.
Executor, Administrator, (small solid bullet) 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 (small solid bullet) 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.
(small solid bullet) 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.
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Check
(check_graphic) For all non-retirement Short (small solid bullet) Minimum check: $500.
Fixed-Income and Short-Intermediate (small solid bullet) All account owners must sign a signature card to
Municipal Income accounts only. receive a checkbook.
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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 and
prospectuses 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 and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. By telephone or in writing, you may sell your shares
and buy shares of the same class of other Fidelity Advisor funds; Class A
and Class T shares for Initial Class shares of Daily Money Fund: U.S.
Treasury Portfolio or Daily Money Fund: Money Market Portfolio, or shares
of Daily Tax Exempt Money Fund; and Class B shares for Class B shares of
Daily Money Fund: U.S. Treasury Portfolio. The Class A or Class T
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
(although exchanges out of Natural Resources are unlimited) , 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. Class A and Class T shares with an
account value of $10,000 or more are eligible for this program. Because of
Class A's and Class T 's front-end sales charge s , you may not
want to set up a systematic withdrawal plan during a period when you are
buying Class A or Class T 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 PROGRAMS
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 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).
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TO DIRECT DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST TO CLASS T OF A
FIDELITY ADVISOR FUND
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MINIMUM MINIMUM SETTING UP OR CHANGING
INITIAL ADDITIONAL (small solid bullet) For a new or existing account, ask your investment professional
Not Not for the appropriate enrollment form.
Applicable Ap (small solid bullet) To change the fund to which your distributions are directed,
plicable contact your investment professional for instructions.
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FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your investment professional after both accounts
semi-annually, or 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 balance of
$1,000.
(small solid bullet) Both accounts must have the same registration and taxpayer ID
numbers.
(small solid bullet) Call at least 2 business days prior to your next scheduled
exchange date.
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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,
Mid Cap, Equity Growth, Natural Resources , Growth Opportunities,
Strategic Opportunities, and Large Cap are distributed in December;
dividends for Equity Growth and Equity Income may also be distributed in
January; dividends for Emerging Markets Income, Strategic Income, High
Yield, Intermediate Bond, Government Investment, Short Fixed-Income, High
Income Municipal, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income 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(registered trademark) PROGRAM. 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. To change your
distribution option, call 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.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 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
or Class T distributions to a fund with a front-end sales charge, you
will not pay a sales charge on those purchases.
When each of Overseas, Mid Cap, Equity Growth, Natural Resources ,
Growth Opportunities, Strategic Opportunities, Large Cap, Equity Income,
and Income & Growth deducts a distribution from its NAV, the reinvestment
price is the applicable class 's NAV at the close of business that
day. Dividends from Emerging Markets Income, High Yield, Strategic Income,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income will be
reinvested at the applicable fund's NAV on the last day of the month.
Capital gain distributions from the Bond Funds, the Intermediate-Term Bond
Funds, and the Short-Term Bond 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 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,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income earn is
distributed to shareholders as income dividends. Interest that is federally
tax-free remains tax-free when it is distributed. Distributions from each
fund (except High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income), however, are subject to federal income tax. Each
fund (except California Municipal Income and New York Municipal Income) 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 fund (except High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income), are taxed as dividends; long-term capital gain
distributions are taxed as long-term capital gains.
However, for shareholders of High Income Municipal, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income, 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.
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.
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. Each of High Income Municipal, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income may invest up to 100% of its assets
in these securities. Individuals who are subject to the tax must report
this interest on their tax returns.
A portion of the dividends from High Income Municipal, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income 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 each of these
funds' income from each state to help you calculate your taxes.
To the extent that New York Municipal Income's income dividends are derived
from state tax-free investments, they will be free from New York State and
City personal income taxes.
To the extent that California Municipal Income's income dividends are
derived from interest on California state tax-free investments, they will
be free from California state personal income tax. Distributions derived
from obligations that are not California state tax-free obligations, as
well as distributions from short or long-term capital gains, are subject to
California state personal income tax. Corporate taxpayers should note that
the fund's income dividends and other distributions are not exempt from
California state franchise or corporate income taxes.
During the fiscal year ended 1995, 100% of the income dividends from High
Income Municipal, Intermediate Municipal Income, Short-Intermediate
Municipal Income, and New York Municipal Income was free from federal
income tax, and 100% of New York Municipal Income fund's income dividends
was free from New York taxes. During the fiscal year ended 1995, 18.51% of
High Income Municipal's, 0.64% of Intermediate Municipal Income's , and
17.97% of Short-Intermediate Municipal Income'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
distribution 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 funds, 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 offering price and NAV are 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 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 the
result by the number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations,
if available. 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,
divided by the sum of one minus the sales charge percentage. Class A has
a maximum sales charge of 5.25% of the offering price for the Equity Funds;
4.25% of the offering price for the Bond Funds; 3.25% of the offering price
for the Intermediate-Term Bond Funds; and 1.50% of the offering price for
the Short-Term Bond Funds. Class T has a maximum sales charge of 3.50%
of the offering price for the Equity Funds; 3.50% of the offering price for
the Bond Funds; 2.75% of the offering price for the Intermediate-Term Bond
Funds; and 1.50% of the offering price for the Short-Term Bond Funds. The
REDEMPTION PRICE (price to sell one share) is the applicable class's NAV,
minus any applicable CDSC or redemption fee .
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A
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EQUITY FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of
As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 5.25% 5.54% 4.75%
$50,000 to $99,999 4.25% 4.44% 3.75%
$100,000 to $249,999 3.25% 3.36% 2.75%
$250,000 to $499,999 2.50% 2.56% 2.00%
$500,000 to $999,999 2.00% 2.04% 1.75%
$1,000,000 or more 1.00% 1.01% 0.75%
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BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of
As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 4.25% 4.44% 3.75%
$50,000 to $99,999 3.50% 3.63% 3.00%
$100,000 to $249,999 3.00% 3.09% 2.50%
$250,000 to $499,999 2.00% 2.04% 1.75%
$500,000 to $999,999 1.50% 1.52% 1.25%
$1,000,000 or more 0.50% 0.53% 0.50%
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INTERMEDIATE-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of
As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 3.25% 3.36% 2.75%
$50,000 to $99,999 2.75% 2.83% 2.25%
$100,000 to $249,999 2.25% 2.30% 1.75%
$250,000 to $499,999 1.75% 1.78% 1.50%
$500,000 to $999,999 1.25% 1.27% 1.00%
$1,000,000 or more 0.50% 0.53% 0.50%
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SHORT-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of
As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None None None
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SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS T
EQUITY FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 3.50% 3.63% 3.00%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.50% 2.56% 2.00%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 3.50% 3.63% 3.00%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.50% 2.56% 2.00%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
INTERMEDIATE-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 2.75% 2.83% 2.25%
$50,000 to $99,999 2.25% 2.30% 2.00%
$100,000 to $249,999 1.75% 1.78% 1.50%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
SHORT-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
* SEE SECTION ENTITLED FINDERS FEE.
FINDERS FEE. On eligible purchases of Class T shares in amounts of
$1 million or more, investment professionals will be compensated with a fee
at the rate of 0.25% of the amount purchased. Finders fees are not paid
to trust departments.
Any assets on which a finders fee has been paid will bear a contingent
deferred sales charge ( Class T CDSC) if they do not remain in
Class T shares of the Fidelity Advisor funds, Initial Class shares
of Daily Money Fund: US Treasury Portfolio or Daily Money Fund: Money
Market Portfolio, or shares of Daily Tax-Exempt Money Fund, for a period of
at least one uninterrupted year. The Class T CDSC will be 0.25% of
the lesser of the cost of the shares at the initial date of purchase or the
value of the shares at redemption, not including any reinvested dividends
or capital gains. Class T CDSC shares representing reinvested
dividends and capital gains, if any, will be redeemed first, followed by
other Class T CDSC shares that have been held for the longest period
of time.
Shares held by an insurance company separate account will be aggregated at
the client (e.g., the contract holder or plan sponsor) level, not at the
separate account level. Upon request, anyone claiming eligibility for the
0.25% fee with respect to shares held by an insurance company separate
account must provide FDC access to records detailing purchases at the
client level.
With respect to employee benefit plans, the Class T CDSC does not
apply to the following types of redemptions; (i) plan loans or
distributions or (ii) exchanges to non-Advisor fund investment options.
With respect to Individual Retirement Accounts, the Class T CDSC
does not apply to redemptions made for disability, payment of death
benefits, or required partial distributions starting at age 70.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedules:
EQUITY FUNDS THAT OFFER CLASS B SHARES:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 2 years 3%
2 years 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%
BOND FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 2 years 3%
2 years 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%
INTERMEDIATE-TERM BOND FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 3%
1 year to less than 2 years 2%
2 years to less than 3 years 1%
3 years to less than 4 years [B] 0%
[A] AFTER A MAXIMUM HOLDING PERIOD OF SIX YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS T SHARES OF THE SAME FIDELITY ADVISOR
FUND.
[B] AFTER A MAXIMUM HOLDING PERIOD OF FOUR YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS T SHARES OF THE SAME FIDELITY ADVISOR
FUND.
When exchanging Class B shares of one fund for Class B shares of another
Fidelity Advisor fund or Class B shares of Daily Money Fund: U.S. Treasury
Portfolio, your Class B shares retain the CDSC schedule in effect when they
were originally purchased.
Investment professionals with whom FDC has agreements receive as
compensation from FDC a concession equal to 3.00% (2.00% for the
Intermediate-Term Bond Funds) 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.
Class B shares acquired through distributions (dividends or capital
gains) will not be subject to a CDSC. 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.
CONVERSION FEATURE. After a maximum holding period of six years from the
initial date of purchase (four years for the Intermediate-Term Bond Funds),
Class B shares and any capital appreciation associated with those shares,
convert automatically to Class T shares of the same Fidelity Advisor
fund. Conversion to Class T 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 T 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.
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,
Class T 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 the same class 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, if any, you paid on Class
T or Class B shares will be reimbursed to you by reinvesting that
amount in Class T or Class B shares, as applicable. 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 holding
period schedule, the holding period of your Class T or Class B
shares will continue as if the 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) 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) Automated Purchase Orders: You begin to earn dividends
as of the day your funds are received.
(small solid bullet) Other Purchases: You begin to earn dividends as of the
first business day following the day your funds are received.
AUTOMATED PURCHASE ORDERS. Shares of each fund 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.
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.
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 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, High Yield,
Strategic Income, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income 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.
NATURAL RESOURCES' REDEMPTION FEE, if applicable, of 1.00% for shares
held less than 60 days, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR. If shares you
are redeeming were not all held for the same length of time, those shares
you held longest will be redeemed first for purposes of determining the
applicable fee.
THE TRANSFER AGENTS RESERVE 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), subject to an annual maximum charge of
$60.00 per shareholder. Accounts opened after September 30 will not be
subject to the fee for that year. The fee, which is payable to the transfer
agent, is designed to offset in part the relatively higher costs of
servicing smaller accounts. The fee will not be deducted from
retirement accounts (except non-prototype retirement accounts), accounts
using a systematic investment program, certain (Network Level I and III)
accounts which are maintained through National Securities Clearing
Corporation (NSCC), or if total assets in Fidelity mutual funds exceed
$50,000. Eligibility for the $50,000 waiver is determined by aggregating
Fidelity mutual fund accounts (excluding contractual plans) maintained (i)
by FIIOC (ii) by State Street, and (iii) through NSCC; provided those
accounts are registered under the same primary social security number.
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 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 a shareholder, you have the privilege of exchanging Class A, Class T
and Class B shares of a fund for the same class of shares of other
Fidelity Advisor funds at NAV; Class A and Class T shares for
Initial Class shares of Daily Money Fund: U.S. Treasury Portfolio or Daily
Money Fund: Money Market Portfolio, or shares of Daily Tax-Exempt Money
Fund; and Class B shares for Class B shares of Daily Money Fund: U.S.
Treasury Portfolio. 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 have held Class A or Class T shares of
Short Fixed-Income or Short-Intermediate Municipal Income for
less than six months and you exchange into Class A or Class T of
another Advisor fund, you pay the difference between that fund's Class A
or Class T front-end sales charge and any Class A or Class T
front-end sales charge you may have previously paid in connection with the
shares you are exchanging.
(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. Exchanges out of
Natural Resources are unlimited although the fund reserves the right to
enact limitations in the future. 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 reject exchange
purchases in excess of 1% of its net assets or $1 million, whichever is
less. For purposes of this policy, accounts under common ownership will be
aggregated.
(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) Any exchanges of Class T or Class B shares are
not subject to a CDSC.
(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
I f your purchase qualifies for one of the following reduction
plans , the front-end sales charge will be reduced for purchases of Class
A and Class T shares according to the Sales Charge Schedule shown on page .
Please refer to the funds' SAI 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 A, Class T, and
Class B shares may be included in the following programs for
purposes of qualifying for a Class A or Class T front-end sales
charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A or Class T shares
of a single Fidelity Advisor fund or to combined purchases of (i) Class
A, Class T, and Class B shares of any Fidelity Advisor fund, (ii) Class B
shares of Daily Money Fund: U.S. Treasury Portfolio, and (iii) Initial
Class shares of Daily Money Fund: U.S. Treasury Portfolio, Initial Class
shares of Daily Money Fund: Money Market Portfolio, and shares of Daily
Tax-Exempt Money Fund acquired by exchange from any Fidelity Advisor fund.
The minimum investment eligible for a quantity discount is $50,000, except
that the minimum investment for the Short-Term Bond Funds is $500,000.
To qualify for a quantity discount, investing in a fund's Class A and
Class T 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 $500,000 for the Short-Term Bond Funds).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A and Class T shares by adding to your new purchase of
Class A and Class T shares the value of all of the Fidelity Advisor
fund Class A, Class T, and Class B shares held by you, your spouse,
and your children under age 21. You can also add the value of Class B
shares of Daily Money Fund: U.S. Treasury Portfolio, as well as
Initial Class shares of Daily Money Fund: U.S. Treasury Portfolio,
Initial Class shares of Daily Money Fund: Money Market Portfolio, and
shares of Daily Tax-Exempt Money Fund acquired by exchange from any
Fidelity Advisor fund.
A LETTER OF INTENT (the Letter) lets you receive the same reduced front-end
sales charge on purchases of Class A and Class T 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 with the transfer agent 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 and Class T shares. Neither income
dividends nor capital gain distributions reinvested in additional Class
A, Class T 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 or Class T shares , as
applicable, will be redeemed to pay any applicable front-end sales
charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS
T 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 for a Fidelity or Fidelity Advisor IRA account with the
proceeds of a distribution (i) from an employee benefit plan that qualified
for waiver (11) or had a minimum of $3 million in plan assets invested in
Fidelity funds; or (ii) from an insurance company separate account
qualifying under (6) 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;
6. 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;
7. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC;
9. Purchased by a trust institution or bank trust department (excluding
assets described in (11) and (12) below) that has executed a participation
agreement with FDC specifying certain asset minimums and qualifications,
and marketing restrictions. Assets managed by third parties do not qualify
for this waiver;
10. Purchased for use in a broker-dealer managed account program, provided
the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plans assets do not
qualify for this waiver;
11. Purchased as part of an employee benefit plan having more than (i) 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor funds; or (ii) 25 eligible employees or $250,000 of plan
assets invested in Fidelity Advisor funds that subscribe to the Advisor
Retirement Connection or similar FIIS-sponsored program;
12. Purchased as part of an employee benefit plan through an intermediary
that has signed a participation agreement with FDC specifying certain asset
minimums and qualifications, and marketing, program and trading
restrictions;
13. Purchased on a discretionary basis by a registered investment advisor
which is not part of an organization primarily engaged in the brokerage
business, that has executed a participation agreement with FDC specifying
certain asset minimums and qualifications, and marketing, program and
trading restrictions. Employee benefit plan assets do not qualify for this
waiver; or
14. Purchased with distributions of income, principal, and capital gains
from Fidelity Defined Trusts.
In order to continue to qualify for waivers (9), (10) and (13), eligible
investors with existing Class T accounts will be required to sign
and comply with a participation agreement. Investors prior to June 30, 1995
that have not signed a Participation Agreement will be allowed to continue
investing in Class T shares under the terms of their current
relationship until June 30, 1997, after which they will be prevented from
making new or subsequent purchases in Class T load waived, except
that employee benefit plans will be permitted to make additional purchases
of Class T shares load waived.
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.
If you are investing through an account managed by a broker-dealer, if you
have authorized an investment adviser to make investment decisions for you,
or if you are investing through a trust department, you may qualify to
purchase either Class T shares without a sales charge (as described
in (9), (10) and (13), above) or Institutional Class shares. Because
Institutional Class shares have no sales charge, and do not pay a
distribution fee or a shareholder service fee, Institutional Class shares
are expected to have a higher total return than Class A, Class T, or
Class B shares. Contact your investment professional to discuss if you
qualify.
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 A
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds which are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
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. Those bonds in the Aa, A, Baa, Ba, and B groups
which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, Baa1, and B1.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate d BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - The rating CC typically is applied to debt subordinated to senior debt
that 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 also will
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
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 funds or FDC. This Prospectus and the related SAI do not
constitute an offer by the funds or by FDC to sell or to buy shares of the
funds to any person to whom it is unlawful to make such offer.
APPENDIX B
OVERSEAS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1991 1992 1993 1994 1995
OVERSEAS - CLASS T 6.78% -4.83 41.84 1.98% 8.64%
% %
Lipper International Funds AverageA 12.73 -4.85 36.69 -0.71 9.41%
% % % %
Morgan Stanley EAFE Index 12.13 -12.1 32.56 7.78% 11.21
% 7% % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 6.78
Row: 7, Col: 1, Value: -4.88
Row: 8, Col: 1, Value: 41.84
Row: 9, Col: 1, Value: 1.98
Row: 10, Col: 1, Value: 8.639999999999999
(LARGE SOLID BOX) OVERSEAS - CLASS T
EQUITY GROWTH - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
EQUITY GROWTH - CLASS T 14.51 -0.57 15.57 44.84 6.93% 64.71 9.89% 14.85 -0.89 39.14
% % % % % % % %
Lipper Growth Funds AverageB 14.73 3.08% 14.79 26.91 -4.49 36.70 8.08% 10.63 -2.17 30.79
% % % % % % % %
S&P 500 18.56 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.51
Row: 2, Col: 1, Value: -0.5700000000000001
Row: 3, Col: 1, Value: 15.57
Row: 4, Col: 1, Value: 44.84
Row: 5, Col: 1, Value: 6.930000000000001
Row: 6, Col: 1, Value: 64.71000000000001
Row: 7, Col: 1, Value: 9.890000000000001
Row: 8, Col: 1, Value: 14.85
Row: 9, Col: 1, Value: -0.89
Row: 10, Col: 1, Value: 39.14
(LARGE SOLID BOX) EQUITY GROWTH - CLASS T
NATURAL RESOURCES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
NATURAL RESOURCES - CLASS T 16.10 33.14 -5.28 14.47 13.33 37.94 -2.28 28.67
% % % % % % % %
Lipper Natural Resources Funds 8.83% 32.32 -8.59 2.92% 1.47% 22.94 -4.09 18.80
AverageC % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 16.1
Row: 4, Col: 1, Value: 33.14
Row: 5, Col: 1, Value: -5.28
Row: 6, Col: 1, Value: 14.47
Row: 7, Col: 1, Value: 13.33
Row: 8, Col: 1, Value: 37.94
Row: 9, Col: 1, Value: -2.28
Row: 10, Col: 1, Value: 28.67
(LARGE SOLID BOX) NATURAL RESOURCES - CLASS T
GROWTH OPPORTUNITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
GROWTH OPPORTUNITIES - CLASS T 33.28 24.14 -1.65 42.68 15.03 22.17 2.86% 33.04
% % % % % % %
Lipper Growth Funds AverageB 14.79 26.91 -4.49 36.7% 8.08% 10.63 -2.17 30.79
% % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 33.28
Row: 4, Col: 1, Value: 24.14
Row: 5, Col: 1, Value: -1.65
Row: 6, Col: 1, Value: 42.68
Row: 7, Col: 1, Value: 15.03
Row: 8, Col: 1, Value: 22.17
Row: 9, Col: 1, Value: 2.86
Row: 10, Col: 1, Value: 33.04
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
T
STRATEGIC OPPORTUNITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
STRATEGIC OPPORTUNITIES - CLASS T 27.92 -6.33 22.25 32.60 -7.17 23.08 12.87 20.44 -7.17 38.16
% % % % % % % % % %
Lipper Capital Appreciation FundsD 14.02 -0.03 14.09 26.6% -8.24 39.91 8.78% 15.68 -3.38 30.34
% % % % % % % %
S&P 500 18.56 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 27.92
Row: 2, Col: 1, Value: -6.33
Row: 3, Col: 1, Value: 22.25
Row: 4, Col: 1, Value: 32.6
Row: 5, Col: 1, Value: -7.17
Row: 6, Col: 1, Value: 23.08
Row: 7, Col: 1, Value: 12.87
Row: 8, Col: 1, Value: 20.44
Row: 9, Col: 1, Value: 7.17
Row: 10, Col: 1, Value: 38.16
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS T
EQUITY INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
EQUITY INCOME - CLASS T 17.44 -2.24 23.23 18.43 -14.2 29.81 14.68 18.03 6.46% 32.55
% % % % 8% % % % %
Lipper Equity Income Funds AverageE 17.00 -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17
% % % % % % % % %
S&P 500 18.56 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 17.44
Row: 2, Col: 1, Value: -2.24
Row: 3, Col: 1, Value: 23.23
Row: 4, Col: 1, Value: 18.43
Row: 5, Col: 1, Value: -14.28
Row: 6, Col: 1, Value: 29.81
Row: 7, Col: 1, Value: 14.68
Row: 8, Col: 1, Value: 18.03
Row: 9, Col: 1, Value: 6.46
Row: 10, Col: 1, Value: 32.55
(LARGE SOLID BOX) EQUITY INCOME - CLASS T
INCOME & GROWTH - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
INCOME & GROWTH - CLASS T 20.89 24.60 -2.94 34.48 9.20% 19.66 -5.09 14.06
% % % % % % %
Lipper Balanced Funds AverageF 12.34 19.57 -0.57 26.69 7.07% 10.91 -2.5% 25.16
% % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 20.89
Row: 4, Col: 1, Value: 24.6
Row: 5, Col: 1, Value: -2.94
Row: 6, Col: 1, Value: 34.48
Row: 7, Col: 1, Value: 9.199999999999999
Row: 8, Col: 1, Value: 19.66
Row: 9, Col: 1, Value: -5.06
Row: 10, Col: 1, Value: 14.06
(LARGE SOLID BOX) INCOME & GROWTH - CLASS T
EMERGING MARKETS INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995
EMERGING MARKETS INCOME - CLASS T 6.99%
Lipper General World Income Funds AverageG 18.05
%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 6.99
(LARGE SOLID BOX) EMERGING MARKETS INCOME
CLASS T
HIGH YIELD - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
HIGH YIELD - CLASS T 17.24 3.64% 7.30% 34.94 23.09 20.45 -1.49 19.27
% % % % % %
Lipper High Current Yield Funds 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43
AverageH % % 3% % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 17.24
Row: 4, Col: 1, Value: 3.64
Row: 5, Col: 1, Value: 7.3
Row: 6, Col: 1, Value: 34.94
Row: 7, Col: 1, Value: 23.09
Row: 8, Col: 1, Value: 20.45
Row: 9, Col: 1, Value: -1.49
Row: 10, Col: 1, Value: 19.27
(LARGE SOLID BOX) HIGH YIELD - CLASS T
STRATEGIC INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995
STRATEGIC INCOME - CLASS T 22.02
%
Lipper General Bond Funds AverageI 18.02
%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 22.02
(LARGE SOLID BOX) STRATEGIC INCOME - CLASS T
GOVERNMENT INVESTMENT - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
GOVERNMENT INVESTMENT - CLASS T 6.57% 11.75 8.37% 13.45 6.48% 9.36% -3.85 17.65
% % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34
Bond Funds AverageJ % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39
Index % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.57
Row: 4, Col: 1, Value: 11.75
Row: 5, Col: 1, Value: 8.370000000000001
Row: 6, Col: 1, Value: 13.45
Row: 7, Col: 1, Value: 6.48
Row: 8, Col: 1, Value: 9.360000000000001
Row: 9, Col: 1, Value: -3.85
Row: 10, Col: 1, Value: 17.65
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS T
INTERMEDIATE BOND - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
INTERMEDIATE BOND - CLASS T 14.33 2.32% 7.84% 12.11 7.91% 15.16 7.13% 11.49 -2.47 12.19
% % % % % %
Lipper Intermediate Investment Grade 14.73 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62
Bond Funds AverageK % % % % %
Lehman Brothers Intermediate 13.14 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33
Government/Corporate Bond Index % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: 2.32
Row: 3, Col: 1, Value: 7.84
Row: 4, Col: 1, Value: 12.11
Row: 5, Col: 1, Value: 7.91
Row: 6, Col: 1, Value: 15.16
Row: 7, Col: 1, Value: 7.13
Row: 8, Col: 1, Value: 11.49
Row: 9, Col: 1, Value: -2.47
Row: 10, Col: 1, Value: 12.19
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS T
SHORT FIXED-INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
SHORT FIXED-INCOME - CLASS T 6.19% 10.31 5.87% 13.37 7.61% 9.49% -3.37 9.81%
% % %
Lipper Short Investment Grade Bond 6.86% 10.22 7.87% 12.88 5.97% 6.45% -0.44 10.84
Funds AverageL % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.19
Row: 4, Col: 1, Value: 10.31
Row: 5, Col: 1, Value: 5.87
Row: 6, Col: 1, Value: 13.37
Row: 7, Col: 1, Value: 7.609999999999999
Row: 8, Col: 1, Value: 9.49
Row: 9, Col: 1, Value: -3.37
Row: 10, Col: 1, Value: 9.81
(LARGE SOLID BOX) SHORT FIXED-INCOME - CLASS T
HIGH INCOME MUNICIPAL - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
HIGH INCOME MUNICIPAL - CLASS T 11.80 13.09 10.29 12.18 11.11 13.79 -8.05 16.65
% % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98
Funds AverageM % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 11.8
Row: 4, Col: 1, Value: 13.09
Row: 5, Col: 1, Value: 10.29
Row: 6, Col: 1, Value: 12.18
Row: 7, Col: 1, Value: 11.11
Row: 8, Col: 1, Value: 13.79
Row: 9, Col: 1, Value: -8.050000000000001
Row: 10, Col: 1, Value: 16.65
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS T
INTERMEDIATE MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
INTERMEDIATE MUNICIPAL INCOME - 13.71 2.33% 7.38% 7.79% 6.37% 9.64% 7.32% 9.43% -5.68 14.20
CLASS T % % %
Lipper Intermediate Municipal Bond 13.53 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89
Funds AverageN % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 13.71
Row: 2, Col: 1, Value: 2.33
Row: 3, Col: 1, Value: 7.38
Row: 4, Col: 1, Value: 7.79
Row: 5, Col: 1, Value: 6.37
Row: 6, Col: 1, Value: 9.639999999999999
Row: 7, Col: 1, Value: 7.319999999999999
Row: 8, Col: 1, Value: 9.43
Row: 9, Col: 1, Value: -5.68
Row: 10, Col: 1, Value: 14.2
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS T
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995
SHORT-INTERMEDIATE MUNICIPAL 8.68%
INCOME - CLASS T
Lipper Short Municipal Debt Funds 7.43%
AverageO
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 8.68
(LARGE SOLID BOX) SHORT-INTERMEDIATE MUNICIPAL
INCOME - CLASS T
OVERSEAS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1991 1992 1993 1994 1995
OVERSEAS - CLASS B 6.78% -4.83 41.84 1.98% 8.58%
% %
Lipper International Funds AverageA 12.73 -4.85 36.69 -0.71 9.41%
% % % %
Morgan Stanley EAFE Index 12.13 -12.1 32.56 7.78% 11.21
% 7% % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: 6.78
Row: 7, Col: 1, Value: -4.83
Row: 8, Col: 1, Value: 41.84
Row: 9, Col: 1, Value: 1.98
Row: 10, Col: 1, Value: 8.58
(LARGE SOLID BOX) OVERSEAS - CLASS B
NATURAL RESOURCES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
NATURAL RESOURCES - CLASS B 16.10 33.14 -5.28 14.47 13.33 37.94 -2.28 28.24
% % % % % % % %
Lipper Natural Resources Funds 8.83% 32.32 -8.59 2.92% 1.47% 22.94 -4.09 18.80
AverageC % % % % %
S&P 500 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 16.1
Row: 4, Col: 1, Value: 33.14
Row: 5, Col: 1, Value: -5.28
Row: 6, Col: 1, Value: 14.47
Row: 7, Col: 1, Value: 13.33
Row: 8, Col: 1, Value: 37.94
Row: 9, Col: 1, Value: -2.28
Row: 10, Col: 1, Value: 28.24
(LARGE SOLID BOX) NATURAL RESOURCES - CLASS B
STRATEGIC OPPORTUNITIES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
STRATEGIC OPPORTUNITIES - CLASS B 27.92 -6.33 22.25 32.60 -7.17 23.08 12.87 20.44 -7.22 37.35
% % % % % % % % % %
Lipper Capital Appreciation FundsD 14.02 -0.03 14.09 26.6% -8.24 39.91 8.78% 15.68 -3.38 30.34
% % % % % % % %
S&P 500 18.56 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 27.92
Row: 2, Col: 1, Value: -6.33
Row: 3, Col: 1, Value: 22.25
Row: 4, Col: 1, Value: 32.6
Row: 5, Col: 1, Value: -7.17
Row: 6, Col: 1, Value: 23.08
Row: 7, Col: 1, Value: 12.87
Row: 8, Col: 1, Value: 20.44
Row: 9, Col: 1, Value: -7.22
Row: 10, Col: 1, Value: 37.34999999999999
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS B
EQUITY INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
EQUITY INCOME - CLASS B 17.44 -2.24 23.23 18.43 -14.2 29.81 14.68 18.03 6.39% 31.96
% % % % 8% % % % %
Lipper Equity Income Funds AverageE 17.00 -2.18 16.74 22.18 -6.78 26.86 9.77% 13.66 -2.54 30.17
% % % % % % % % %
S&P 500 18.56 5.10% 16.61 31.69 -3.10 30.47 7.62% 10.08 1.32% 37.58
% % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 17.44
Row: 2, Col: 1, Value: -2.24
Row: 3, Col: 1, Value: 23.23
Row: 4, Col: 1, Value: 18.43
Row: 5, Col: 1, Value: -14.28
Row: 6, Col: 1, Value: 29.81
Row: 7, Col: 1, Value: 14.68
Row: 8, Col: 1, Value: 18.03
Row: 9, Col: 1, Value: 6.39
Row: 10, Col: 1, Value: 31.96
(LARGE SOLID BOX) EQUITY INCOME - CLASS B
EMERGING MARKETS INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995
EMERGING MARKETS INCOME - CLASS 6.38%
B
Lipper General World Income Funds AverageG 18.05
%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 8, Col: 1, Value: 0.0
Row: 9, Col: 1, Value: 0.0
Row: 10, Col: 1, Value: 6.38
(LARGE SOLID BOX) EMERGING MARKETS INCOME -
CLASS B
HIGH YIELD - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
HIGH YIELD - CLASS B 17.24 3.64% 7.30% 34.94 23.09 20.45 -2.11 18.34
% % % % % %
Lipper High Current Yield Funds AverageH 12.89 -0.58 -10.1 36.91 17.51 18.95 -3.85 16.43
% % 3% % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 17.24
Row: 4, Col: 1, Value: 3.64
Row: 5, Col: 1, Value: 7.3
Row: 6, Col: 1, Value: 34.94
Row: 7, Col: 1, Value: 23.09
Row: 8, Col: 1, Value: 20.45
Row: 9, Col: 1, Value: -2.11
Row: 10, Col: 1, Value: 18.34
(LARGE SOLID BOX) HIGH YIELD - CLASS B
STRATEGIC INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995
STRATEGIC INCOME - CLASS B 21.35
%
Lipper General Bond Funds AverageI 18.02
%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: 21.35
(LARGE SOLID BOX) STRATEGIC INCOME - CLASS B
GOVERNMENT INVESTMENT - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
GOVERNMENT INVESTMENT - CLASS B 6.57% 11.75 8.37% 13.45 6.48% 9.36% -4.38 16.92
% % % %
Lipper General U.S. Government 6.67% 12.46 8.22% 14.44 6.41% 9.42% -4.64 17.34
Bond Funds AverageJ % % % %
Salomon Brothers Treasury/Agency 7.10% 14.24 8.78% 15.33 7.24% 10.74 -3.40 18.39
Index % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 6.57
Row: 4, Col: 1, Value: 11.75
Row: 5, Col: 1, Value: 8.370000000000001
Row: 6, Col: 1, Value: 13.45
Row: 7, Col: 1, Value: 6.48
Row: 8, Col: 1, Value: 9.360000000000001
Row: 9, Col: 1, Value: -4.38
Row: 10, Col: 1, Value: 16.92
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS B
INTERMEDIATE BOND - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
INTERMEDIATE BOND - CLASS B 14.33 2.32% 7.84% 12.11 7.91% 15.16 7.13% 11.49 -3.10 11.51
% % % % % %
Lipper Intermediate Investment Grade 14.73 2.13% 7.06% 11.67 7.22% 15.63 6.88% 9.52% -3.25 16.62
Bond Funds AverageK % % % % %
Lehman Brothers Intermediate 13.14 3.66% 6.67% 12.77 9.16% 14.62 7.17% 8.79% -1.93 15.33
Government/Corporate Bond Index % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: 2.32
Row: 3, Col: 1, Value: 7.84
Row: 4, Col: 1, Value: 12.11
Row: 5, Col: 1, Value: 7.91
Row: 6, Col: 1, Value: 15.16
Row: 7, Col: 1, Value: 7.13
Row: 8, Col: 1, Value: 11.49
Row: 9, Col: 1, Value: -3.1
Row: 10, Col: 1, Value: 11.51
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS B
HIGH INCOME MUNICIPAL - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995
HIGH INCOME MUNICIPAL - CLASS B 11.80 13.09 10.29 12.18 11.11 13.79 -8.52 15.60
% % % % % % % %
Lipper High Yield Municipal Bond 11.28 10.11 5.13% 11.52 8.51% 11.41 -4.67 15.98
Funds AverageM % % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: 11.8
Row: 4, Col: 1, Value: 13.09
Row: 5, Col: 1, Value: 10.29
Row: 6, Col: 1, Value: 12.18
Row: 7, Col: 1, Value: 11.11
Row: 8, Col: 1, Value: 13.79
Row: 9, Col: 1, Value: -8.52
Row: 10, Col: 1, Value: 15.6
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS B
INTERMEDIATE MUNICIPAL INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
INTERMEDIATE MUNICIPAL INCOME - 13.71 2.33% 7.38% 7.79% 6.37% 9.64% 7.32% 9.43% -6.12 13.22
CLASS B % % %
Lipper Intermediate Municipal Bond 13.53 1.32% 7.57% 8.26% 6.59% 10.52 7.80% 10.18 -3.51 12.89
Funds AverageN % % % % %
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 13.71
Row: 2, Col: 1, Value: 2.33
Row: 3, Col: 1, Value: 7.38
Row: 4, Col: 1, Value: 7.79
Row: 5, Col: 1, Value: 6.37
Row: 6, Col: 1, Value: 9.639999999999999
Row: 7, Col: 1, Value: 7.319999999999999
Row: 8, Col: 1, Value: 9.43
Row: 9, Col: 1, Value: -6.119999999999999
Row: 10, Col: 1, Value: 13.22
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS B
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING CLASS T 'S MAXIMUM
FRONT-END SALES CHARGE OR CLASS B'S APPLICABLE CONTINGENT DEFERRED SALES
CHARGE. INITIAL OFFERING OF CLASS T SHARES FOR EQUITY GROWTH, EQUITY
INCOME, INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON
SEPTEMBER 10, 1992, AND BEAR A 12B-1 FEE (AT THEN CURRENTLY APPLICABLE
RATES FOR EQUITY GROWTH AND EQUITY INCOME OF 0.65%, AND FOR INTERMEDIATE
BOND AND INTERMEDIATE MUNICIPAL INCOME OF 0.25%) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND WHICH DOES NOT BEAR A
12B-1 FEE. CLASS T SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1
FEE BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS T SHARES FOR STRATEGIC OPPORTUNITIES TOOK
PLACE ON AUGUST 20, 1986, AND BEAR A 12B-1 FEE (AT THEN CURRENTLY
APPLICABLE RATE OF 0.65%) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO AUGUST 20, 1986 ARE THOSE OF INITIAL CLASS, THE ORIGINAL
CLASS OF THE FUND WHICH DOES NOT BEAR A 12B-1 FEE. CLASS T SHARE
RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEES BEEN REFLECTED IN PRIOR
DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR EQUITY INCOME, INTERMEDIATE BOND,
AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JUNE 30, 1994, AND BEAR A
12B-1 AND SHAREHOLDER SERVICING FEE (AT A THEN CURRENTLY APPLICABLE
COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JUNE 30, 1994, AND SEPTEMBER 10, 1992, ARE THOSE OF
CLASS T AND INSTITUTIONAL CLASS SHARES, RESPECTIVELY. CLASS T
RETURNS INCLUDE A THEN CURRENTLY APPLICABLE 12B-1 FEE OF 0.65% FOR EQUITY
INCOME, AND 0.25% FOR INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL INCOME.
INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, DOES NOT BEAR A
12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 AND
SHAREHOLDER SERVICING FEES BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR STRATEGIC OPPORTUNITIES TOOK PLACE
ON JUNE 30, 1994, AND BEAR A 12B-1 AND SHAREHOLDER SERVICING FEE (AT A THEN
CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE 30, 1994, AND AUGUST 20, 1986,
ARE THOSE OF CLASS T AND INITIAL CLASS SHARES, RESPECTIVELY.
CLASS T RETURNS INCLUDE A THEN APPLICABLE 12B-1 FEE OF 0.65%.
INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, DOES NOT BEAR A 12B-1 FEE.
CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE AND
SHAREHOLDER SERVICING FEE BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR EMERGING MARKETS INCOME, HIGH YIELD,
GOVERNMENT INVESTMENT, AND HIGH INCOME MUNICIPAL TOOK PLACE ON JUNE 30,
1994, AND BEAR A 12B-1 AND SHAREHOLDER SERVICING FEE (AT A THEN CURRENTLY
APPLICABLE COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN PRIOR DATE
RETURNS. RETURNS PRIOR TO JUNE 30, 1994, ARE THOSE OF CLASS T
SHARES, THE ORIGINAL CLASS OF THESE FUNDS AND INCLUDE THEN APPLICABLE
CLASS T 12B-1 FEES OF 0.25%. CLASS B RETURNS WOULD HAVE BEEN LOWER
HAD ITS 12B-1 AND SHAREHOLDER SERVICING FEE BEEN REFLECTED IN PRIOR DATE
RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR OVERSEAS AND NATURAL
RESOURCES TOOK PLACE ON JULY 3, 1995, AND BEAR A 12B-1 AND SHAREHOLDER
SERVICING FEE (AT A THEN CURRENTLY APPLICABLE COMBINED RATE OF 1.00%) WHICH
IS NOTE REFLECTED IN PRIOR DATE RETURNS. RETURNS PRIOR TO JULY 3, 1995 ARE
THOSE OF CLASS T SHARES, THE ORIGINAL CLASS OF THESE FUNDS AND
INCLUDE THEN APPLICABLE CLASS T 12B-1 FEES OF 0.65%. CLASS B SHARE
RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEES BEEN REFLECTED IN PRIOR
DATE RETURNS.
[A] THE LIPPER INTERNATIONAL FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 254 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[B] THE LIPPER GROWTH FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER 572 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[C] THE LIPPER NATURAL RESOURCES FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 32 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[D] THE LIPPER CAPITAL APPRECIATION FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 158 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[E] THE LIPPER EQUITY INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 130 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[F] THE LIPPER BALANCED FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER 220 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[G] THE LIPPER GENERAL WORLD INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 135 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[H] THE LIPPER HIGH CURRENT YIELD FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 119 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[I] THE LIPPER GENERAL BOND FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 64 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[J] THE LIPPER GENERAL U.S. GOVERNMENT BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 174 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[K] THE LIPPER INTERMEDIATE INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER 157 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[L] THE LIPPER SHORT INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 147 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[M] THE LIPPER HIGH YIELD MUNICIPAL BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 38 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[N] THE LIPPER INTERMEDIATE MUNICIPAL BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER 121 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[O] THE LIPPER SHORT MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER 49 MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
FIDELITY ADVISOR FUNDS: CLASS A, CLASS T, CLASS B, AND INSTITUTIONAL CLASS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
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10.................................. Cover Page
..
11.................................. Cover Page
..
12.................................. Description of the Trusts
..
13a- c............................ Investment Policies and Limitations
Portfolio Transactions
d..................................
14a- c............................ Trustees and Officers
15 Trustees and Officers
a-c..............................
16a FMR; Portfolio Transactions
i...............................
Trustees and Officers
ii.............................
Management Contracts
iii............................
Management Contracts
b.................................
c, Contracts with FMR Affiliates
d..............................
e.............................. Management Contracts
f............................. Distribution and Service Plans
g.............................. *
Description of the Trusts
h..................................
Contracts with FMR Affiliates
i..................................
17a-d............................. Portfolio Transactions
.
e............................... *
18a................................ Description of the Trusts
..
*
b..................................
19a................................ Additional Purchase, Exchange and Redemption
.. Information
Valuation; Additional Purchase, Exchange and
b.................................. Redemption Information
*
c..................................
20.................................. Distributions and Taxes
..
21a, Contracts with FMR Affiliates; Distribution and
b.............................. Service Plans
c. *
................................
22a................................ *
..
Performance
b..................................
23.................................. Financial Statements
..
</TABLE>
* Not Applicable
FIDELITY ADVISOR FUNDS
CLASS A, CLASS T, CLASS B , AND INSTITUTIONAL CLASS
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 30 , 1996
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus (dated
August 30 , 1996) for Class A, Class T, and Class B
shares , and (dated February 26, 1996) for Institutional Class
shares . Please retain this document for future reference. The funds'
financial statements and financial highlights, included in their respective
Semiannual and Annual Reports, for the most recent semiannual and
fiscal period are incorporated herein by reference. To obtain an
additional copy of this SAI, the Prospectus or any Semiannual or
Annual Report, please call Fidelity Distributors Corporation, 82
Devonshire Street, Boston, Massachusetts 02109 or your investment
professional.
<TABLE>
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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
Special Considerations Affecting New York
Special Considerations Affecting California
Special Considerations Affecting Puerto Rico
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
</TABLE>
ACOM /ACOMI -ptb- 08 96
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Natural Resources Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Large Cap 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 Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate
Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
Fidelity Advisor California Municipal Income Fund
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
(FMR U.K.)
Fidelity Management & Research (Far East) Inc.
(FMR Far East)
Fidelity International Investment Advisors (FIIA)
Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.)
Fidelity Investments Japan Limited (FIJ)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENTS
State Street Bank and Trust Company (State Street) ( Class T -
Taxable Funds)
Fidelity Investments Institutional Operations Company (FIIOC) ( Class A,
Class B , and Institutional Class - Taxable Funds)
UMB Bank, n.a. (UMB) ( Class A, Class T, Class B , and
Institutional Class - Municipal Funds)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets or other circumstances will not be considered when determining
whether the investment complies with a fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 (1940 Act)) of the fund.
However, except for the fundamental investment limitations listed below 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 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 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 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.
(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.
For purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
MID CAP FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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 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 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. Warrants
acquired by the fund in units or attached to securities are not subject to
this restriction.
(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 managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
EQUITY GROWTH 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 (a) more than 5% of the 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 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.)
(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 "Futures and Options" beginning on page .
NATURAL 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;
(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); 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 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 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 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 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 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.
(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.
For purposes of limitation (5), FMR considers an issuer to be
principally engaged in a business activity normally based on standard
industrial classifications published by the U.S. government. However, FMR
may consider an issuer to be principally engaged in a business activity if
at least 50% of its assets, gross income, or net profits are committed to,
or derived from, that activity.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures contracts and options, see the
section entitled "Futures and Options" 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 fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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 or market, in excess of 5% of the fund's net assets. Included in
that amount, but not to exceed 2% of 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 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.
For purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" 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;
(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.
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 "Futures and Options" on page .
LARGE CAP FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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 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 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. Warrants
acquired by the fund in units or attached to securities are not subject to
this restriction.
(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 managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on 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.
(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.
(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 purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning 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 of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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 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 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.
For purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning 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 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 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) With respect to 75% of its total assets, the fund does not currently
intend to 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, the fund would hold more than 10% of
the outstanding voting securities of that issuer.
(xiii) 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.
(xiv) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" 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 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% 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 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.
For purposes of limitation (vii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" 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 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.
(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 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) With respect to 75% of its total assets, the fund does not currently
intend to 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, the fund would hold more than 10% of
the outstanding voting securities of that issuer.
(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 purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" 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 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.
(v) 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.
(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 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 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.
For purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
INTERMEDIATE BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment), in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements).
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or 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 (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: (a) lending money (up to 7.5% 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 not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
SHORT FIXED-INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental 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 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 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 all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (vii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" 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);
(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 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 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.
(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 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 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 invest in oil, gas or other
mineral exploration or development programs or leases.
(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 all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For purposes of investment limitations (1) and (5), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" on page .
INTERMEDIATE MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of its total assets would be invested in the securities of
that issuer, or (b) the fund would hold more than 10% of the outstanding
voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); 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.
(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 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.
(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. 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.
(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 invest in oil, gas, other
mineral exploration or development programs or leases.
(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
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.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For purposes of investment limitations (1) and (5), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures contracts and options, see the
section entitled "Futures and Options" beginning on page .
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate, unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business;
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements).
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(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) With respect to 75% of its total assets, the fund does not currently
intend to 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, the fund would hold more than 10% of
the outstanding voting securities of that issuer.
(xiv) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For purposes of investment limitations (4) and (i), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
NEW YORK MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(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 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 managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For purposes of investment limitations (4) and (i), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
CALIFORNIA MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(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 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 invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For purposes of investment limitations (4) and (i), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transaction, see the
section entitled "Futures and Options" beginning on page .
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 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 securities; U.S. Government securities with affiliated
financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance
with exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
ASSET-BACKED SECURITIES represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend
upon payment of the underlying loans by individuals, although the
securities may be supported by letters of credit or other credit
enhancements. The value of asset-backed securities may also depend on the
creditworthiness of the servicing agent for the loan pool, the originator
of the loans, or the financial institution providing the credit
enhancement.
CLOSED-END INVESTMENT COMPANIES. A fund may purchase the shares of
closed-end investment companies to facilitate investment in certain
countries. Shares of closed-end investment companies may trade at a premium
or a discount to their net asset value.
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. 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
the 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.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve significant risks in addition to the risks inherent in U.S.
investments. 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.
Foreign investments involve a risk of local political, economic, 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 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
is no assurance that FMR will be able to anticipate these potential events
or counter their effects. These risks are magnified for investments in
developing countries, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade
a small number of securities.
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.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depository Receipts (ADRs), as well as other "hybrid" forms of
ADRs, including European Depository Receipts (EDRs) and Global Depository
Receipts (GDRs), are certificates evidencing ownership of shares of a
foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and
interest and corporate actions. ADRs are alternatives to directly
purchasing the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the municipal funds
do not intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, each municipal fund may
invest a portion of its assets in fixed-income obligations whose interest
is subject to federal income tax.
Should a municipal fund invest in federally taxable obligations, it would
purchase securities that, in FMR's judgment, are of high quality. These
would include those obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The funds' 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 municipal funds' distributions.
If such proposals were enacted, the availability of municipal obligations
and the value of the municipal funds' holdings would be affected and the
Trustees would reevaluate the municipal funds' investment objectives and
policies.
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 the 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 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 funds 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 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
funds or that it will hedge at an appropriate time.
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.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities 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 a fund and the risk of actual liability if a fund is
involved in litigation. No guarantee can be made, however, that litigation
against a fund will not be undertaken or liabilities incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options; Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, Options and Futures Relating to Foreign
Currencies, OTC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. Each 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.
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 expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
FUTURES CONTRACTS. 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(registered trademark)) or the Bond Buyer Municipal Bond
Index. Futures can be held until their delivery dates, or can be closed out
before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. 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, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on each fund's investments in futures contracts and
options, and each fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible 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.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. 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 the fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter 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.
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
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.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features) and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by 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.
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
United States 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.
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,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income 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, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income) 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.
INVERSE FLOATERS have variable interest rates that typically move in the
opposite direction from prevailing short-term interest rate levels - rising
when prevailing short-term interest rates fall and vice versa. This
interest rate feature can make the prices of inverse floaters considerably
more volatile than those of bonds with comparable maturities.
ISSUER LOCATION. 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. The issuer of a security is located in a particular country if:
1) the security is issued or guaranteed by the government of the country;
or 2) the issuer is organized under the laws of the country, derives at
least 50% of its revenues or profits from goods sold, investments made or
services performed in the country, or has at least 50% of its assets
located in the country.
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 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, a 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.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see each fund's investment
limitations). For purposes of these limitations, a fund generally will
treat the borrower as the "issuer" of indebtedness held by the fund. In the
case of loan participations where a bank or other lending institution
serves as financial intermediary between a fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require 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.
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.
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 lower-quality debt
securities and a fund's ability to dispose of 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. 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.
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 is an
obligation of the issuer backed by a mortgage or pool of mortgages or a
direct interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations (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.
MUNICIPAL LEASES and participation interests therein may take the form of a
lease, an installment purchase, or a conditional sale contract, and are
issued by state and local governments and authorities to acquire land or a
wide variety of equipment and facilities. Generally, a fund will not hold
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 a 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.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL SECTORS:
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and Federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral during periods of forbearance. Other risks associated
with student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
ELECTRIC UTILITIES 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 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 generally
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways or other transit facilities.
Airport bonds are dependent on the general stability of the airline
industry and on the stability of a specific carrier 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.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, public resistance to rate
increases, costly environmental litigation, and Federal environmental
mandates are challenges faced by issuers of water and sewer bonds.
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. Natural 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.
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.
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.
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. To protect a fund
from the risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to a fund in connection with bankruptcy
proceedings), it is each fund's (except Equity Growth's) current policy to
engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR. Equity
Growth will engage in repurchase agreement transactions only with banks of
the Federal Reserve System and primary dealers in U.S. Government
securities.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a 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.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in 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).
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.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will be
required to hold them aside while the short sale is outstanding. A fund
will incur transaction costs, including interest expense, in connection
with opening, maintaining, and closing short sales.
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.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. A fund may acquire
standby commitments to enhance the liquidity of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, a fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
purchase an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
STRIPPED GOVERNMENT SECURITIES. Stripped securities are created by
separating the income and principal components of a debt instrument and
selling them separately. U.S. Treasury STRIPS (Separate Trading of
Registered Interest and Principal of Securities) are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury bond by the Federal Reserve Bank. Bonds issued by government
agencies also may be stripped in this fashion.
Privately stripped government securities are created when a dealer deposits
a Treasury security or federal agency security with a custodian for
safekeeping and then sells the coupon payments and principal payment that
will be generated by this security. Proprietary receipts, such as
Certificates of Accrual on Treasury Securities (CATS), Treasury Investment
Growth Receipts (TIGRS), and generic Treasury Receipts (TRs), are stripped
U.S. Treasury securities that are separated into their component parts
through trusts created by their broker sponsors. Bonds issued by government
agencies also may be stripped in this fashion.
Because of the SEC's views on privately stripped government securities, a
fund must evaluate them as it would non-government securities pursuant to
regulatory guidelines applicable to all money market funds. A fund
currently intends to purchase only those privately stripped government
securities that have either received the highest ranking from two
nationally recognized rating services (or one, if only one has rated the
security) or, if unrated, have been judged to be of equivalent quality by
FMR pursuant to procedures adopted by the Board of Trustees.
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.
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 a fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. A fund expects to be able to eliminate 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 the fund's accrued obligations under the
agreement.
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.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit a fund to sell them at
par value plus accrued interest on short notice.
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
thereof. The funds consider variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs they
purchase. The IRS has not ruled whether the interest on Participating VRDOs
is tax-exempt, and, accordingly, the funds intend to purchase these
instruments based on opinions of bond counsel. The funds may also 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.
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.
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.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separative Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. government, a government agency, or a
corporation in zero coupon form.
The following paragraph restates fundamental policies previously disclosed
in the above descriptions of security types and investment practices.
FUNDAMENTAL POLICIES: It is the policy of Equity Growth to engage in
repurchase agreement transactions only with banks of the Federal Reserve
System and primary dealers in U.S. Government securities.
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 a fund
may invest include those involved in the energy industry, industrial
materials (chemicals, base metals, timber and paper) and agricultural
materials (grain cereals). 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. 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. Economic
prospects are changing due to recent government attempts to reduce
restrictions against foreign investments.
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.
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 a fund's portfolio.
The United States-Canada Free Trade Agreement, which became effective in
January 1989, will be phased in over a period of ten years. This agreement
will remove tariffs on U.S. technology and Canadian agricultural products
in addition to removing trade barriers affecting other important sectors of
each country's economy. Canada, the United States, and Mexico have
implemented the North American Free Trade Agreement (NAFTA), which was
entered into in 1994. This cooperation is expected to lead to increased
trade and reduced trade barriers.
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. The region has been in transition over the last five
years from the stagnant 1980s, which were characterized by poor economic
policies, higher international interest rates, and limited access to new
foreign capital. 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.
High inflation and low economic growth have given 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 modernize the Latin American
economies and regenerate growth in the region. 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.
Latin American equity markets can be extremely volatile and in the past
have shown little correlation with the U.S. 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 has been transformed significantly over the last six to
seven years. In the past few years, the government has sold the telephone
company, the major steel companies, the banks, and many other industries.
The remaining major state ownership is in the oil and electricity sectors.
The United States is Mexico's major trading partner, accounting for
two-thirds of its exports and imports. The Mexican government, in
consultation with international economic agencies, is implementing programs
to stabilize the economy and foster growth. For example, Mexico, the United
States, and Canada implemented NAFTA. This cooperation is expected to lead
to increased trade and reduced trade barriers.
In the early 1980s, Mexico experienced a foreign debt crisis. By 1987,
foreign debt had reached prohibitive levels, accounting for 90% to 95% of
Gross Domestic Product (GDP), thus draining Mexico of its resources. 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. In addition, continued political unrest,
particularly in southern Mexico, and uncertainty as to the effectiveness of
reforms have recently had an adverse impact on economic development.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy direction.
Over the last two years, Brazil has stabilized its domestic economy through
a relentless process of balancing the government budget, the privatization
of state enterprises, deregulation and reduction of red tape, and the
introduction of greater competition into the domestic business environment.
Inflation has been reduced from 50% per month to about 3% per month since
mid 1994. A major long-run strength is Brazil's natural resources. Iron
ore, bauxite, tin, gold, and forestry products make up some of Brazil's
natural resource base, which includes some of the largest mineral reserves
in the world. In terms of population, Brazil is the sixth largest country
in the world with about 155 million people, and represents a huge domestic
market.
Chile, like Brazil, is endowed with considerable mineral resources,
particularly copper, which accounts for 40% of total exports. Economic
reform has been ongoing in Chile for at least 15 years, but political
democracy has only recently returned. 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. Thanks to
structural reforms, the revitalized Argentine economy has been among the
top three fastest growing economies in the world over the last three years.
The newly created Argentine economic institutions have integrated the
country with the rest of the world, leaving the state to concentrate on its
essential functions. Privatization is ongoing and should reduce the amount
of external debt outstanding. The markets for labor, capital, and goods and
services have been deregulated. Nearly all non-tariff barriers and export
taxes have been eliminated, the tariff structure has been simplified, and
tariffs have been sharply reduced.
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. Internal gasoline prices, which
are one-third those of international prices, are being increased in order
to reduce subsidies. 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.
EMERGING MARKETS: LATIN AMERICA
MARKET CAPITALIZATION IN U.S. DOLLARS
JUNE 1995
MILLIONS
Argentina $ 33,498
Brazil 149,110
Chile 83,453
Colombia 18,176
Mexico 93,638
Peru 9,997
Venezuela 4,936
Source: IFC (International Finance Corporation, Second Quarter 1995)
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1994
Argentina 7.1%
Brazil 5.7%
Chile 4.2%
Mexico 3.5%
Venezuela 3.3%
Source: World Economic Outlook, May 1995
(International Monetary Fund. Figures are quoted based on each country's
domestic currency.)
For national stock market index performance, please see the section of
"Performance" beginning on page .
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.
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.
The success of market reforms and a surge in infrastructure spending have
fueled rapid growth in many developing countries in Asia. Rapidly rising
household incomes have fostered large middle classes and new waves of
consumer spending. The increases in infrastructure and consumer spending
have made domestic demand the growth engine for these countries. Thus,
their growth now depends less upon exports to Organization for Economic
Cooperation and Development (OECD) countries. While exports may no longer
be the sole source of growth for developing economies, improved
competitiveness in export markets has contributed to growth in many of
these nations. The increased productivity in many Asian countries has
enabled them to achieve, or maintain, their status as top exporters while
improving their national living standards.
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.
The country enjoys an able bureaucracy that has maintained economic policy
during the country's many coups. In recent years, the risk of a coup has
diminished, but corruption remains widespread.
Hong Kong's impending return to Chinese dominion in 1997 has not initially
had a positive effect on its economic growth, which was vigorous in the
1980s. 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, where it is the largest foreign investor,
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 manufacturing, 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. Real
GDP grew about 8.3% in 1994. Both South Korea and North Korea joined the
United Nations separately in late 1991, creating another forum for
negotiation and joint cooperation. The reunification of North and South
Korea could have a detrimental effect on the economy of South Korea.
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. Dependent on
oil prices during the 1980s, its manufactured products now predominate,
contributing 21% of GDP. Indonesia's development is progressing smoothly,
and it has become the world's twelfth largest economy.
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 OECD
countries or to a fall in world commodity prices.
India is one of the world's top fifteen industrial nations and has
considerable natural resources. The government exercises significant
influence over many aspects of the economy. Accordingly, future government
actions could have a significant effect on private sector companies, market
conditions, and prices and yields of securities of Indian issuers held by a
fund. Policymakers in India actively encourage foreign direct investment,
particularly in labor intensive industries. In addition, Indian stock
exchanges rely entirely on delivery of physical share certificates and have
experienced operational difficulties. These problems have included the
existence of fraudulent shares in the market, failed trades, and delays in
the settlement and registration of securities transactions. Indian stock
exchanges have in the past been forced to close for political reasons; for
example, a brokers' strike closed the exchange for ten days in December
1993, and there is no assurance that the exchanges will not be forced to
close again.
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 1994, the growth
rate in Japan slowed to 0.6% and its budget showed a deficit of 7.8% of
GDP. 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 1980s 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.
Japan is suffering its worst recession in two decades. Profits have fallen
sharply, unemployment has reached an historical high of 3.2%, and consumer
confidence is low. The banking sector has experienced a sharp rise in
non-performing loans, and strains in the financial system may continue.
Nine discount rate cuts since their peak of 6% in 1991, a succession of
fiscal stimulus packages, support plans for the debt-burdened financial
system, and spending for reconstruction following the Kobe earthquake
should help to contain recessionary forces, but substantial uncertainties
remain. The general government position has deteriorated as a result of
weakening economic growth, as well as stimulative measures taken recently
to support economic activity and to restore financial stability.
In addition to a cyclical downturn, Japan is suffering through structural
adjustments. Like the Europeans, the Japanese have seen a deterioration in
their competitiveness due to high wages, a strong currency, and structural
rigidities. Japan has also become a mature industrial economy and, as a
result, will see its long-term growth rate slow down over the next ten
years. Finally, Japan is reforming its political process and deregulating
its economy. These activities have resulted in turmoil, uncertainty, and a
crisis of confidence.
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 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. Some trade agreements between the countries
have reduced the friction caused by the current trade imbalance. A record
high value for the Yen in the first half of 1995 threatened to derail
Japan's recovery from a long economic downturn, mainly because it made
Japanese products more expensive overseas and eroded the value of foreign
earnings when repatriated to Japan. However, the recent easing of the Yen's
value has created expectations that Japanese earnings will improve for the
fiscal year ending March 1996.
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.
EMERGING MARKETS: ASIA
MARKET CAPITALIZATION IN U.S. DOLLARS
JUNE 1995
MILLIONS
India $ 147,210
Indonesia 52,243
Korea 178,670
Malaysia 224,176
Pakistan 9,469
Philippines 55,038
Sri Lanka 2,259
Taiwan 186,822
Thailand 150,584
Source: IFC (International Finance Corporation, Second Quarter 1995)
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1994
China 12.0%
Hong Kong 5.7%
India 4.9%
Indonesia 7.0%
Japan n/a
Korea 8.3%
Malaysia 8.5%
Philippines 4.5%
Singapore 7.0%
Taiwan 6.2%
Thailand 8.5%
Source: World Economic Outlook, May 1995
(International Monetary Fund. Figures are quoted based on each country's
domestic currency.)
For national stock market index performance, please see the section of
"Performance" beginning on page .
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. However, in 1993, Europe's economies began to slow and subsequently
slid into recession as tight monetary conditions and lack of progress
toward inflation convergence and budgetary consolidation in many countries
weakened consumer and business confidence. More generally, the turbulence
in the foreign exchange markets since the middle of 1992 and escalating
tensions over trade contributed to increased uncertainty in many countries.
The U.S. dollar continued on its downward track with respect to both the
German Mark and many other of Europe's currencies such as the Italian Lira,
the Spanish Peseta, and the Swedish Krona, the value of which have been
affected by political uncertainties and fiscal problems.
Europe's economies began to improve in 1995 as continued growth in the
United States and the countries of Southeast Asia provided the foundation
for an export-led recovery. This recovery was aided by a sharp rebound of
the U.S. dollar after it had reached postwar lows in the spring of 1995.
The Eastern European countries, after several years of declining output,
have generally shown dramatic growth in 1994 and 1995. Despite formidable
obstacles and major differences among countries and regions, many nations
are making substantial progress in their efforts to become market-oriented
economies. However, these economies are becoming increasingly disparate and
the experience of countries in the region varies markedly. Those nations
making the most successful transition include Poland, the Czech Republic,
and Hungary, while some of the former Soviet republics continue to suffer
from the consequences of the break up of the Soviet Union and have made
little progress in implementing effective market-oriented reforms. Key
aspects of the reform and stabilization efforts have not yet been fully
implemented, and risks of policy slippage remain. 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 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 transition to a market-based
trading system that is 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, interest rates have been falling, and may continue to
do so as evidence of the waning inflationary pressures accumulates.
The European Community (EC) consists of Belgium, Denmark, France, Germany,
Greece, Ireland, Italy, Luxembourg, the 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 excise taxes 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 U.S. 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 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 in those countries 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 in
late 1992 and early 1993. 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 hope for avoiding
hyper-inflation and for improving economic conditions. This development can
facilitate the implementation of stronger stabilization programs. Economic
conditions in the former Soviet Union have continued to deteriorate. Real
GDP in Russia fell 11.9 percent in 1993, after an 18 percent decline in
1992. In many other countries of the region, output losses 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.
Economic conditions appear to have improved for some of the transition
economies of central Europe during the past year. Following three
successive years of output declines, there has been a turnaround in the
Czech Republic and the Slovak 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 have achieved positive real growth in 1994 and 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. 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 conflicts
currently continue throughout the former Yugoslavia. Although there has
been recent progress toward a peaceful settlement of these conflicts, the
outcome remains 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. In the rest of Europe, monetary policy and financial
market developments have been dominated by the currency turmoil that began
in September 1992. At the same time, conditions are improving for
significant reductions of official interest rates in Europe, which should
help to contain recessionary forces and provide support to the overall
economic recovery in the regions by early 1996. With the passage of the
General Agreement on Trade and Tariffs earlier this year, Europe has taken
a step forward in resisting protectionist pressures. Interest rates
continue to decline, but some countries' tight monetary conditions remain
an obstacle to stronger growth and a threat to exchange market stability.
However, in the long term, economic unification 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 continue to
cause difficulties in Turkey's continuing 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 (ANNUAL % CHANGE)
1994
Denmark 4.6%
France 2.5%
Germany 2.9%
Italy 2.5%
Netherlands 2.4%
Spain 1.9%
Switzerland 2.0%
United Kingdom 3.8%
Source: World Economic Outlook, May 1995
(International Monetary Fund. Figures are quoted based on each country's
domestic currency.)
For national stock market index performance, please see the section of
"Performance" beginning on 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 (which include Morocco, Egypt, and
Algeria), 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 appears to have been 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.
SPECIAL CONSIDERATIONS AFFECTING NEW YORK
The financial condition of New York State (the State), its public
authorities and public benefit corporations (the Authorities) and its local
governments, particularly The City of New York (the City), could affect the
market values and marketability of, and therefore the net asset value per
share and the interest income of New York Municipal Income Fund or result
in the default of existing obligations, including obligations which may be
held by the fund. The following section provides only a brief summary of
the complex factors affecting the financial situation in New York and is
based on information obtained from the State, certain of its Authorities,
the City and certain other localities, as publicly available on the date of
this SAI. The information contained in such publicly available documents
has not been independently verified. It should be noted that the
creditworthiness of obligations issued by local issuers may be unrelated to
the creditworthiness of the State, and that there is no obligation on the
part of the State to make payment on such local obligations in the event of
default in the absence of a specific guarantee or pledge provided by the
State.
The State and the City are facing serious financial difficulties and each
has a decline in their credit standings. S&P and Moody's have each assigned
ratings for the State's general obligation bonds that are among the three
lowest of those states with rated general obligation bonds. S&P and Moody's
have each assigned ratings for the City's general obligations that are
among the four lowest of those cities with rated general obligation bonds.
The ratings of certain related debt of other issuers for which the State
has an outstanding moral obligation, lease purchase, guarantee or other
contractual obligation are generally linked directly to the State's rating.
Should the financial condition of the State, its Authorities, or its local
governments deteriorate, their respective credit ratings could be further
reduced, and the market value and marketability of their outstanding notes
and bonds could be adversely affected, and their respective access to the
public credit markets jeopardized.
ECONOMIC FACTORS. New York is the third most populous state in the nation,
and has a relatively high level of personal wealth. However, the State
economy has grown more slowly than that of the nation as a whole, resulting
in the gradual erosion of its relative economic affluence (due to factors
such as relative costs for taxes, labor, and energy). The State's economy
is diverse, with a comparatively large share of the nation's financial,
insurance, transportation, communications, and services employment, and a
very small share of the nations' farming and mining activity. New York has
a declining proportion of its workforce engaged in manufacturing and
increasing proportion engaged in service industries. The State, therefore
is likely to be less affected than the nation as a whole during an economic
recession concentrated in construction and manufacturing sectors of the
economy, but is likely to be more affected during a recession concentrated
in the service-producing sector. The State's manufacturing and maritime
base have been seriously eroded, as illustrated by the decline of the steel
industry in the Buffalo area and of the apparel and textile industries in
the City. In addition, the City experienced substantial socio-economic
changes, as a large segment of its population and a significant share of
corporate headquarters and other businesses relocated (many out-of-state).
Both the State and the City experienced substantial revenue increases in
the mid-1980s attributable directly and indirectly to growth in new jobs,
rising profits, and capital appreciation derived from the finance sector of
the City's economy. The finance sector's growth was a catalyst for the New
York City metropolitan region's related business and professional services,
retail trade and residential and commercial real estate markets. The then
rising real estate market contributed to City revenues, as higher property
values and new construction added to collections from property taxes,
mortgage recording, and transfer taxes and sales taxes on building
materials. The boom on Wall Street more than compensated for the continued
erosion of the State's (and the City's) manufacturing and maritime base,
since average wages in finance and related business and professional
services were substantially higher (thereby providing a net increase of
higher incomes, taxed at even higher marginal rates).
During the calendar years 1984 through 1991, the State's rate of economic
expansion was somewhat slower than that of the nation as a whole. In the
1990-91 national recession, the economy of the Northeast region in general
and the State in particular was more heavily damaged than that of the rest
of the nation and has been slower to recover. Although the national economy
began to expand in 1991, the State economy remained in recession until
1993, when employment growth resumed. Employment growth has been hindered
during recent years by significant cutbacks in the computer and instrument
manufacturing, utility and defense industries. Personal income increased
substantially in 1992 and 1993 and the State economy entered the third year
of a slow recovery in 1995. Most of the growth occurred in the trade,
construction and service industries, with business, social services and
health sectors accounting for most of the service industry growth.
According to assumptions contained in the State financial plan for fiscal
year 1995-1996 issued on June 20, 1995 (the 1995-96 State Financial Plan),
employment is expected to grow slightly during 1995, although the rate of
increase is expected to be below the rate experienced in 1994 due to
cutbacks in federal spending and employment, as well as continued corporate
downsizing. The Mid-Year Update to the 1995-96 State Financial Plan issued
on October 25, 1995 (the Mid-Year Update) contains a marginally weaker
economic forecast than that contained in the initial 1995-96 State
Financial Plan, and predicts a significant slowing of State employment
growth during calendar year 1996, due to the forecasted slackening pace of
national economic growth, industry consolidating, and governmental
employment.
Notwithstanding the State budget for fiscal year 1995-96 which enacts
significant tax and program reductions, the State can expect to confront
structural deficits in future years. The 1995-96 State Financial Plan
includes actions that will have an effect on the budget outlook for fiscal
year 1996-97 and beyond. In part, the 1995-96 State Financial Plan reflects
actions which provide nonrecurring measures (sometimes referred to as
"one-shots") variously estimated to provide $900 million to $1.0 billion of
savings. Additionally, the three-year plan to reduce State personal income
taxes, as discussed below briefly, will decrease State tax receipts by an
estimated $1.7 billion in fiscal year 1996-97. Similarly, other actions
taken to reduce disbursements in the State's 1995-96 fiscal year, such as
reductions in the State workforce and Medicaid and welfare expenditures,
are expected to provide greater reductions in future fiscal years. The net
impact of these and other factors is expected to produce a potential
imbalance in receipts and disbursements for State fiscal year 1996-97 and
future fiscal years.
Further, there can be no assurance that the State economy will not
experience worse-than-predicted results in the 1995-96 fiscal year with
corresponding material and adverse effects on the State's projections of
receipts and disbursements. Although the Mid-Year Update (Third-quarter
update) projects a continued balance in the 1995-96 State Financial Plan,
downward revisions have been made to the estimates of both receipts and
disbursements. As the 1995-96 State Financial Plan and the updates thereto
are based upon forecasts of national and State economic activity, it should
be noted that many uncertainties exist in such forecasts, including federal
financial and monetary policies, the availability of credit and the
condition of the world economy. In addition, the economic and financial
condition of the State may be affected by various financial, social,
economic and political factors. These factors can be complex, may vary from
year to year and are frequently the results of actions taken not only by
the State and its agencies and instrumentalities, but also by other
entities, such as the federal government, that are not under the control of
the State.
The fiscal health of the State may also be impacted by the fiscal health of
the City. Although the City has had a balanced budget since 1981, estimates
of the City's future revenues and expenditures are subject to various
uncertainties. For example, the effects of the October 1987 stock market
crash and the 1990-92 national recession have had a disproportionately
adverse impact on the New York City metropolitan region, as private sector
job losses since 1989 have offset all the prior employment gains of the
1980s. Declines in both employment and earnings in the finance sector
contributed to declines in retail sales and real estate values. In
addition, a number of widely publicized bankruptcies among highly leveraged
retailing, brokerage and real estate development companies occurred. The
effects of the recession have extended to banking, insurance, business
services (such as law, accounting and advertising), publishing and
communications. Factors which may inhibit the City's economic recovery
include (i) credit restraints imposed by the weak financial condition of
several major money center banks located in the City; (ii) increases in
combined State and local tax burdens, if uncompetitive tax rates are
imposed; (iii) perceived declines in the quality of life attributable to
service reductions and the deterioration of the City's infrastructure; (iv)
additional employment losses in the City's banking sector or corporate
headquarters complex due to further corporate relocations or
restructurings; or (v) increased expenditures for public health assistance
and care. The City's future economic condition will also likely be affected
by its competitive position as a world financial center (compared to
London, Tokyo, Frankfurt, and competing regional U.S. centers). Investors
should note that the budget for the City's 1996 fiscal year addresses a
projected $2.7 billion budget gap. Most of the budget-gap closing
initiatives may be implemented only with the cooperation of certain City
officials, the City's municipal unions, or the State or Federal
governments. No assurance can be given that such initiatives will be taken.
While the State's economy is broader-based than that of the City,
particular industries are concentrated in and have a disproportionate
impact on certain areas, such as heavy industry in Buffalo, photographic
and optical equipment in Rochester, machinery and transportation equipment
in Syracuse and Utica-Rome, computers in Binghamton and in the Mid-Hudson
Valley, and electrical equipment in the Albany-Troy-Schenectady area.
Constraints on economic growth, taxpayer resistance to proposed substantial
increases in local tax rates, and reductions in State aid in regions apart
from the City have contributed to financial difficulties for several county
and other local governments.
THE STATE. As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and its regional
economies, actions of the federal government, and State actions affecting
the level of receipts and disbursements. Owing to these and other factors,
the State may, in future years, face substantial potential budget gaps
resulting from a significant disparity between tax revenues projected from
a lower recurring receipts base and the future costs of maintaining State
programs at current levels. The State has been experiencing and continues
to experience substantial financial difficulties, with General Fund (the
principal operating account) deficits incurred during the fiscal years
1989-1990 through 1991-1992. The State's accumulated General Fund deficit
(on a GAAP basis) grew 91% from FY1986-87 to FY1990-91, and reached a
then-record $6.265 billion (audited) by March 31, 1991. An accumulated
General Fund deficit at March 31, 1993 was restated to be $2.551 billion.
The State ended its 1993-94 fiscal year with a negative fund balance of
$1.637 billion. This represented an improvement over prior years, primarily
due to an improving national and State economy resulting in
higher-than-expected receipts from personal income tax and various business
taxes and the relative success of the New York Local Government Assistance
Corporation (LGAC). The General Fund showed an operating surplus of $914
million (on a GAAP basis). The State's 1994-95 fiscal year budget was
adopted on June 8, 1994, more than two months after the beginning of the
State's fiscal year. The State ended its FY 1994-95 reporting a General
Fund operating deficit of $1.426 billion, primarily due to changes in
accounting methodologies used by the State Comptroller and the use of
$1.026 billion of the FY 1993-94 cash surplus to fund operating expenses in
FY 1994-95. These factors were offset by net proceeds of $315 million of
bonds issued by LGAC. Actual receipts reported fell short of original
projections, primarily in the categories of business taxes. These
shortfalls were offset by better than expected performance in the remaining
taxes, principally the user taxes and fees. Total expenditures for FY
1994-95 increased $2.083 billion, or 6.7% over the prior fiscal year.
On June 7, 1995, the New York State legislature passed the final
legislation regarding the State's 1995-96 budget. Both the enacted budget
bills for 1995-96 and the 1995-96 State Financial Plan include reductions
in the actual level of spending from that which occurred in the 1994-95
fiscal year and project reductions in Medicaid and State Authority
operating costs. The 1995-96 budget also projects an approximate increase
of 3% in all governmental funds over the amounts received in fiscal year
1994-95 and includes the phase-in of a three-year reduction in the State's
personal income tax. The Governor released his proposed budget for FY
1996-97 on December 15, 1995 (the 1996-97 Executive Budget), 30 days in
advance of the constitutionally-mandated release date. The 1996-97
Executive Budget projects a $3.9 billion budget gap, which it proposes to
close largely by Medicaid cost containment measures (approximately $1.0
billion), welfare reform (approximately $240 million) and restructuring of
the state healthcare delivery system (approximately $470 million). The
phased reduction of the State's personal income tax is continued in the
1996-97 Executive Budget. There are risks and uncertainties concerning
whether or not certain spending and tax cuts will be upheld if challenged
in the courts. For example, the State Comptroller is challenging in court
the proposed use of certain pension reserves. If such suit is successful,
approximately $110 million would become unavailable as a source of
contribution to the balanced State budget. Finding an additional $110
million in reductions or from other sources may prove difficult.
Additionally, even if all spending and tax cuts contained in the State
budget are successfully implemented, resulting in a balanced budget for
fiscal year 1995-96, there can be no assurance that the State will not face
budget gaps in future years, resulting from a disparity between tax
revenues projected from a lower recurring-receipts base and the spending
required to maintain State programs at current levels. Furthermore, the
State is a party to numerous lawsuits in which an adverse decision could
require extraordinary expenditures. Certain major budgetary considerations
affecting the State are outlined below.
REVENUE BASE. The State's principal revenue sources are economically
sensitive, and include the personal income tax (53% of fiscal year 1994-95
General Fund receipts and estimated to be approximately 54% of fiscal year
1995-96 General Fund receipts), user taxes and fees (20% of fiscal year
1994-95 and nearly 21% of estimated 1995-96 General Fund receipts,
respectively). Uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax law also can have an adverse impact on
State tax receipts. One-fourth of the 4% State sales tax has been dedicated
to pay debt service of LGAC, and has correspondingly reduced General Fund
receipts. To the extent those moneys are not necessary for payment to LGAC,
they are transferred from the LGAC Tax fund to the General Fund and
reported as a transfer from other funds rather than as sales and use tax
receipts. During fiscal years 1991-92, 1992-93, 1993-94, and 1994-95 moneys
were so transferred. Capital gains are a significant component of income
tax collections. Auto sales and building materials are significant
components of retail sales tax collections. Tax rates are relatively high
and may impose political and economic constraints on the ability of the
State to further increase its taxes. In 1995, the State enacted a
tax-reduction program designed to reduce, by 20 percent over three years,
receipts from the personal income tax. The tax had remained unchanged since
1989 as a result of annual deferrals of tax reductions originally enacted
in 1987. The tax-reduction program is estimated to reduce receipts by $515
million in the 1995-96 fiscal year, $1.7 billion in the 1996-97 fiscal year
and produce further significant reductions in fiscal year 1997-98. In
addition to such reductions in overall tax rates, the tax-reduction program
also includes other modifications to the tax laws which will have the
effect of lowering the amount of tax revenues to be received by the State.
In the absence of countervailing economic growth or expenditure cuts, the
tax cuts could make the achievement of a balanced State budget more
difficult in future years.
A significant risk to the 1995-96 State Financial Plan arises from tax
legislation pending in the U.S. Congress. Changes to the federal tax
treatment of capital gains, if made, are likely to flow automatically to
the State personal income tax. Such changes, depending upon their precise
character and timing, as well as taxpayer response, could produce either
revenue gain or loss during the remainder of the State's 1995-96 fiscal
year.
STATE DEBT. The State has the heaviest debt burden of any state (with
nearly $5.2 billion of long-term general obligations, $4.7 billion of LGAC
debt and $18 billion of lease-purchase or other contractual debt
outstanding as of March 31, 1995), and debt service costs absorb a large
share of the State's budget. As of March 31, 1995 the State is also
obligated with respect to nearly $7.0 billion for statutory moral
obligations for nine of its Authorities and for guarantees of $358 million
of other Authority debt. Historically, the State has had one of the largest
seasonal financing requirements of any municipal issuer, and was required
each spring to borrow substantial sums from public credit markets to
finance its accumulated General Fund deficit and its scheduled payments of
aid to local governments and school districts. To help reduce such seasonal
financing needs, the State created LGAC as a financing vehicle to finance
the State's local assistance payments by issuing long-term debt, payable
over 30 years from a portion of the State sales tax, as discussed above.
The State budget and State financial plan for fiscal year 1995-96 each
proposes to utilize the remainder of authorized but yet unissued LGAC
bonds. As of June 1995, LGAC had issued bonds and notes to provide net
proceeds of $4.7 billion, thus completing the LGAC program. The impact of
LGAC's borrowing is that the State is able to meet its cash flow needs in
the first quarter of the 1995-96 fiscal year without relying on short-term
seasonal borrowings. Neither the 1995-96 State financial plan nor the
1994-95 State Financial Plan included a spring borrowing, the first time in
35 years that there was no short-term borrowing. Investors should note that
the enabling legislation for LGAC contains a covenant restricting the
amount of any future State spring borrowing, which may reduce the State's
fiscal flexibility in future years.
BUDGETARY FLEXIBILITY. A significant portion of the State's General Fund
budget is accounted for by contractually required expenses (such as pension
and debt service costs) and by federally mandated programs (such as AFDC
and Medicaid). In addition, State aid for school districts comprises a
major share of the budget, and total appropriations and distribution of
such aid is especially contentious politically. Furthermore, the State's
ability to respond to unanticipated developments in the future may have
been impaired since the State has utilized a substantial range of actions
of a non-recurring nature in recent years to finance its General fund
operations, including tapping excess monies in special funds, refinancing
outstanding debt to reduce reserve fund requirements and current (but not
long-term) debt service costs, recalculating pension fund contributions,
selling State assets, reimbursing past General Fund expenditures by the
issuance of authority debt and deferring payment for expenditures to future
fiscal years. The 1995-96 State Financial Plan contains actions of a
non-recurring nature including mergers of certain authorities payments from
the sale of certain State assets, and payments associated with the
resolution of certain court cases, totalling approximately $900 million to
$1 billion. The 1996-97 Executive Budget, however, contains actions of a
non-recurring nature only to the extent of approximately $123 million.
LABOR COSTS. The State government workforce is mostly unionized, subject to
the Taylor Law which authorizes collective bargaining and prohibits (but
has not historically prevented) strikes and work slowdowns. Costs for
employee health benefits have increased substantially, and can be expected
to further increase. The State has a substantial unfunded liability for
future pension benefits, and has utilized changes in its pension fund
investment return assumptions to reduce current contribution requirements.
If such investment earnings assumptions are not sustained by actual
results, additional State contributions will be required in future years to
meet the State's contractual obligations. The State's change in actuarial
method from the aggregate cost method to a modified projected unit credit
in the 1990-91 fiscal year created a substantial surplus that was amortized
and applied to offset the State's contribution through the 1993-94 fiscal
year. This change in actuarial method was ruled unconstitutional by the
State's highest court and the State returned to the aggregate cost method
in fiscal year 1994-95 using a four-year phase-in. Employer contributions,
including the State's, are expected to increase over the next five to ten
years.
PUBLIC ASSISTANCE. The State has the second largest number of persons
receiving public assistance (AFDC and Home Relief) of any state. AFDC costs
are shared among the federal government, the State and its counties
(including the City) by statutory formula. Caseloads tend to rise
significantly during economic downturns, but have fallen only in the later
stages of past economic recoveries.
MEDICAID. The State participates in the federal Medicaid program under a
state plan approved by the Health Care Financing Administration. The
federal government provides a substantial portion of eligible program
costs, with the remainder shared by the State and its counties (including
the City). Basic program eligibility and benefits are determined by federal
guidelines, but the State provides a number of optional benefits and
expanded eligibility. Program costs have increased substantially in recent
years, and account for a rising share of the State budget. Federal law
requires the State adopt reimbursement rates for hospitals and nursing
homes that are reasonable and adequate to meet the costs that must be
incurred by efficiently and economically operated facilities in providing
patient care, a standard that has led to past litigation by hospitals and
nursing homes seeking higher reimbursement from the State. The budget
adopted for fiscal year 1995-96, and in particular the 1996-97 Executive
Budget, each includes reductions in spending for Medicare. Cutbacks in
State spending for Medicaid may adversely affect the financial condition of
hospitals and health care institutions that are the obligors of bonds that
may be held by the fund.
THE STATE AUTHORITIES. The State's Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The New York
State Public Authorities Control Board approves the issuance of debt and
major contracts by ten of the Authorities. As of September 30, 1994, the
date of the latest available data, there were 18 Authorities that had
outstanding debt of $100 million or more, the aggregate debt of which
(including refunding bonds and moral obligation, lease-purchase,
contractual obligation, or State-guaranteed debt) then totaled
approximately $70.3 billion. As of March 31, 1995, aggregate public
authority debt outstanding as State-supported was approximately $28 billion
and State-related debt was approximately $36 billion. In recent years the
State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain Authorities for operating and other
expenses and, (from 1976 to 1987) in fulfillment of its commitments on
moral obligation indebtedness or otherwise, for debt service. The State
budgeted operating assistance of approximately $1.3 billion for the
Metropolitan Transportation Authority (MTA) for fiscal year 1994-1995 and
estimates total State assistance in fiscal year 1995-96 to be approximately
$1.1 billion. This assistance is expected to continue to be required (and
may increase) in future years. Failure by the State to appropriate
necessary amounts or to take other action to permit the Authorities to meet
their obligations could adversely affect the ability of the State and the
Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes.
The MTA, whose credit standing was recently reduced, oversees the operation
of the City's subway and bus lines by its affiliates, the New York City
Transit Authority and the Manhattan and Bronx Surface Transit Operating
Authority (collectively, the TA). MTA subsidiaries operate certain commuter
rail and bus lines in the New York metropolitan area. An affiliated agency,
the Triborough Bridge and Tunnel Authority (TBTA), operates certain
intrastate toll bridges and tunnels. To maintain its facilities and
equipment, which deteriorated significantly in the late 1970s due to
deferred maintenance, the MTA prepared a five-year capital program subject
to approval by the MTA Capital Program Review Board. In April 1993, the
State legislature authorized the funding of a portion of a five-year $9.56
billion capital plan for the MTA for 1992 through 1996. MTA's five-year
capital program for 1992-96 was approved by the State capital program
review board in December 1993. There can be no assurance that all
governmental actions for the 1992-96 capital program will be taken, that
funding sources currently identified will not be decreased or eliminated,
or that the capital program will not be delayed or reduced. If the capital
program is delayed or reduced, ridership and fare revenues may decline,
which could impair the MTA's ability to meet its operating expenses without
additional State assistance. In addition, because fares are not sufficient
to finance its mass transit operations, the MTA has depended and will
continue to depend for operating support upon a system of State, local
government and TBTA support, and to the extent available, Federal
assistance (including loans, grants and operating subsidies). There can be
no assurance that any such assistance will continue at any particular level
or in any fixed relationship to the operating costs and capital needs of
the MTA.
THE CITY. The City has required, and continues to require, significant
financial assistance from the State. The City depends on State assistance
both to enable the City to balance its budget and to meet its cash
requirements. In the early 1970s, the City incurred substantial operating
deficits, and its financial controls, accounting practices, and disclosure
policies were widely criticized. In 1975, the City encountered severe
financial difficulties and lost access to the public credit markets. The
State Legislature responded in 1975 by creating the Municipal Assistance
Corporation For The City of New York (MAC) to provide financing assistance
for the City and the Financial Control Board to exercise certain oversight
and review functions with respect to the City's finances. The Financial
Control Board's powers over the City were suspended in June 1986, but would
be reinstated (under current law) if the City experiences certain adverse
financial circumstances. At the time of the fiscal crisis, the State
provided substantial financial assistance to the City, the federal
government provided the City with direct seasonal loans and guarantees on
the City's long-term debt, and the City's labor unions accepted deferrals
of wage increases and approved purchases of City bonds by the pension
funds. No assurance can be given that similar assistance would again be
made available if needed, particularly given the current budgetary
constraints faced by both the Federal and State governments.
The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas including the provision of
social services such as day care, foster care, health care, family
planning, services for the elderly and special employment services for
needy individuals and families who qualify for such assistance. State law
requires the City to allocate a large portion of its total budget to Board
of Education operations, and mandates the City to assume the local share of
public assistance and Medicaid costs. While the City has had GAAP operating
surpluses, in recent fiscal years the City has experienced and continues to
experience ongoing financial difficulties, primarily related to the impact
of the recent recession on the local economy (reducing revenues from most
major taxes and increasing public assistance and Medicaid caseloads),
rising health care costs for City employees and for Medicaid, and rising
inflation and interest rates. In response, the City implemented gap-closing
programs in recent fiscal years, which initially relied primarily on
actions of a non-recurring nature, but included substantial property tax
rate increases and a personal income tax surcharge imposed in fiscal year
1991 and selected service cutbacks. Reductions in State aid, larger than
budgeted labor settlements and increased police expenditures added to the
adverse budgetary impact of the local recession, confronting the City with
a potential $3.3 billion imbalance during fiscal year 1992 budget
negotiations. This initial budget gap was closed by adoption of a budget
providing for various tax increases and significant service reductions. Aid
to nonprofit cultural institutions in the City was significantly reduced
(as was State aid to such institutions), including certain institutions
that are obligors of bonds that may be held by the fund. The City's budget
for fiscal year 1994 identified measures to close a $300 million budget
gap, which was the result of shortfalls in Federal and State aid from
previously projected levels. The City achieved balanced operating results
as reported in accordance with GAAP for the 1994 fiscal year. For fiscal
year 1995, the City adopted a budget which halted the trend in recent years
of substantial increases in City-funded spending from one year to the next
and the City budget adopted for fiscal year 1996 reduces City-funded
spending for the second consecutive year.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and includes the City's
capital, revenue and expense projections and outlines proposed budget
gap-closing programs for those years with projected budget gaps. The mayor
is responsible for preparing the City's four-year financial plan, including
the City's current financial plan for the 1996 through 1999 fiscal years
(the 1996-1999 Financial Plan). The City's projections set forth in the
1996-1999 Financial Plan are based on various assumptions and contingencies
which are uncertain and which may not materialize. Changes in major
assumptions could significantly affect the City's ability to balance its
budget and to meet its annual cash flow and financing requirements. Such
assumptions and contingencies include the timing and pace of a regional and
local economic recovery, increases in interest rates, the impact on real
estate tax revenues of the real estate market, wage increases for city
employees consistent with those assumed in the 1996-99 Financial Plan,
employment growth, the ability to implement proposed reductions in City
personnel and other cost reduction initiatives which may require in certain
cases the cooperation of the City's municipal unions, the ability of the
New York City Health and Hospitals Corporation and the Board of Education
to take actions to offset reduced revenues, the ability to complete revenue
generating transactions, provision of State and Federal aid and mandate
relief, and the impact on City revenues of proposals for Federal and State
welfare reform. No assurance can be given that the assumptions used by the
City in the 1996-99 Financial Plan will be realized. Furthermore, actions
taken in recent fiscal years to avert deficits may have reduced the City's
flexibility in responding to future budgetary imbalances, and have deferred
certain expenditures to later fiscal years.
The City submitted on July 21, 1995 a fourth quarter modification to the
City's financial plan for the 1995 fiscal year which projects a balanced
budget in accordance with GAAP for the City's 1995 fiscal year. On July 11,
1995, the City submitted the 1996-1999 City Financial Plan, which is based
on the City's expense and capital budgets of the City's 1996 fiscal year
adopted on June 14, 1995 (the 1996 City Budget). The 1996 City Budget sets
forth proposed actions by the City for the 1996 fiscal year to close a
substantial projected budget gap (approximately $3.1 billion) resulting
from lower than projected tax receipts and other revenues and greater than
projected expenditures. Proposed actions in the 1996-1999 Financial Plan
for the City's 1996 fiscal year include a reduction of approximately $400
million primarily affecting public assistance and Medicaid payments by the
City, expenditure reductions in agencies totalling approximately $1.2
billion and transitional labor savings of approximately $600 million. These
and other proposed actions were contained in the 1996-1999 Financial Plan
as well as the 1996 City Budget. The City Budget is subject to the ability
of the City to implement the proposed reductions in expenditures, personal
services and personnel, which are substantial and may be difficult to
implement. For example, one of the key items contained in the 1996 City
Budget is the sale of the City's water system for approximately $2.3
billion. This plan has been hotly contested since it was announced, and is
currently the focus of several lawsuits. In November, the Mayor sued the
City Comptroller to compel his signature on bonds needed to accomplish the
sale of the water system. The Comptroller had blocked the bond sale,
stating that the sale of City water assets would be illegal and "an
improvident fiscal gimmick." In December, a coalition of civic, housing and
environmental groups from New York City and Westchester County (the
Coalition) filed suit to block the Mayor's plan to sell the water system
and announced an intention to join in the Comptroller's battle to block the
bond sale. In addition, certain proposals may be offset by various State
and Federal legislation which could mandate levels of City funding
inconsistent with the 1996 City Budget and the 1996-1999 Financial Plan. In
addition, the 1996-1999 Financial Plan anticipates the receipt of
substantial amounts of Federal aid. Certain proposed State and Federal
actions are subject to approvals from the Legislature, the Governor and the
President, as applicable. Both Federal and State actions are uncertain;
certain legislative proposals contemplate significant reductions in Federal
spending, including proposed Federal welfare reform which could result in
caps on, or block grants of, Federal programs. Further, no assurance can be
given that either such actions will in fact be taken or that the projected
savings will result even if such actions are taken.
The City derives its revenues from a variety of local taxes, user charges,
miscellaneous revenues and federal and State unrestricted and categorical
grants. The City projects that local revenues will provide approximately
68.0% of total revenues in fiscal year 1996 while federal aid, including
categorical grants, will provide 11.7% in fiscal year 1996 and State aid,
including unrestricted aid and categorical grants, will provide 20.3% in
fiscal year 1996. As a proportion of total revenues, State aid has remained
relatively constant over the period from 1980 to 1990, while federal aid
was sharply reduced (having provided nearly 20% of total fiscal year 1980
revenues). The largest source of the City's revenues is the real estate tax
(approximately 22% of total revenues projected for fiscal year 1996), at
rates levied by the City council (subject to certain State constitutional
limits). State legislation requires that increases in assessments of
certain classes of real property be phased-in over a five-year period;
thus, property owners may receive higher assessments when property values
are declining. However, in the event of a reduction in total assessments,
higher tax rates would be required to maintain the same amount of tax
revenue. The City derives the remainder of its tax revenues from a variety
of other economically sensitive local taxes (subject to authorization by
the legislature), including: a local sales and compensating use tax
(primarily dedicated to MAC debt service) imposed in addition to the
State's retail sales tax; the personal income tax on City residents and the
earnings tax on non-residents; a general corporation tax; and a financial
corporation tax. High tax burdens in the city impose political and economic
constraints on the ability of the City to increase local tax rates. The
City's four-year financial plans have been the subject of extensive public
comment and criticism, principally questioning the reasonableness of
assumptions that the City will have the capacity to generate sufficient
revenues in the future to provide the level of services contained in such
City financial plans. On July 10, 1995, S&P lowered the City's credit
rating from A- to BBB+, among the lowest ratings of any major city in the
country. The rating agency cited specifically the City Budget's reliance on
"one-shot" measures to balance the budget for fiscal year 1995-96 without
rectifying the underlying structural problems, its continued optimistic
projections of State and Federal aid, and continued high debt levels. S&P
also mentioned the feeble local economy and the City Budget's over-reliance
on the financial services sector which historically has been volatile.
The City is the largest municipal debt issuer in the nation, and has more
than doubled its debt load since the end of fiscal year 1988, in large
measure to rehabilitate its extensive, aging physical plant. The City's
seasonal borrowing needs increased significantly during fiscal years 1990
and 1991, largely due to delayed State aid payments, and totalled $2.25
billion in fiscal year 1992, $1.4 billion in fiscal year 1993, $1.75
billion in fiscal year 1994 and $2.2 billion in fiscal year 1995. The
City's current capital financing program reflects major reductions
(approximately $2.13 billion) in the size of the capital program to be
implemented cumulatively through fiscal year 1999 which is intended to
reduce future debt service requirements. Such reductions may adversely
affect the condition of the City's aging and deteriorating infrastructure
and physical assets, such as sewers, streets, bridges and tunnels, and mass
transit facilities. Further, the City's capital financing program currently
contemplates receipt of proceeds of approximately $1 billion resulting from
the sale of the City's water and sewer system to the Water Board, and
proposes to utilize a substantial portion of such proceeds for capital
project improvements. It is not certain that such proceeds will become
available for capital improvements, because, as discussed above, both the
City Comptroller and the Coalition have opposed such proposed transfer of
the water and sewer system.
In November 1993, the voters approved a proposed charter whereby Staten
Island would secede from the City. Staten Island is one of five
counties/boroughs, comprising 4% of the City's population and 19% of its
land area. State law provides a complex mechanism for such secession. The
State Legislature is also considering establishment of a similar secession
mechanism for Queens.
OTHER LOCALITIES. Certain localities in addition to the City could have
financial problems which, if significant, could lead to requests for
additional State assistance during the State's 1995-96 fiscal year and
thereafter. Fiscal difficulties experienced by the City of Yonkers, for
example, could result in State actions to allocate State resources in
amounts that cannot yet be determined. In the recent past, the State
provided substantial financial assistance to its political subdivisions,
primarily for aid to elementary, secondary and higher education, Medicaid
income maintenance, and local transportation programs. The legislature
enacted substantial reductions from previously budgeted levels of State aid
since December 1990. To the extent the State is constrained by its
financial condition, State assistance to localities may be further reduced,
compounding the serious fiscal constraints already experienced by many
local governments. Localities also face anticipated and potential problems
resulting from pending litigation (including challenges to local property
tax assessments), judicial decisions and socio-economic trends. The
Legislature enacted substantial reductions from previously budgeted levels
of State aid since December 1990.
SPECIAL CONSIDERATIONS AFFECTING CALIFORNIA
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives, as
discussed below, could adversely affect the market values and marketability
of, or result in default of, existing obligations, including obligations
that may be held by the fund. Obligations of the state or local governments
may also be affected by budgetary pressures affecting the State of
California (the State) and economic conditions in the State. Interest
income to the fund could also be adversely affected. The following
discussion highlights only some of the more significant financial trends
and problems, and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State, its
agencies, or instrumentalities, as available as of the date of this SAI.
FMR has not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
LIMITATION ON TAXES. Certain obligations held by the fund may be
obligations of issuers that rely in whole or in part, directly or
indirectly, on AD VALOREM property taxes as a source of revenue. The taxing
powers of local governments and districts are limited by Article XIIIA of
the California Constitution, enacted by the voters in 1978 and commonly
known as "Proposition 13." Briefly, Proposition 13 limits to 1% of full
cash value the rate of AD VALOREM property taxes on real property and
generally restricts the increase in taxes upon reassessment of property to
2% per year, except upon new construction or change of ownership (subject
to a number of exemptions). Taxing entities may, however, raise AD VALOREM
taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% AD VALOREM tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as
of March 1, 1975 if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits were filed challenging the acquisition-based
assessment system of Proposition 13, but on June 18, 1992, the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through AD
VALOREM property taxes above the 1% limit; it also requires voters of any
government unit to give 2/3 approval to levy any "special tax." However,
court decisions allowed non-voter-approved levies of "general taxes" which
were not dedicated to a specific use.
A 1986 initiative statute, called "Proposition 62," imposed additional
limits on local governments, by requiring either majority or 2/3 voter
approval for any increases in "general taxes" or "special taxes,"
respectively (other than property taxes, which are unchangeable). Court
decisions had struck down most of Proposition 62 and many local
governments, especially cities, had enacted or raised local "general taxes"
without voter approval. In September 1995, the California Supreme Court
overruled the prior cases, and upheld the constitutionality of Proposition
62. Many aspects of this decision (such as its impact on charter (home
rule) cities, and whether it will have retroactive effect) remain unclear,
but its future effect will be to further limit the fiscal flexibility of
many local governments.
APPROPRIATIONS LIMITS. The State and its local governments are subject to
an annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations
limit imposed. "Appropriations subject to limitation" are authorizations to
spend "proceeds of taxes," which consist of tax revenues and certain other
funds, including proceeds from regulatory licenses, user charges, or other
fees to the extent that such proceeds exceed the cost of providing the
product or service; but " proceeds of taxes" for local governments exclude
most State subventions. No limit is imposed on appropriations of funds
which are not "proceeds of taxes," such as reasonable user charges or fees
and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are: (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters; (2)
appropriations arising from certain emergencies declared by the Governor;
(3) appropriations for certain capital outlay projects; and (4)
appropriations by the State of post-1989 increases in gasoline taxes and
vehicle weight fees.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized by Proposition 111 to follow more closely
growth in the State's economy. For the 1990-91 fiscal year, each unit of
government has recalculated its appropriations limit by taking the actual
1986-87 limit and applying the Proposition 111 annual adjustments forward
to 1990-91. This was expected to raise the limit in most cases.
Under Proposition 111, "excess" revenues are measured over a two-year
cycle. With respect to local governments, excess revenues must be returned
by a revision of tax rates or fee schedules within the two subsequent
fiscal years. The appropriations limit for a local government may be
overridden by referendum under certain conditions for up to four years at a
time. With respect to the State, 50% of any excess revenues is to be
distributed to K-12 school and community college districts (collectively,
K-14 districts) and the other 50% is to be refunded to taxpayers.
In the years immediately following enactment, very few California
governmental entities operated near their appropriations limit. In the
mid-to-late 1980's, many entities were at or approaching their limit, and
several successfully obtained voter approval for four-year waivers of the
limit. Since Proposition 111, the appropriations limit has again ceased to
be a practical limit on California governments, but this condition may
change in the future. During FY 1986-87, State receipts from proceeds of
taxes exceeded its appropriations limit by $1.138 billion, which was
returned to taxpayers. Since that time, appropriations subject to
limitation were under the State limit. The 1996-97 Governor's Budget
proposal estimates State appropriations will be more than $6.4 billion
under the limit for FY 1995-96 and over $9.2 billion under the limit for FY
1996-97.
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of December 31, 1995, the State had approximately $18.3 billion of
general obligation bonds outstanding, and $2.9 billion remained authorized
but unissued. In addition, at June 30, 1995, the State had lease-purchase
obligations, payable from the State's General Fund, of approximately $5.6
billion. State voters will have $5.0 billion of new bond authorizations on
the March 26, 1996 ballot, and additional bonds may be placed on the
November 5, 1996 ballot. Of the State's outstanding general obligation
debt, approximately 21% is presently self-liquidating (for which program
revenues are anticipated to be sufficient to reimburse the General Fund for
debt service payments). In FY 1994-95, debt service on general obligation
bonds and lease-purchase debt was approximately 5.3% of General Fund
revenues. The State has paid the principal of and interest on its general
obligation bonds, lease-purchase debt, and short-term obligations when due.
ECONOMY
The State's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 27% in the 1980s and,
at over 32 million, it now represents over 12% of the total U.S.
population. Total personal income in the State, at an estimated $703
billion in 1994, accounts for more than 12% of all personal income in the
nation. Total employment in 1994 was over 14 million, the majority of which
is in the service, trade, and manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job losses
were the worst of any post-war recession. Employment levels stabilized by
late 1993 and steady growth occurred since the start of 1994; pre-recession
job levels are expected to be reached in 1996. Unemployment, while higher
than the national average, came down significantly from the January 1994
peak of 10%. Economic indicators show a steady recovery underway in
California since the start of 1994, although the residential housing sector
has been weaker than in previous recoveries. Any delay or reversal of the
economic recovery may cause a recurrence of revenue shortfalls for the
State.
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in 1994-95 were the
California personal income tax (43% of total revenues), the sales tax
(34%), bank and corporation taxes (13%), and the gross premium tax on
insurance (3%). The State maintains a Special Fund for Economic
Uncertainties (the SFEU), derived from General Fund revenues, as a reserve
to meet cash needs of the General Fund, but which is required to be
replenished as soon as sufficient revenues are available. Year-end balances
in the SFEU are included for financial reporting purposes in the General
Fund balance. In recent years (but not in the past three years, as the
recession has cut revenues), the State has budgeted to maintain the SFEU at
around 3% of General Fund expenditures.
Throughout the 1980s, State spending increased rapidly as the State
population and economy also grew rapidly, including many assistance
programs to local governments, which were constrained by Proposition 13 and
other laws. The largest State program is assistance to local public school
districts. In 1988, an initiative (Proposition 98) was enacted which
(subject to suspension by a 2/3 vote of the Legislature and the Governor)
guarantees local school districts and community college districts a minimum
share of State General Fund revenues (currently about 35%).
Since the start of FY1990-91, the State faced adverse economic, fiscal, and
budget conditions. The economic recession seriously affected State tax
revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget
with the largest programs supported by the General Fund (education, health,
welfare and corrections) growing at rates significantly higher than the
growth rates for the principal revenue sources of the General Fund. These
structural concerns will continue in future years; in particular, it is
anticipated that there will be a need to increase capital and operating
costs of the correctional system in response to a "Three Strikes" law
enacted in 1994 which mandates life imprisonment for certain felony
offenders.
RECENT BUDGETS. As a result of these factors, among others, from the late
1980s until 1992-93 the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years,
and the State accumulated and sustained a budget deficit in the SFEU
approaching $2.8 billion at its peak at June 30, 1993. Starting in FY
1990-91 and for each year thereafter, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature and
Governor eventually agreed on a number of different steps to produce Budget
Acts in the years 1991-92 to 1994-95, including:
(medium solid bullet) significant cuts in health and welfare program
expenditures;
(medium solid bullet) transfers of program responsibilities and some
funding sources from the State to local governments, coupled with some
reduction in mandates on local government;
(medium solid bullet) transfer of about $3.6 billion in annual local
property tax revenues from cities, counties, redevelopment agencies and
some other districts to local school districts, thereby reducing state
funding for schools;
(medium solid bullet) reduction in growth of support for higher education
programs, coupled with increases in student fees;
(medium solid bullet) revenue increases (particularly in the FY 1991-92
budget), most of which were for a short duration;
(medium solid bullet) increased reliance on aid from the federal government
to offset the costs of incarcerating, educating and providing health and
welfare services to undocumented aliens (although these efforts have
produced much less federal aid than the State Administration had
requested); and
(medium solid bullet) various one-time adjustment and accounting changes.
Despite these budget actions, the effects of the recession led to large
unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of FY 1993-94, the accumulated deficit was so large
(almost $2.8 billion) that it was impractical to budget to retire it in one
year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit past the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, to carry the final
retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures and
the turnaround of the economy by late 1993 finally led to the restoration
of positive financial results. While General Fund revenues and expenditures
were essentially equal in FY 1992-93 (following two years of excess
expenditures over revenues), the General Fund had positive operating
results in FY 1993-94 and FY 1994-95, which have reduced the accumulated
budget deficit to around $600 million as of June 30, 1995. The 1996-97
Governor's Budget projects complete elimination of the deficit by June 30,
1996.
A consequence of the accumulated budget deficits in the early 1990s,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the
annual budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and the
Governor failed to adopt a budget for FY 1992-93 by July 1, 1992, which
would have allowed the State to carry out its normal annual cash flow
borrowing to replenish its cash reserves, the State Controller was forced
to issue approximately $3.8 billion of registered warrants (IOUs) over a
2-month period to pay a variety of obligations representing prior years'
(or continuing) appropriations and mandates from court orders. Available
funds were used to make constitutionally-mandated payments, such as debt
service on bonds and warrants.
The State's cash condition became so serious in late spring of 1992 that
the State Controller was required to issue revenue anticipation warrants
maturing in the following fiscal year in order to pay the State's
continuing obligations. The State was forced to rely increasingly on
external debt markets to meet its cash needs, as a succession of notes and
warrants (both forms of short-term cash flow financing) often needed to pay
previously-maturing notes or warrants, were issued in the period from June
1992 to July 1994. These borrowings were used also in part to spread out
the repayment of the accumulated budget deficit over the end of the fiscal
year.
The State issued $7.0 billion of short-term debt in July 1994 to meet its
cash flow needs and to finance the deferral of part of its accumulated
deficit to FY 1995-96. In order to assure repayment of $4.0 billion of this
borrowing which matures on April 25, 1996, the State enacted legislation
(the Trigger Law) which would lead to automatic, across-the-board budget
cuts in General Fund expenditures if cash flow projections made at certain
times deteriorated from estimates made in July 1994 when the borrowings
were made. The State's cash position remained favorable enough during FY
1994-95 that the State Controller determined that no automatic budget cuts
were needed in that year.
CURRENT BUDGET. For the first time in four years, the State entered FY
1995-96 with strengthening revenues based on an improving economy. The
major feature of the Governor's proposed Budget, a 15% phased cut in
personal income and business taxes, was rejected by the Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5% increase from the
prior years. Expenditures were budgeted at $43.4 billion, a 4% increase.
The Department of Finance projected that, after repaying the last of the
carryover budget deficit, there would be a positive balance of less than
$30 million in the SFEU at June 30, 1996.
The Department of Finance projected cash flow borrowings in FY 1995-96
would be the smallest in many years, comprising about $2 billion of notes
to be issued in April 1996, and maturing by June 30, 1996. With full
payment of $4 billion of revenue anticipation warrants on April 25, 1996,
the Department saw no further need for borrowing over the end of the fiscal
year. The Department projected that available internal cash resources to
pay State obligations would be about $1.9 billion at June 30, 1996. On
October 15, 1995, the State Controller, in the last step in the Trigger Law
process, reported that projected cash resources in the General Fund during
FY 1995-96 would be large enough to again avoid the need for any automatic
budget cuts. However, the Controller estimated that the State's cash
position on June 30, 1996 would be about $500 million less than estimated
by the Department of Finance.
The principal features of the 1995-96 Budget Act, in addition to those
noted above, were additional cuts in health and welfare expenditures (some
of which are subject to approvals or waivers by the federal government);
assumed further federal aid for illegal immigrant costs; and an increase in
per-pupil funding for public schools and community colleges, the first such
significant increase in four years.
The Governor's Proposed Budget for FY 1996-97 (the Governor's Budget),
released on January 10, 1996, updated financial projections for the current
year. With the improved economic conditions, the Department of Finance
projects $45.0 billion of General Fund revenues, and expenditures are
projected to increase to $44.2 billion for FY 1995-96. The net results are
projected to leave a budget reserve in the SFEU of about $40 million at
June 30, 1996, thus finally repaying the accumulated deficits of the
recession years.
The Governor's Budget proposes General Fund spending in 1996-97 of $45.2
billion, with revenues of $45.6 billion, leaving a budget reserve in the
SFEU of about $400 million. The Governor has again proposed a three-year
phased 15% reduction of personal income and corporate tax rates. The
Governor"s Budget also assumes implementation of certain
previously-approved cuts in health and welfare costs, adoption of further
cuts in welfare payments, and receipt of new federal aid for illegal
immigrant costs. The Governor's Budget proposes increased expenditures for
K-12 school aid, higher education, and corrections. The Governor's Budget
projects annual cash flow borrowing of about $3.2 billion.
The State's financial difficulties for the past budget years and other
factors noted above will result in continued pressure upon almost all local
governments, especially those which depend on State aid, such as school
districts and counties. While recent budgets included both permanent tax
increases and actions to reduce costs of state government over the longer
term, the Governor and other analysts have noted that structural imbalances
still exist, and there can be no assurance that the State will not face
budget gaps in the future.
State general obligation bonds are currently rated "A1" by Moody's, "A" by
Fitch Investors Service, Inc., and "A" by S&P. There can be no assurance
that such ratings will be maintained in the future. All three of these
ratings were reduced from "AAA" levels since late 1991.
OBLIGATIONS OF OTHER CALIFORNIA ISSUERS
STATE ASSISTANCE. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the State's Legislature enacted measures to provide for the redistribution
of the State's General Fund surplus to local agencies; the reallocation of
certain State revenues to local agencies; and the assumption of certain
governmental functions by the State to assist municipal issuers to raise
revenues. Total local assistance from the State's General Fund totaled
approximately $29.1 billion in FY 1993-94 (about 70% of General Fund
expenditures) and has been budgeted at $30.5 billion for FY 1994-95,
including the effect of implementing reductions in certain aid programs. To
reduce State General Fund support for school districts, the 1992-93 and
1993-94 Budget Acts caused local governments to transfer $3.8 billion of
property tax revenues to school districts, representing reversal of the
post-Proposition 13 "bailout" aid.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other considerations, the absolute level, or the rate of growth, of State
assistance to local governments may continue to be reduced. Any such
reductions in State aid could compound the serious fiscal constraints
already experienced by many local governments, particularly counties. At
least one rural county (Butte) publicly announced that it might enter
bankruptcy proceedings in August 1990, although such plans were put off
after the Governor approved legislation to provide additional funds for the
county. Other counties have also indicated that their budgetary condition
is extremely grave. At the start of FY 1995-96, Los Angeles County (L.A.
County), the largest county in the State, faced a nominal $1.2 billion gap
in its $12 billion budget, half of which was in the L.A. County health care
system. The gaps were closed only with significant cuts in services and
personnel, particularly in the health care system, federal aid, and
transfer of some funds from other local governments to the L.A. County
pursuant to special legislation. L.A. County's debt was downgraded by
Moody's and S&P in the summer of 1995. A school district (Richmond Unified)
filed for protection under bankruptcy laws several years ago, but the
petition was later dismissed; other school districts have indicated
financial stress, although none has threatened bankruptcy.
ORANGE COUNTY. On December 6, 1994, Orange County, California (Orange
County), together with its pooled investment funds (the Pools) filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports
that the Pools had suffered significant market losses in their investments,
causing a liquidity crisis for the Pools and Orange County. More than 200
other public entities, most but not all located in Orange County, were also
depositors in the Pools. Orange County estimated the Pools' losses at
approximately $1.7 billion, or 22% of its initial deposits of approximately
$7.5 billion. Many of the entities which kept money in the Pools (Pool
participants), including Orange County, faced cash flow difficulties,
suffered ratings adjustments, and implemented cuts in personnel and
programs. Some obligations of Orange County and certain other Pool
participants had technical defaults, or were rescheduled. The Bankruptcy
Court has approved a settlement agreement between Orange County and most of
the other Pool participants which provided about 80% (90% in the case of
school districts) return of cash invested, with the balance to be repaid
over time, including from potential recoveries in lawsuits. Orange County
has implemented a financial recovery plan which includes significant
personnel cuts, and refinancing of current debts using new funds
transferred to Orange County from certain other local governments pursuant
to special legislation adopted in late 1995.
The State has no obligation with respect to any obligations or securities
of Orange County or any of the other Pool participants. However, the State
may be obligated to intervene to ensure that school districts have
sufficient funds to operate, or to maintain certain Orange
County-administered State programs. As of January 1, 1996, no school
districts which were Pool participants had become insolvent.
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
Mello-Roos bonds may be adversely affected by a general decline in real
estate values or a slowdown in real estate sales activity. In many cases,
such bonds are secured by land which is undeveloped at the time of issuance
but anticipated to be developed within a few years after issuance. In the
event of such reduction or slowdown, such development may not occur or may
be delayed, thereby increasing the risk of a default on the bonds. Because
the special assessments or taxes securing these bonds are not the personal
liability of the owners of the property assessed, the lien on the property
is the only security for the bonds. Moreover, in most cases the issuer of
these bonds is not required to make payments on the bonds in the event of
delinquency in the payment of assessments or taxes, except from amounts, if
any, in a reserve fund established for the bonds.
CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain State long-term lease
obligations, though typically payable from the General Fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be
no remedies available to the holders of the certificates evidencing the
lease obligation in the event abatement occurs. The most common causes of
abatement are failure to complete construction of the facility before the
end of the period during which lease payments have been capitalized and
uninsured casualty losses to the facility (e.g., due to earthquake). In the
event abatement occurs with respect to a lease obligation, lease payments
may be interrupted (if all available insurance proceeds and reserves are
exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (District) entered
into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover
operating deficits. Following a fiscal crisis in which the District's
finances were taken over by a State receiver (including a brief period
under bankruptcy court protection), the District failed to make rental
payments on this lease, resulting in a lawsuit by the Trustee for the
Certificate of Participation holders. One of the defenses raised in answer
to this lawsuit was the invalidity of the original lease transaction. The
trial court upheld the validity of the District's lease, and the case has
been settled. However, any future judgment in a similar case against the
position taken by the Trustee may have implications for lease transactions
of a similar nature by other State entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development Securities
secured by real property may be affected by State laws limiting foreclosure
rights of creditors. Health Care and Hospital Securities may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on AD VALOREM property taxes may particularly affect "tax
allocation" bonds issued by State redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (for example, because
of a major natural disaster such as an earthquake), the tax increment
revenue may be insufficient to make principal and interest payments on
these bonds. Both Moody's and S&P suspended ratings on State tax allocation
bonds after the enactment of Articles XIIIA and XIIIB, and only resumed
such ratings on a selective basis.
Proposition 87, approved by State voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are
the issuers of Tax Allocation Securities) no longer receive an increase in
tax increment when taxes on property in the project area are increased to
repay voter-approved bonded indebtedness.
Substantially all of the State is within an active geologic region subject
to major seismic activity. Any California municipal obligation held by the
fund could be affected by an interruption of revenues because of damaged
facilities or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could
be constrained by the inability of (i) an issuer to have obtained
earthquake insurance coverage at reasonable rates; (ii) an insurer to
perform on its contracts of insurance in the event of widespread losses; or
(iii) the federal or State government to appropriate sufficient funds
within their respective budget limitations.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution (described briefly above), the ambiguities and possible
inconsistencies in their terms, and the impossibility of predicting future
appropriations or changes in population and the cost of living, and the
probability of continuing legal challenges, it is not currently possible to
determine fully the impact of Article XIIIA or Article XIIIB, or the
outcome of any pending litigation with respect to those provisions on State
obligations held by the fund or on the ability of the State or local
governments to pay debt service on such obligations. Legislation has been
or may be introduced (either in the State Legislature or by initiative)
which would modify existing taxes or other revenue-raising measures or
which either would further limit or, alternatively, would increase the
abilities of State and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which
any such legislation will be enacted, or if enacted, how it would affect
California municipal obligations. It is also not presently possible to
predict the extent of future allocations of State revenues to local
governments or the abilities of State or local governments to pay the
interest on, or repay the principal of, such California municipal
obligations in light of future fiscal circumstances.
SPECIAL CONSIDERATIONS AFFECTING PUERTO RICO
The following highlights some of the more significant financial trends and
problems affecting the Commonwealth of Puerto Rico (the Commonwealth or
Puerto Rico) and is based on information drawn from official statements and
prospectuses relating to the securities offerings of Puerto Rico, its
agencies and instrumentalities, available as of the date of this SAI. FMR
has not independently verified any of the information contained in such
official statements, prospectuses, and other publicly available documents,
but it is not aware of any fact which would render such information
materially inaccurate.
The economy of Puerto Rico is closely integrated with that of the United
States. In fiscal 1994, trade with the United States accounted for
approximately 87% of Puerto Rico's exports and approximately 67% of its
imports. In this regard, Puerto Rico experienced a $4.3 billion positive
adjusted merchandise trade balance in fiscal 1994.
Since fiscal 1985, personal income, both aggregate and per capita, have
increased consistently each fiscal year. In fiscal 1994, aggregate personal
income was $25.7 billion and personal income per capita was $7,047. Gross
domestic product in fiscal year 1991, 1992, 1993, 1994, and 1995 was $22.8
billion, $23.7 billion, $25.2 billion, $26.6 billion, and $28.3 billion,
respectively. For fiscal 1996, an increase in gross product of 2.7% over
fiscal 1995 is forecasted. However, actual growth in the Puerto Rico
economy will depend on several factors, including the state of the U.S.
economy, the exchange rate for the U.S. dollar, increases in exports and
visitors to the Commonwealth, the price stability of oil imports, the level
of federal transfers, and the cost of borrowing. Due to uncertainties with
respect to these factors, there is no assurance that the economy of Puerto
Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five year period
from fiscal 1990 through fiscal 1994. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession in 1991. This was primarily because of low oil
prices, low interest rates, and Puerto Rico's strong manufacturing base,
which has a large component of non-cyclical industries. Other factors in
the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, the level of federal transfers, and the relatively low
cost of borrowing funds during that period.
Puerto Rico has made marked improvements in fighting unemployment.
Nonetheless, although unemployment is at relatively low historical levels
for the Commonwealth, it remains above the U.S. average. The unemployment
rate declined from 16.0% to 13.8% from fiscal 1994 to fiscal 1995. As of
October 1995, the unemployment rate stood at 15.0%. Despite this relative
downturn, there is a possibility that the unemployment rate will increase
if there are changes in factors that directly impact the economy of Puerto
Rico.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy and accounted for $16.3 billion or 41.5% of gross
domestic product in fiscal 1994. However, manufacturing has experienced a
basic change over the years as a result of the influx of higher wage, high
technology industries such as pharmaceuticals, electronics, computers,
microprocessors, scientific instruments, and high technology machinery. The
service sector, which includes wholesale and retail trade, finance and real
estate, ranks second in its contribution to gross domestic product and is
the economic sector that employs the greatest number of people. In fiscal
1994, the service sector generated $15 billion in gross domestic product
and employed over 478,000 people. The government sector of the Commonwealth
also plays an important role in the economy of the island. In fiscal 1994,
the government accounted for $4.1 billion of Puerto Rico's gross domestic
product and provided 22.2% of total employment. Tourism also contributed
significantly to the island economy and total visitor expenditures amounted
to $1.8 billion in fiscal 1995.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
(Section 936), and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application a credit (the Section 936 credit) against their
U.S. corporate income tax on the portion of the tax attributable to (i)
income derived from the active conduct of a trade or business in Puerto
Rico (active business income) or from the sale or exchange of substantially
all of the assets used in the active conduct of such trade or business and
(ii) qualified possession source investment income. The Industrial
Incentives Program, through the 1987 Industrial Incentives Act, grants
corporations engaged in certain qualified activities a fixed 90% exemption
from Commonwealth income and property taxes and a 60% exemption from
municipal license taxes.
Pursuant to amendments to the Internal Revenue Code (the Code) for taxable
years commencing after 1993, two alternative limitations apply to the
Section 936 credit against active business income and sale of assets
income, as previously described. The first option limits the credit against
such income to 40% of the credit allowable previous to the amendments of
1993, with a five-year phase-in period starting at 60% of the current
allowable credit (the Percentage Limitation). The second option limits the
allowable credit to the sum of (i) 60% of qualified compensation paid to
employees (as defined in the Code), (ii) a specified percentage of
depreciation deductions, and (iii) a portion of the Puerto Rico income
taxes paid by the Section 936 corporation, up to a 9% effective tax rate
(the Economic Activity Limitation).
On November 17, 1995, the U.S. Congress adopted, as part of its larger
federal income tax legislative package, a ten-year phase-out of the current
Section 936 credit for companies that are existing credit claimants and the
elimination of the credit for companies establishing new operations in
Puerto Rico and for existing companies that add a substantial new line of
business. The Section 936 credit based on the Economic Activity Limitation
will continue as under current law without change until tax years beginning
in 2002, during which years a corporation's possession business income will
be subject to a cap based on its possession income for an average adjusted
base period. The credit based on the Percentage Limitation will continue as
under current law until tax years beginning in 1998. In that year and
thereafter, the credit based on the Percentage Limitation will be 40%, but
the possession business income will be subject to a cap based on a
corporation's possession income for an average adjusted base period. The
Section 936 credit is eliminated entirely for taxable years beginning in
2006. However, the credit granted to qualified possession source investment
income is eliminated for taxable years beginning after December 31, 1995.
President Clinton vetoed the legislation submitted by the U.S. Congress on
December 7, 1995. The Administration has proposed a modification to the
Section 936 credit that would phase out the credit based on the Percentage
Limitation over a five year period beginning in 1997, retain the credit
based upon the Economic Activity Limitation under current law, allow a
five-year carry forward of excess Section 936 credit based upon the
Economic Activity Limitation, and retain the Section 936 credit granted to
qualified possession source investment income under current law.
The Governor of Puerto Rico has proposed to the U.S. Congress a
modification of the total elimination of the Section 936 credit by offering
qualifying companies the option of the existing Section 936 credit, as
amended by the U.S. House of Representatives proposal, or a new incentive
program, to be available throughout the United States, including Puerto
Rico. The proposal would provide such companies a credit based on
qualifying wages paid, other wage-related expenses such as fringe benefits,
depreciation expenses for certain tangible assets, research and development
expenses, and passive investment income from qualifying investments in the
subject jurisdiction, so long as the company's employees are in an
"economically developing" jurisdiction in which prevailing per capita
income is substantially below the national average, among other things. The
credit granted to qualifying companies would continue in effect until the
jurisdiction shows, among other things, substantial economic improvement in
terms of the specified economic parameters. The Governor's proposal is not
currently included in either the legislation adopted by the U.S. Congress
on November 17, 1995 or in the Administration's proposal. It is not
possible at this time to determine the final legislative changes that may
be made to Section 936 or the effect that this will have on the long-term
outlook for the economy of Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to the
sub-advisers (see the section entitled Management Contracts), the
sub-advisers are authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. In selecting broker-dealers, subject
to applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to: the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and, for equity funds, arrangements for
payment of fund expenses. Generally, commissions for investments traded on
foreign exchanges will be higher than for investments traded on U.S.
exchanges and may not be subject to negotiation.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; and the availability of
securities or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
perform functions incidental thereto (such as clearance and settlement).
The selection of such broker-dealers generally is made by FMR (to the
extent possible consistent with execution considerations), in accordance
with a ranking of broker-dealers determined periodically by FMR's
investment staff (for equity funds), and is based upon the quality of
research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause a
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services (FBS), subsidiaries of FMR
Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. From September 1992 through December 1994, FBS operated
under the name Fidelity Brokerage Services Limited, Inc. (FBSL). As of
January 1995, FBSL was converted into an unlimited liability company and
assumed the name FBS. 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 Growth, Natural
Resources , Growth Opportunities, Strategic Opportunities, Equity
Income, Mid Cap, Large Cap, 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.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal periods ended 1994 and 1995, respectively, each fund's
portfolio turnover rates are shown in the chart below. Because a high
turnover rate increases transaction costs and may increase taxable gains,
FMR carefully weighs the anticipated benefits of short-term investing
against these consequences. An increased turnover rate may be due to a
greater volume of shareholder purchase or redemption orders, short-term
interest rate volatility and other special market conditions.
FUND FISCAL PERIOD ENDED 1994 1995
Overseas October 31 34% 47%
Large Cap November 30 n/a 100%*
Equity Growth November 30 137% 97%
Natural Resources October 31 125% 161%
Growth Opportunities October 31 43% 39%
Strategic Opportunities December 31+ 228%** 142%
Mid Cap November 30 n/a 200%*
Equity Income November 30 140% 80%
Income & Growth October 31 202% 297%
Emerging Markets Income December 31 354%** 305%
High Yield October 31 118% 112%
Strategic Income December 31 104%** 193%
Government Investment October 31 313% 261%
Intermediate Bond November 30 68% 189%
Short Fixed-Income October 31 108% 179%
High Income Municipal October 31 38% 37%
Intermediate Municipal Income November 30 53% 53%
Short-Intermediate Municipal Income November 30 111%** 80%
California Municipal Income October 31 n/a 100%*
New York Municipal Income October 31 n/a 100%*
* Estimated 1996 turnover rate
** Annualized
+ As of November 9, 1994, the fiscal year end for Strategic Opportunities
changed from September 30 to December 31.
The following tables show the brokerage commissions paid by Overseas,
Equity Growth, Natural Resources , Growth Opportunities, Strategic
Opportunities, Equity Income, and Income & Growth, Emerging Markets Income,
High Yield, and Strategic Income. The first table shows the total amount of
brokerage commissions paid by each fund and the total amount of brokerage
commissions paid to FBSI and FBS (formerly FBSL) for the past three fiscal
years. The second table shows the percentage of aggregate brokerage
commissions paid to and the percentage of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions effected through
FBSI and FBS for the fiscal year ended 1995. The third table shows amount
of brokerage commissions paid to firms providing research and the
approximate dollar amount of the transactions on which brokerage
commissions were paid for the fiscal year ended 1995. Each of these funds
pays both commissions and spreads in connection with the placement of
portfolio transactions; FBSI and FBS are paid on a commission basis. The
difference between the percentage of brokerage commissions paid to and the
percentage of the dollar amount of transactions effected through FBSI is a
result of the low commission rates charged by FBSI. The other funds paid no
brokerage commissions for the fiscal years ended 1993 through 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL PERIOD TOTAL TO FBSI TO FBS
ENDED AMOUNT PAID
OVERSEAS October 31
1995 $ 1,420,464 $ 5,926 $ 142,450
1994 1,601,660 685 0
1993 500,186 800 0
EQUITY GROWTH November 30
1995 2,185,589 862,434 2,034
1994 2,086,370 729,903 0
1993 915,767 362,158 0
NATURAL RESOURCES October 31
1995 947,646 243,517 0
1994 630,752 195,272 0
1993 147,017 41,286 0
GROWTH OPPORTUNITIES October 31
1995 6,189,975 1,793,388 9,682
1994 3,589,080 1,368,574 0
1993 2,583,165 899,767 0
STRATEGIC OPPORTUNITIES December 31
1995 1,138,485 217,580 0
10/1/94-12/31/94 403,617 70,465 96
10/1/93-9/30/94 1,166,854 151,233 0
1993 1,068,788 103,206 0
EQUITY INCOME November 30
1995 1,410,440 549,549 7,528
1994 827,499 290,182 0
1993 557,493 126,832 0
INCOME & GROWTH October 31
1995 8,952,888 2,249,157 122,777
1994 7,338,038 1,104,577 0
1993 2,998,137 796,821 0
HIGH YIELD October 31
1995 123,145 3,958 0
1994 0 0 0
1993 0 0 0
EMERGING MARKETS INCOME December 31
1995 11,820 0 0
1994 0 0 0
STRATEGIC INCOME December 31
1995 152 0 0
1994 0 0 0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL PERIOD % OF % OF % OF % OF
ENDED 1995 COMMISSIONS TRANSACTIONS COMMISSIONS TRANSACTIONS
PAID TO FBSI EFFECTED THROUGH PAID TO FBS EFFECTED THROUGH
FBSI FBS
OVERSEAS October 31 0.42% 1.27% 10.03% 12.77%
EQUITY GROWTH November 30 39.46% 49.20% 0.09% 0.04%
NATURAL RESOURCES October 31 25.70% 40.78% 0% 0%
GROWTH OPPORTUNITIES October 31 28.97% 42.88% 0.16% 0.09%
STRATEGIC OPPORTUNITIES December 31 19.11% 28.36% 0% 0%
EQUITY INCOME November 30 38.96% 51.92% 0.53% 0.23%
INCOME & GROWTH October 31 25.12% 36.76% 1.37% 1.20%
EMERGING MARKETS INCOME December 31 0% 0% 0% 0%
STRATEGIC INCOME December 31 0% 0% 0% 0%
HIGH YIELD October 31 3.21% 7.48% 0% 0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIOD AMOUNT PAID TO FIRMS TOTAL AMOUNT OF
ENDED 1995 PROVIDING RESEARCH* TRANSACTIONS ON WHICH
COMMISSIONS WERE PAID
OVERSEAS October 31 $ 1,236,730 $ 473,866,633
EQUITY GROWTH November 30 2,074,723 2,483,941,828
NATURAL RESOURCES October 31 899,748 503,396,441
GROWTH OPPORTUNITIES October 31 5,830,623 4,827,223,877
STRATEGIC OPPORTUNITIES December 31 746,302 681,612,409
EQUITY INCOME November 30 1,330,219 1,395,245,290
INCOME & GROWTH October 31 8,491,571 5,171,123,405
STRATEGIC INCOME December 31 87 196,788
HIGH YIELD October 31 115,795 42,091,477
EMERGING MARKETS INCOME December 31 11,579 2,138,461
</TABLE>
* The provision of research services was not necessarily a factor in the
placement of all this business with such firms.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company (FSC) normally determines each class's net asset
value per share (NAV) as of the close of the New York Stock Exchange (NYSE)
(normally 4:00 p.m. Eastern time). The valuation of portfolio securities is
determined as of this time for the purpose of computing each class's NAV
and, where applicable, offering price.
GROWTH AND GROWTH & INCOME FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for which
the primary market is the United States are valued at last sale price or,
if no sale has occurred, at the closing bid price. Most equity securities
for which the primary market is outside the United States are valued using
the official closing price or the last sale price in the principal market
in which they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price normally is used.
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. Fixed-income
securities 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 evaluation of these services, may use various
pricing services or discontinue the use of any pricing service.
Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
TAXABLE NON-GOVERNMENT AND INTERNATIONAL INCOME FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities and other
assets for which market quotations are readily available may be valued at
market values determined by such securities' most recent bid prices (sales
prices if the principal market is an exchange) in the principal market in
which they normally are traded, as furnished by recognized dealers in such
securities or assets.
Fixed-income 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 evaluation of these services, may use various pricing
services or discontinue the use of any pricing service.
Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
Most equity securities for which the primary market is the United States
are valued at last sale price or, if no sale has occurred, at the closing
bid price. Most equity securities for which the primary market is outside
the United States are valued using the official closing price or the last
sale price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated quote
or last bid price normally is used.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
TAXABLE GOVERNMENT INCOME FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities and other
assets for which market quotations are readily available may be valued at
market values determined by such securities' most recent bid prices (sales
prices if the principal market is an exchange) in the principal market in
which they normally are traded, as furnished by recognized dealers in such
securities or assets.
Fixed-income 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 evaluation of these services, may use various pricing
services or discontinue the use of any pricing service.
Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
MUNICIPAL FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income 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 evaluation of these
services, may use various pricing services or discontinue the use of any
pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
PERFORMANCE
Each class of shares may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. Share price, yield, and total return
fluctuate in response to market conditions and other factors, and the value
of shares when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for a class are computed by dividing the class's
pro rata share of the applicable interest and dividend income, if any, for
a given 30-day or one-month period, net of expenses, by the average number
of shares of that class entitled to receive distributions during the
period, dividing this figure by the class's net asset value (NAV) or
offering price, as appropriate, at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at
a discount by adding a portion of the discount to daily income. For a
fund's investments denominated in foreign currencies, income and expenses
are calculated first in their respective currencies, and are then converted
to U.S. dollars, either when they are actually converted or at the end of
the 30-day or one month period, whichever is earlier. Capital gains and
losses generally are excluded from the calculation as are gains and losses
from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a class's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
In calculating a class's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing a class's yield.
Yield information may be useful in reviewing a class's performance and in
providing a basis for comparison with other investment alternatives.
However, each class's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates, a
class's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the class's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the class's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
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, if applicable, state tax
rate. If only a portion of a class's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and, where applicable, state income tax laws
for 1996. It shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2.00% to 8.00%. Of
course, no assurance can be given that a class will achieve any specific
tax-exempt yield. While the municipal funds invest principally in
obligations whose interest is exempt from federal or from federal and state
income tax, other income received by the funds may be taxable.
EXPECTED 1996 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If individual tax-exempt yield is:
2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable Income* Federal
Income
Tax
Single Return Joint Return Bracket** Then taxable equivalent yield is:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 24,000 $ 0 - $ 40,100 15.0% 2.35% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28.0% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 58,151 - $ 121,300 $ 96,901 - $ 147,700 31.0% 2.90% 4.35% 5.80% 7.25% 8.70% 10.14% 11.59%
$ 121,301 - $ 263,750 $ 147,701 - $ 263,750 36.0% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$ 236,751 - + $ 263,751 - + 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A federally tax-exempt fund may invest a portion of its assets in
obligations that are subject to federal income tax. When 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.
NEW YORK MUNICIPAL INCOME ONLY
Use the first table to find your approximate effective tax bracket as a New
York State resident with triple taxes (federal, state, and New York City)
or double taxes (federal and state) for 1996.
1996 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable Income* Marginal Tax Rate
Single Return Joint Return Marginal New York New York Combined Combined
Federal State City New York New York
Income State and State, City
Tax Federal and Federal
Bracket Effective Tax
Tax Bracket**
Bracket**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - $ 24,000 $ 0 - $ 40,100 15.0% 0% 0% 15.00% 15.00%
$ 24,001 - $ 25,000 $ 40,101 - $ 45,000 28.0% 7.125% 4.389% 33.13% 36.29%
$ 25,001 - $ 58,150 $ 45,001 - $ 96,900 28.0% 7.125% 4.400% 33.13% 36.30%
$ 58,151 - $ 60,000 $ 96,901 - $ 108,000 31.0% 7.125% 4.400% 35.92% 38.95%
$ 60,001 - $ 121,300 $ 108,001 - $ 147,700 31.0% 7.125% 4.457% 35.92% 38.99%
$ 121,301 - $ 263,750 $ 147,701 - $ 263,750 36.0% 7.125% 4.457% 40.56% 43.41%
$ 263,751 - + $ 263,751 - + 36.6% 7.125% 4.457% 43.90% 46.60%
</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.
Having determined your effective tax bracket, use the appropriate table
below to determine the tax-equivalent yield for a given tax-free yield.
NEW YORK CITY RESIDENTS - TRIPLE TAXES - 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal, state, and New York City personal income tax rate in 1996 is:
15.00% 36.29% 36.30% 38.95% 38.99% 43.41% 46.60%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
</TABLE>
2% 2.35% 3.14% 3.14% 3.28% 3.28% 3.53% 3.75%
3% 3.53% 4.71% 4.71% 4.91% 4.92% 5.30% 5.62%
4% 4.71% 6.28% 6.28% 6.55% 6.56% 7.07% 7.49%
5% 5.88% 7.85% 7.85% 8.19% 8.20% 8.84% 9.36%
6% 7.06% 9.42% 9.42% 9.83% 9.83% 10.60% 11.24%
7% 8.24% 10.99% 10.99% 11.47% 11.47% 12.37% 13.11%
8% 9.41% 12.56% 12.56% 13.10% 13.11% 14.14% 14.98%
9% 10.59% 14.13% 14.13% 14.74% 14.75% 15.90% 16.85%
10% 11.76% 15.70% 15.70% 16.38% 16.39% 17.67% 18.73%
11% 12.94% 17.27% 17.27% 18.02% 18.03% 19.44% 20.60%
NEW YORK STATE RESIDENTS (OUTSIDE NYC) - DOUBLE TAXES - 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal and state personal income tax rate in 1996 is:
15.00% 33.13% 33.13% 35.92% 35.92% 40.56% 43.90%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
</TABLE>
2% 2.35% 2.99% 2.99% 3.12% 3.12% 3.36% 3.57%
3% 3.53% 4.49% 4.49% 4.68% 4.68% 5.05% 5.35%
4% 4.71% 5.98% 5.98% 6.24% 6.24% 6.73% 7.13%
5% 5.88% 7.48% 7.48% 7.80% 7.80% 8.41% 8.91%
6% 7.06% 8.97% 8.97% 9.36% 9.36% 10.09% 10.70%
7% 8.24% 10.47% 10.47% 10.92% 10.92% 11.78% 12.48%
8% 9.41% 11.96% 11.96% 12.48% 12.48% 13.46% 14.26%
9% 10.59% 13.46% 13.46% 14.04% 14.04% 15.14% 16.04%
10% 11.76% 14.95% 14.95% 15.61% 15.61% 16.82% 17.83%
11% 12.94% 16.45% 16.45% 17.17% 17.17% 18.51% 19.61%
The fund may invest a portion of its assets in obligations that are subject
to city, state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
the tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
CALIFORNIA MUNICIPAL INCOME ONLY
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1996.
1996 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Taxable Income* Federal Income State Combined California
and Federal Effective
Single Return Joint Return Tax Bracket Marginal Rate Tax Bracket**
$ 0 - $ 4,831 $ 0 - $ 9,662 15.0% 1.0% 15.85%
$ 4,832 - $ 11,449 $ 9,663 - $ 22,898 15.0% 2.0% 16.70%
$ 11,450 - $ 18,068 $ 22,899 - $ 36,136 15.0% 4.0% 18.40%
$ 18,069 - $ 24,000 $ 36,137 - $ 40,100 15.0% 6.0% 20.10%
$ 24,001 - $ 25,083 $ 40,101 - $ 50,166 28.0% 6.0% 32.32%
$ 25,084 - $ 31,700 $ 50,167 - $ 63,400 28.0% 8.0% 33.76%
$ 31,701 - $ 58,150 $ 63,401 - $ 96,900 28.0% 9.3% 34.70%
$ 58,151 - $ 109,936 $ 96,901 - $ 147,700 31.0% 9.3% 37.42%
$ 109,937 - $ 121,300 31.0% 10.0% 37.90%
$ 147,701 - $ 219,872 36.0% 9.3% 41.95%
$ 121,301 - $ 219,872 $ 219,873 - $ 263,750 36.0% 10.0% 42.40%
$ 219,873 - $ 263,750 36.0% 11.0% 43.04%
$263,751 - $ 439,744 39.6% 10.0% 45.64%
$263,751 - + $ 439,745 - + 39.6% 11.0% 46.24%
</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.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal and state personal tax rate in 1996 is:
15.85% 16.70% 18.40% 20.10% 32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
To match Your taxable investment would have to earn the following yield:
these
tax-free
yields:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2% 2.38% 2.40% 2.45% 2.50% 2.96% 3.02% 3.06% 3.20% 3.22% 3.45% 3.47% 3.51% 3.68% 3.72%
3% 3.57% 3.60% 3.68% 3.75% 4.43% 4.53% 4.59% 4.79% 4.83% 5.17% 5.21% 5.27% 5.52% 5.58%
4% 4.75% 4.80% 4.90% 5.01% 5.91% 6.04% 6.13% 6.39% 6.44% 6.89% 6.94% 7.02% 7.36% 7.44%
5% 5.94% 6.00% 6.13% 6.26% 7.39% 7.55% 7.66% 7.99% 8.05% 8.61% 8.68% 8.78% 9.20% 9.30%
6% 7.13% 7.20% 7.35% 7.51% 8.87% 9.06% 9.19% 9.59% 9.66% 10.34% 10.42% 10.53% 11.04% 11.16%
7% 8.32% 8.40% 8.58% 8.76% 10.34% 10.57% 10.72% 11.19% 11.27% 12.06% 12.15% 12.29% 12.88% 13.02%
8% 9.51% 9.60% 9.80% 10.01% 11.82% 12.08% 12.25% 12.78% 12.88% 13.78% 13.89% 14.04% 14.72% 14.88%
9% 10.70% 10.80% 11.03% 11.26% 13.30% 13.59% 13.78% 14.38% 14.49% 15.50% 15.63% 15.80% 16.56% 16.74%
10% 11.88% 12.00% 12.25% 12.52% 14.78% 15.10% 15.31% 15.98% 16.10% 17.23% 17.36% 17.56% 18.40% 18.60%
11% 13.07% 13.21% 13.48% 13.77% 16.25% 16.61% 16.85% 17.58% 17.71% 18.95% 19.10% 19.31% 20.24% 20.46%
</TABLE>
The California income tax rates are those in effect for 1995, which will be
the same in 1996 except that California law requires that the brackets be
adjusted annually for inflation using 100% of the California Consumer Price
Index through June of the tax year. As of the date of this SAI, the
California Franchise Tax Board had not published the 1996
inflation-adjusted tax brackets.
The fund may invest a portion of its assets in obligations that are subject
to state or federal income taxes. 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 and state 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 total return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years. Average
annual total returns covering periods of less than one year are calculated
by determining 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 return. While average annual
total 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 total returns represent
averaged figures as opposed to the actual year-to-year performance.
In addition to average annual total returns, a class may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking a
class's maximum sales charge into account. Excluding a sales charge from a
total return calculation produces a higher total return figure. Total
returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using 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 a NAV has
crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown below:*
FUND AS OF 13-WEEK 39-WEEK
Natural Resources - Class T 10/27/95 $19.91 $18.52
Natural Resources - Class B 10/27/95 19.89 18.52
Natural Resources - Institutional 10/27/95 19.92 18.53
Growth Opportunities - Class T 10/27/95 30.47 28.28
Growth Opportunities - Institutional 10/27/95 30.52 28.30
Income & Growth - Class T 10/27/95 15.37 14.90
Income & Growth - Institutional 10/27/95 15.39 14.89
Overseas - Class T 10/27/95 14.14 13.74
Overseas - Class B 10/27/95 14.14 13.74
Overseas - Institutional 10/27/95 14.18 13.75
High Yield - Class T 10/27/95 11.69 11.22
High Yield - Class B 10/27/95 11.69 11.23
High Yield - Institutional 10/27/95 11.57 11.12
Equity Growth - Class T 11/24/95 39.19 35.51
Equity Growth - Institutional 11/24/95 39.69 35.91
Equity Income - Class T 11/24/95 19.37 18.20
Equity Income - Class B 11/24/95 19.33 18.18
Equity Income - Institutional 11/24/95 19.49 18.28
Strategic Opportunities - Class T 12/29/95 24.01 22.32
Strategic Opportunities - Class B 12/29/95 23.71 22.07
Strategic Opportunities - Institutional 12/29/95 23.92 22.20
Strategic Opportunities - Initial 12/29/95 24.21 22.47
Emerging Market Income - Class T 12/29/95 8.65 8.18
Emerging Market Income - Class B 12/29/95 8.68 8.22
Emerging Market Income - Institutional 12/29/95 8.65 8.17
Strategic Income - Class T 12/29/95 10.72 10.35
Strategic Income - Class B 12/29/95 10.74 10.38
Strategic Income - Institutional 12/29/95 10.74 10.36
* Moving averages are shown for those classes that had commenced operations
prior to February 26, 1996.
The following tables and charts show performance for each class of shares
of each fund. Class T shares have a maximum front-end sales charge
of 3.50% for Overseas, Mid Cap, Equity Growth, Natural
Resources , Growth Opportunities, Strategic Opportunities, Large Cap,
Equity Income, and Income & Growth (the Equity Funds); 3.50% for
Emerging Markets Income, High Yield, Strategic Income, Government
Investment, California Municipal Income, New York Municipal Income,
and High Income Municipal (the Bond Funds); 2.75% for Intermediate Bond and
Intermediate Municipal Income (the Intermediate-Term Bond Funds); and 1.50%
for Short Fixed-Income and Short-Intermediate Municipal Income (the
Short-Term Bond Funds). Class T shares are also subject to a 12b-1
fee of 0.50% (the Equity Funds), 0.25% (the Bond Funds and the
Intermediate-Term Bond Funds), and 0.15% (the Short-Term Bond Funds). Class
A shares have a maximum front-end sales charge of 5.25% for the Equity
Funds, 4.25% for the Bond Funds, 3.25% for the Intermediate-Term Bond Funds
and 1.50% for the Short-Term Bond Funds. Class A shares are also subject to
a 12b-1 fee of 0.25% (Equity Funds), and 0.15% (Bond Funds,
Intermediate-Term Bond Funds, and Short-Term Bond Funds). Class B shares
have contingent deferred sales charges (CDSC) upon redemption: maximum CDSC
is 4.00% for all funds except the Intermediate Bond Funds, which have a
maximum CDSC of 3.00%. Class B shares are also subject to a 12b-1 fee of
0.75% (the Equity Funds) or 0.65% (the Bonds Funds and the
Intermediate-Term Bond Funds), as well as a 0.25% shareholder services fee.
Institutional Class shares do not have a sales charge or a 12b-1 fee.
HISTORICAL BOND FUND RESULTS. The following tables show yields,
tax-equivalent yields (for municipal funds), and total returns for each
class of each bond fund for the semi-annual period ended 1996 as
indicated (Class A will commence operations on September 3, 1996). The
tax-equivalent yield is based on a 36% federal income tax rate. Note that
each municipal fund may invest in securities whose income is subject to the
federal alternative minimum tax.
Average Annual Total
Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Yield2 Tax One Five Ten Past 6 One Five Ten
Months Equiva Year Years Years/ Months Year Years Years/
ended lent Life of Life of
Yield2 Fund+ Fund+
Emerging
Markets 6/30 N/A N/A 25.64% N/A 7.76% 8.42% 25.64% N/A 18.86%
Income - Class A
Emerging
Markets 8.66% N/A 26.62% N/A 8.12% 9.27 % 26.62 % N/A 19.79 %
Income - Class T
Emerging
Markets 8.37% N/A 26.22 % N/A 7.96 % 8.84 % 26.62 % N/A 19.37 %
Income - Class B
Emerging
Markets N/A N/A 31.13 % N/A 9.77 % 13.06 % 31.13 % N/A 24.06 %
Income - Institutional
High Yield -
Class A 4/30 N/A N/A 9.78% 15.20% 13.29% 1.85% 9.78% 102.86% 220.09%
High Yield -
Class T 8.16% N/A 10.64 % 15.38 % 13.38 % 2.65 % 10.64 % 104.45 % 222.59 %
High Yield -
Class B 7.85 % N/A 9.78 % 15.69 % 13.60 % 1.94 % 9.78 % 107.22 % 22 8 .54 %
High Yield - 8.27 % N/A 14.08 % 16.08 % 13.75 % 6.37 % 14.08 % 110.80 % 2 32.61 %
Institutional
Strategic
Income - 6/30 N/A N/A 6.57% N/A 12.27% -.77% 6.57% N/A 21.30%
Class A
Strategic
Income - 6.96 % N/A 7.40 % N/A 12.80 % 0.01 % 7.40 % N/A 22.25 %
Class T
Strategic
Income - 6.56 % N/A 6.59 % N/A 12.80 % -0.70 % 6.59 % N/A 22.25 %
Class B
Strategic
Income - N/A N/A 11.68 % N/A 15.47 % 3.69 % 11.68 % N/A 27.12 %
Institutional
Government 4/30 N/A N/A 3.05% 6.09% 6.42% -4.53% 3.05% 34.39% 78.64%
Investment - Class A
Government 5.34 % N/A 3.86 % 6.25 % 6.51 % -3.78 % 3.86 % 35.44 % 80.03 %
Investment - Class T
Government 4.95 % N/A 2.86 % 6.54 % 6.75 % -4.59 % 2.86 % 37.26 % 83.79 %
Investment - Class B
Government 5.70 % N/A 7.79 % 7.05 % 6.94 % -0.23 % 7.79 % 40.56 % 86.85 %
Investment -
Institutional
Intermediate
Bond - 5/31 N/A N/A .55% 6.68% 7.49% -3.59% .55% 38.17% 105.96%
Class A
Intermediate
Bond - 5.46 % N/A 1.07 % 6.79 % 7.55 % -3.09 % 1.07 % 38.89 % 107.03 %
Class T
Intermediate
Bond - 4.92 % N/A 0.21 % 7.03 % 7.67 % -3.66 % 0.21 % 40.48 % 109.40 %
Class B
Intermediate
Bond - 5.96 % N/A 4.14 % 7.69 % 8.00 % -0.30 % 4.14 % 44.85 % 115.92 %
Institutional
Short Fixed-
Income - 4/30 N/A N/A 4.87% 6.11% 6.95% .24% 4.87% 34.50% 78.60%
Class A
Short Fixed-
Income - 5.45 % N/A 4.87 % 6.11 % 6.95 % 0.24 % 4.87 % 34.50 % 78.60 %
Class T
Short Fixed-
Income - 5.52 % N/A 6.59 % 6.45 % 7.15 % 1.84 % 6.59 % 36.71 % 81.53 %
Institutional
High
Income 4/30 N/A N/A 2.10% 6.47% 8.64% -3.67% 2.10% 36.81% 104.44%
Municipal - Class A
</TABLE>
Average Annual Total Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Yield2 Tax One Five Ten Past 6 One Five Ten
Months Equiva Year Years Years/ Months Year Years Years/
ended lent Life of Life of
Yield2 Fund+ Fund+
High Income 5.40 % 8.44 % 2.90 % 6.64 % 8.74 % -2.92 % 2.90 % 37.88 % 106.04 %
Municipal - Class T
High Income 4.83 % 7.55 % 1.88 % 6.89 % 8.98 % -3.65 % 1.88 % 39.53 % 110.00 %
Municipal - Class B
High Income 4.92 % 7.69 % 6.82 % 7.44 % 9.21 % 0.72 % 6.82 % 43.14 % 113.90 %
Municipal -
Institutional
Intermed
iate 5/31 N/A N/A .68% 5.05% 6.08% -3.55% .68% 27.92% 80.38%
Municipal Income -
Class A
Intermediate 4.22 % 6.59 % 1.20 % 5.16 % 6.13 % -3.05 % 1.20 % 28.58 % 81.31 %
Municipal Income -
Class T
Intermediate 3.71 % 5.80 % 0.25 % 5.41 % 6.26 % -3.65 % 0.25 % 30.14 % 83.51 %
Municipal Income -
Class B
Intermediate 4.59 % 7.17 % 4.24 % 5.93% 6.52 % -0.08 % 4.24 % 33.38 % 88.07 %
Municipal Income -
Institutional
Short-Intermediate
5/31 N/A N/A 2.57% N/A 3.88% -.81% 2.57% N/A 8.79%
Municipal Income -
Class A
Short-Intermediate 3.82% 5.97 % 2.57 % N/A 3.88 % -0.81 % 2.57 % N/A 8.79 %
Municipal Income -
Class T
Short-Intermediate 3.62% 5.66 % 4.26 % N/A 4.65 % 0.86 % 4.26 % N/A 10.58 %
Municipal Income -
Institutional
California
Municipal - 4/30 N/A N/A N/A N/A N/A N/A N/A N/A -6.80%
Class A
California
Municipal - N/A N/A N/A N/A N/A N/A N/A N/A -6.07 %
Class T
California
Municipal - N/A N/A N/A N/A N/A N/A N/A N/A -6.71 %
Class B
California
Municipal - N/A N/A N/A N/A N/A N/A N/A N/A -2.83 %
Institutional
New York
Municipal 4/30 N/A N/A N/A N/A N/A -2.23% N/A N/A 1.13%
Income - Class A
New York
Municipal 4.42 % 7.81 % N/A N/A N/A -2.79 % N/A N/A 1.92 %
Income - Class T
New York
Municipal 3.98 % 7.03 % N/A N/A N/A -3.55 % N/A N/A 1.06 %
Income - Class B
New York
Municipal 4.58 % 8.09% N/A N/A N/A 0.94 % N/A N/A 5.95 %
Income - Institutional
</TABLE>
+ Life of fund figures are from commencement of operations (March 10, 1994
for Emerging Markets Income; January 5, 1987 for High Yield; January 7,
1987 for Government Investment; October 31, 1994 for Strategic Income;
September 16, 1987 for Short Fixed-Income and High Income Municipal; March
16, 1994 for Short-Intermediate Municipal Income; August 21, 1995 for New
York Municipal Income and February 20, 1996 for California Municipal
Income ) through each fund's semi-annual period ended 1996.
1 Average annual and cumulative total returns for Class T shares
include the effect of paying Class T 's maximum applicable front-end
sales charge of 3.50% for Equity Funds and Bond Funds; 2.75% for the
Intermediate Bond Funds; 1.50% for the Short Bond Funds. Average annual and
cumulative total returns for Class A shares include the effect of paying
Class A's maximum applicable front-end sales charge of 4.25% for Bond
Funds, 3.25% for Intermediate-Term Bond Funds and 1.50% for Short Term Bond
Funds. Average annual and cumulative total returns for Class B shares
include the effect of paying Class B's applicable CDSC upon redemption
based on the following schedule: For the Equity Funds and the Bond Funds -
one year or less, 4%; greater than one year to three years, 3%; greater
than three years to four years, 2%; greater than four years to five years,
1%; greater than five years, 0%, for the Intermediate Bond Funds - one year
or less, 3%; greater than one year to two years, 2%; greater than two years
to three years, 1%; greater than three years, 0%. Returns prior to July 3,
1995 for Institutional Class shares of all funds except Intermediate Bond,
Intermediate Municipal Income, and New York Municipal Income are those of
each fund's Class T shares and include the then-current Class
T 12b-1 fees of either 0.25% for Emerging Markets Income, High Yield,
Strategic Income, and Government Investment or 0.15% for Short-Fixed Income
and Short-Intermediate Municipal Income. Class T returns prior to
September 10, 1992 for Intermediate Bond and Intermediate Municipal Income
are those of Institutional Class and do not reflect Class T 's
then-applicable 12b-1 fees of 0.25% (the Bond Funds and Intermediate Bond
Funds). Class B returns prior to June 30, 1994 for all funds except
Intermediate Bond, Intermediate Municipal Income, and New York Municipal
Income are those of Class T shares and include the applicable
Class T 12b-1 fees discussed above. Class B returns from each fund's
commencement of operations up to September 10, 1992 for Intermediate Bond
and Intermediate Municipal Income reflect the returns of Institutional
Class, which does not have a 12b-1 fee. Class A of each fund will
commence operations on September 3, 1996. Returns prior to that
date for all funds except Intermediate Bond, and Intermediate Municipal
Income are those of Class T, the original Class of the fund, and reflect
Class T's then applicable 12b-1 fee. For Intermediate Bond and Intermediate
Municipal Income returns between commencement of operations and September
10, 1992 reflect the returns of Institutional Class, which does not have a
12b-1 fee. Returns between September 10, 1992 and each fund's respective
semi-annual period ended 1996, are those of Class T, and reflect Class T's
then applicable 12b-1 fee.
2 Yields and tax-equivalent yields shown for Class T shares include
the effect of the applicable Class T front-end sales charge and
12b-1 fee. Yields and tax-equivalent yields shown for Class B shares
include the effect of the applicable Class B 12b-1 fee, but not the CDSC.
Note: If FMR had not reimbursed certain class expenses during certain of
these periods, the yields and total returns for those periods for Emerging
Markets Income, High Yield, Strategic Income, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Intermediate
Municipal Income, and Short-Intermediate Municipal Income would have been
lower. The table below shows what the classes yields and tax-equivalent
yields (if applicable) would have been if the class had not been in
reimbursement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class T Class B Institutional Class
Fund Yield* Tax- Yield* Tax-Equiva Yield* Tax-Equiva
Equivalent lent Yield* lent Yield*
Yield*
Emerging Markets
Income 8.66 % N/A 8.37 % N/A N/A N/A
High Yield N/A N/A N/A N/A 6.15 N/A
Government
Investment N/A N/A 4.81% N/A 4.89% N/A
High Income
Municipal N/A N/A N/A N/A 4.62% 7.22%
Short-Intermediate
Municipal 3. 7 6% 5. 88 % N/A N/A 2.12% 2.12%
Income
New York Municipal
Income 2.47% 4.36% 1.25% 2.21% -0.74% -0.74%
</TABLE>
* See footnote 2 above.
HISTORICAL EQUITY FUND RESULTS. The following table shows the total returns
for each class of each equity fund for the semi-annual period ended 1996
as indicated (Class A will commence operations on September 3, 1996).
Average Annual Total Cumulative Total
Returns1 Returns1
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 One Five Ten Past 6 One Five Ten
Months Year Years Years/Life Months Year Years Years/Life
Ended of Fund+ of Fund+
Overseas -
Class A 4/30 7.14% 9.74% 7.21% 4.67% 7.14% 59.14% 52.10%
Overseas -
Class T 9.12% 10.14% 7.53% 6.61% 9.12% 62.08% 54.91%
Overseas -
Class B 8.61% 10.70% 8.10% 6.02% 8.61% 66.27% 59.88%
Overseas -
Institutional 13.51% 11.01% 8.24% 10.51% 13.51% 68.61% 61.15%
Mid Cap -
Class A 5/31 N/A N/A N/A N/A N/A N/A 6.78%
Mid Cap -
Class T N/A N/A N/A N/A N/A N/A 8.76%
Mid Cap -
Class B N/A N/A N/A N/A N/A N/A 8.40%
Mid Cap -
Institutional N/A N/A N/A N/A N/A N/A 12.60%
Equity Growth -
Class A 5/31 27.41% 16.05% 17.10% 4.57% 27.41% 110.50% 385.01%
Equity Growth -
Class T 29.76% 16.48% 17.32% 6.50% 29.76% 114.39% 393.97%
Equity Growth -
Institutional 35.35% 17.96% 18.06% 10.69% 35.35% 128.38% 426.22%
Natural Resources -
Class A 4/30 27.49% 16.35% 16.64% 19.67% 27.49% 113.21% 261.35%
Natural Resources -
Class T 29.84% 16.78% 16.90% 21.88% 29.84% 117.15% 268.02%
Natural Resources -
Class B 29.76% 17.37% 17.32% 21.69% 29.76% 122.70% 279.12%
Natural Resources -
Institutional 34.77% 17.65% 17.42% 26.38% 34.77% 125.39% 282.00%
Growth Opportunities -
Class A 4/30 17.69% 15.87% 20.02% 2.37% 17.69% 108.85% 368.00%
Growth Opportunities -
Class T 19.86% 16.29% 20.28% 4.26% 19.86% 112.71% 376.65%
Growth
Opportunities - 24.92% 17.26% 20.87% 8.38% 24.92% 121.69% 396.75%
Institutional
Strategic Opportunities -
Class A 6/30 9.74% 12.13% 11.08% -5.24% 9.74% 77.22% 185.88%
Strategic Opportunities -
Class T 11.76% 12.54% 11.28% -3.49% 11.76% 80.49% 191.16%
Strategic Opportunities -
Class B 11.14% 13.01% 11.57% -4.20% 11.14% 84.31% 198.93%
Strategic
Opportunities - 16.37% 13.45% 11.73% 0.17% 16.37% 87.94% 203.17%
Institutional
Large Cap -
Class A 5/31 N/A N/A N/A N/A N/A N/A -2.03%
Large Cap -
Class T N/A N/A N/A N/A N/A N/A -0.22%
Large Cap -
Class B N/A N/A N/A N/A N/A N/A -0.70%
Large Cap -
Institutional N/A N/A N/A N/A N/A N/A 3.50%
Equity Income -
Class A 5/31 15.82% 15.50% 12.00% 2.68% 15.82% 105.57% 210.70%
Equity Income -
Class T 17.96% 15.93% 12.21% 4.58% 17.96% 109.36% 216.44%
Equity Income -
Class B 17.68% 16.47% 12.53% 4.07% 17.68% 114.36% 225.50%
Equity Income -
Institutional 23.01% 17.41% 12.93% 8.68% 23.01% 123.16% 237.28%
Income & Growth -
Class A 4/30 1.93% 8.79% 10.57% -2.73% 1.93% 52.35% 155.21%
Income & Growth -
Class T 3.82% 9.18% 10.79% -0.93% 3.82% 55.17% 159.93%
Income & Growth -
Institutional 8.55% 10.16% 11.32% 2.71% 8.55% 62.24% 171.77%
</TABLE>
+ Life of fund figures are from commencement of operations (April 23, 1990
for Overseas; December 29, 1987 for Natural Resources ; November 18,
1987 for Growth Opportunities; January 6, 1987 for Income & Growth and
February 20, 1996 for Mid Cap and Large Cap ) through each fund's
semi-annual period ended 1996.
1 Average annual and cumulative total returns for Class T shares
include the effect of paying Class T 's maximum applicable front-end
sales charge of 3.50% for Equity Funds and Bond Funds; 2.75% for the
Intermediate-Term Bond Funds; 1.50% for the Short-Term Bond Funds. Average
annual and cumulative total returns for Class A shares include the effect
of paying Class A's maximum applicable front-end sales charge of 5.25% for
Equity Funds. Average annual and cumulative total returns for Class B
shares include the effect of paying Class B's applicable CDSC upon
redemption based on the following schedule: For the Equity Funds and the
Bond Funds - one year or less, 4%; greater than one year to three years,
3%; greater than three years to four years, 2%; greater than four years to
five years, 1%; greater than five years, 0%, for the Intermediate-Term Bond
Funds - one year or less, 3%; greater than one year to two years, 2%;
greater than two years to three years, 1%; greater than three years, 0%.
Returns prior to July 3, 1995 for Institutional Class shares of all funds
except Equity Growth and Equity Income are those of each fund's Class
T shares and include the then-current 12b-1 fee of 0.65%. Class
T returns prior to September 10, 1992 for Equity Growth and Equity
Income are those of the Institutional Class which does not have a 12b-1
fee. Class T returns prior to August 20, 1986 for Strategic
Opportunities reflect those of Initial Class shares, the fund's original
class which does not have a 12b-1 fee. Class B returns prior to June 30,
1994 for all funds except Overseas, Natural Resources , Strategic
Opportunities and Equity Income are those of Class T shares and
include the applicable Class T 12b-1 fee. Class B returns from each
fund's commencement of operations to September 10, 1992 for Equity Growth
and Equity Income reflect the returns of the Institutional Class, which
does not have a 12b-1 fee. Class B returns for Strategic Opportunities from
August 20, 1986 through June 30, 1994 reflect the performance of Class
T shares, including the then-applicable 0.65% 12b-1 fee and from
December 31, 1983 through August 20, 1986 reflect the performance of
Initial Class shares. Class B returns prior to July 3, 1995 for Overseas
and Natural Resources reflect Class T performance, including
the then-applicable 0.65% 12b-1 fee. Class A of each fund will
commence operations on September 3, 1996. Returns prior to that
date for all funds except Equity Growth and Equity Income are those of
Class T, the original Class of the fund, and reflect Class T's then
applicable 12b-1 fee. For Equity Growth and Equity Income returns between
commencement of operations and September 10, 1992 reflect the returns of
Institutional Class, which does not have a 12b-1 fee. Returns between
September 10, 1992 and each fund's respective semi-annual period ended
1996, are those of Class T, and reflect Class T's then applicable 12b-1
fee.
Note: If FMR had not reimbursed certain class expenses during certain of
these periods, the total returns for those periods for Overseas, Mid
Cap, Natural Resources , Strategic Opportunities, Large Cap,
Equity Income, and Income & Growth 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, 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 each class's
total return compared to the record of a broad average of common stocks 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 and including the
effect of each fund's Class A or Class T, as applicable, maximum
front-end sales charge or Class B applicable CDSC. 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.
EQUITY GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 34,030 $ 1,637 $ 22,887 $ 58,554 $ 41,199 $ 47,557 $ 14,092
1994 24,367 1,053 16,075 41,495 30,077 34,192 13,752
1993 25,204 1,089 14,555 40,848 29,766 32,779 13,376
1992 22,496 864 12,310 35,669 27,035 28,578 13,028
1991 20,744 758 7,987 29,489 22,814 24,302 12,642
1990 13,286 485 5,115 18,886 18,956 20,777 12,275
1989 14,798 440 3,143 18,381 19,640 21,131 11,550
1988 10,270 38 2,181 12,489 15,010 15,910 11,037
1987 8,475 22 1,126 9,624 12,171 13,310 10,587
1986 11,261 20 331 11,611 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
EQUITY GROWTH - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 34,658 $ 1,668 $ 23,309 $ 59,635 $ 41,199 $ 47,557 $ 14,092
1994 24,817 1,072 16,372 42,261 30,077 34,192 13,752
1993 25,670 1,109 14,823 41,602 29,766 32,779 13,376
1992 22,911 880 12,537 36,328 27,035 28,578 13,028
1991 21,127 771 8,135 30,033 22,814 24,302 12,642
1990 13,531 494 5,210 19,235 18,956 20,777 12,275
1989 15,071 449 3,201 18,721 19,640 21,131 11,550
1988 10,459 38 2,222 12,719 15,010 15,910 11,037
1987 8,632 22 1,147 9,801 12,171 13,310 10,587
1986 11,469 20 337 11,826 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
EQUITY GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 36,420 $ 2,443 $ 24,480 $ 63,343 $ 41,199 $ 47,557 $ 14,092
1994 26,060 1,318 17,183 44,561 30,077 34,192 13,752
1993 26,817 1,191 15,485 43,493 29,766 32,779 13,376
1992 23,778 913 13,012 37,703 27,035 28,578 13,028
1991 21,894 799 8,430 31,123 22,814 24,302 12,642
1990 14,022 511 5,399 19,932 18,956 20,777 12,275
1989 15,618 465 3,317 19,400 19,604 21,131 11,550
1988 10,839 40 2,302 13,181 15,010 15,910 11,037
1987 8,945 23 1,189 10,157 12,171 13,310 10,587
1986 11,885 21 349 12,255 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
NATURAL RESOURCES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 18,329 $ 126 $ 10,244 $ 28,610 $ 30,328 $ 31,450 $ 13,319
1994 16,638 115 8,929 25,682 23,986 25,207 12,955
1993 16,667 115 7,920 24,702 23,093 23,104 12,626
1992 13,151 91 4,271 17,513 20,090 19,672 12,288
1991 13,369 92 3,065 16,527 18,268 18,172 11,906
1990 11,654 81 2,095 13,830 13,683 13,970 11,568
1989 11,939 0 1,062 13,001 14,791 14,557 10,884
1988* 10,868 0 0 10,868 11,702 11,395 10,416
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
NATURAL RESOURCES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 18,576 $ 128 $ 10,434 $ 29,138 $ 30,328 $ 31,450 $ 13,319
1994 16,945 117 9,094 26,156 23,986 25,207 12,955
1993 16,974 117 8,067 25,158 23,093 23,104 12,626
1992 13,394 93 4,350 17,837 20,090 19,672 12,288
1991 13,616 94 3,122 16,832 18,268 18,172 11,906
1990 11,870 82 2,133 14,085 13,683 13,970 11,568
1989 12,159 0 1,082 13,241 14,791 14,557 10,884
1988* 11,069 0 0 11,069 11,702 11,395 10,416
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
NATURAL RESOURCES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 19,230 $ 134 $ 10,800 $ 30,164 $ 30,328 $ 31,450 $ 13,319
1994 17,560 121 9,423 27,104 23,986 25,207 12,955
1993 17,590 121 8,358 26,069 23,093 23,104 12,626
1992 13,880 96 4,507 18,483 20,090 19,672 12,288
1991 14,110 98 3,234 17,442 18,268 18,172 11,906
1990 12,300 85 2,211 14,596 13,683 13,970 11,568
1989 12,600 0 1,121 13,721 14,791 14,557 10,884
1988* 11,470 0 0 11,470 11,702 11,395 10,416
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
NATURAL RESOURCES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 19,270 $ 133 $ 10,823 $ 30,226 $ 30,328 $ 31,450 $ 13,319
1994 17,560 121 9,424 27,105 23,986 25,207 12,955
1993 17,590 122 8,359 26,070 23,093 23,104 12,626
1992 13,880 96 4,508 18,484 20,090 19,672 12,288
1991 14,110 98 3,235 17,443 18,268 18,172 11,906
1990 12,300 85 2,211 14,596 13,683 13,970 11,568
1989 12,600 0 1,121 13,721 14,791 14,557 10,884
1988* 11,470 0 0 11,470 11,702 11,395 10,416
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GROWTH OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 29,268 $ 1,523 $ 12,525 $ 43,317 $ 30,770 $ 31,921 $ 13,319
1994 25,222 921 9,109 35,252 24,336 25,585 12,955
1993 24,057 786 7,583 32,426 23,430 23,449 12,626
1992 20,030 497 4,785 25,312 20,383 19,966 12,288
1991 19,500 369 2,713 22,581 18,534 18,444 11,906
1990 12,308 71 1,712 14,091 13,882 14,179 11,568
1989 15,662 35 891 16,588 15,006 14,775 10,884
1988* 13,521 0 0 13,521 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GROWTH OPPORTUNITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 29,809 $ 1,552 $ 12,756 $ 44,117 $ 30,770 $ 31,921 $ 13,319
1994 25,688 938 9,277 35,903 24,336 25,585 12,955
1993 24,501 801 7,723 33,025 23,430 23,449 12,626
1992 20,400 506 4,873 25,779 20,383 19,966 12,288
1991 19,860 375 2,763 22,998 18,534 18,444 11,906
1990 12,535 72 1,744 14,351 13,882 14,179 11,568
1989 15,951 37 907 16,895 15,006 14,775 10,884
1988* 13,771 0 0 13,771 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 30,970 $ 1,612 $ 13,253 $ 45,835 $ 30,770 $ 31,921 $ 13,319
1994 26,620 971 9,614 37,205 24,336 25,585 12,955
1993 25,390 830 8,003 34,223 23,430 23,449 12,626
1992 21,140 524 5,050 26,714 20,383 19,966 12,288
1991 20,580 390 2,863 23,833 18,534 18,444 11,906
1990 12,990 75 1,807 14,872 13,882 14,179 11,568
1989 16,530 37 940 17,507 15,006 14,775 10,884
1988* 14,270 0 0 14,270 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 17,475 $ 6,406 $ 12,777 $ 36,658 $ 40,054 $ 45,581 $ 14,044
1994 13,134 4,392 9,007 26,533 29,114 33,338 13,696
1993 14,609 4,351 9,622 28,582 28,735 31,759 13,339
1992 13,380 3,494 6,858 23,732 26,104 27,146 12,983
1991 12,987 2,748 5,291 21,026 24,251 25,300 12,617
1990 12,390 2,015 2,679 17,083 18,585 20,347 12,242
1989 13,914 1,480 3,008 18,403 19,183 20,457 11,537
1988 10,788 758 2,333 13,879 14,567 15,526 11,025
1987 9,145 231 1,977 11,353 12,492 13,394 10,558
1986 11,385 62 673 12,120 11,868 12,703 10,110
</TABLE>
* From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 17,798 $ 6,524 $ 13,013 $ 37,335 $ 40,054 $ 45,581 $ 14,044
1994 13,377 4,473 9,173 27,023 29,114 33,338 13,696
1993 14,879 4,432 9,799 29,110 28,735 31,759 13,339
1992 13,627 3,559 6,985 24,171 26,104 27,146 12,983
1991 13,227 2,798 5,389 21,414 24,251 25,300 12,617
1990 12,619 2,052 2,728 17,399 18,585 20,347 12,242
1989 14,171 1,508 3,064 18,743 19,183 20,457 11,537
1988 10,988 771 2,376 14,135 14,567 15,526 11,025
1987 9,314 234 2,014 11,562 12,492 13,394 10,558
1986 11,596 63 685 12,344 11,868 12,703 10,110
</TABLE>
* From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 18,206 $ 6,906 $ 13,331 $ 38,443 $ 40,054 $ 45,851 $ 14,044
1994 13,766 4,781 9,443 27,990 29,114 33,338 13,696
1993 15,419 4,592 10,155 30,166 28,735 31,759 13,339
1992 14,122 3,687 7,238 25,047 26,104 27,146 12,983
1991 13,706 2,901 5,584 22,191 24,251 25,300 12,617
1990 13,076 2,127 2,827 18,030 18,585 20,347 12,242
1989 14,685 1,562 3,175 19,422 19,183 20,457 11,537
1988 11,386 800 2,462 14,648 14,567 15,526 11,025
1987 9,652 243 2,087 11,982 12,492 13,394 10,558
1986 12,016 66 710 12,792 11,868 12,703 10,110
</TABLE>
* From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 18,384 $ 6,984 $ 13,444 $ 38,812 $ 40,054 $ 45,581 $ 14,044
1994 13,862 4,635 9,506 28,003 29,114 33,338 13,696
1993 15,419 4,592 10,155 30,166 28,735 31,759 13,339
1992 14,122 3,687 7,238 25,047 26,104 27,146 12,983
1991 13,706 2,901 5,584 22,191 24,251 25,300 12,617
1990 13,076 2,127 2,827 18,030 18,585 20,347 12,242
1989 14,685 1,562 3,175 19,422 19,183 20,457 11,537
1988 11,386 800 2,462 14,648 14,567 15,526 11,025
1987 9,652 243 2,087 11,982 12,492 13,394 10,558
1986 12,016 66 710 12,792 11,868 12,703 10,110
</TABLE>
* From month-end closest to initial investment date.
EQUITY INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 15,818 $ 11,618 $ 6,595 $ 34,031 $ 41,199 $ 47,557 $ 14,092
1994 12,654 8,826 4,806 26,286 30,077 34,192 13,752
1993 11,782 7,895 4,474 24,151 29,766 32,779 13,376
1992 10,197 6,394 3,872 20,463 27,035 28,578 13,028
1991 8,785 4,829 3,336 16,950 22,814 24,302 12,642
1990 7,548 3,369 2,866 13,784 18,956 20,777 12,275
1989 9,729 3,189 3,281 16,198 19,640 21,131 11,550
1988 8,801 2,007 2,968 13,776 15,010 15,910 11,037
1987 8,666 1,088 1,094 10,848 12,171 13,310 10,587
1986 10,736 662 302 11,700 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
EQUITY INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 16,110 $ 11,832 $ 6,717 $ 34,659 $ 41,199 $ 47,557 $ 14,092
1994 12,888 8,989 4,894 26,771 30,077 34,192 13,752
1993 12,000 8,041 4,557 24,598 29,766 32,779 13,376
1992 10,385 6,511 3,944 20,840 27,035 28,578 13,028
1991 8,947 4,919 3,398 17,264 22,814 24,302 12,642
1990 7,688 3,432 2,919 14,039 18,956 20,777 12,275
1989 9,908 3,248 3,341 16,497 19,640 21,131 11,550
1988 8,964 2,044 3,023 14,031 15,010 15,910 11,037
1987 8,826 1,109 1,114 11,049 12,171 13,310 10,587
1986 10,934 674 308 11,916 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
EQUITY INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 16,653 $ 12,152 $ 6,944 $ 35,749 $ 41,199 $ 47,557 $ 14,092
1994 13,339 9,319 5,066 27,724 30,077 34,192 13,752
1993 12,435 8,333 4,722 25,490 29,766 32,779 13,376
1992 10,762 6,747 4,087 21,596 27,035 28,578 13,028
1991 9,272 5,097 3,521 17,890 22,814 24,302 12,642
1990 7,967 3,556 3,025 14,548 18,956 20,777 12,275
1989 10,268 3,366 3,462 17,096 19,640 21,131 11,550
1988 9,289 2,118 3,132 14,539 15,010 15,910 11,037
1987 9,146 1,149 1,154 11,449 12,171 13,310 10,587
1986 11,331 698 319 12,348 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 16,812 $ 13,012 $ 7,013 $ 36,837 $ 41,199 $ 47,557 $ 14,092
1994 13,448 9,688 5,107 28,243 30,077 34,192 13,752
1993 12,494 8,479 4,745 25,718 29,766 32,779 13,376
1992 10,778 6,759 4,093 21,630 27,035 28,578 13,028
1991 9,272 5,097 3,521 17,890 22,814 24,302 12,642
1990 7,967 3,556 3,025 14,548 18,956 20,777 12,275
1989 10,268 3,366 3,462 17,096 19,640 21,131 11,550
1988 9,289 2,118 3,132 14,539 15,010 15,910 11,037
1987 9,146 1,149 1,154 11,449 12,171 13,310 10,587
1986 11,331 698 319 12,348 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INCOME & GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 14,497 $ 7,103 $ 3,259 $ 24,859 $ 30,447 $ 31,938 $ 13,910
1994 13,900 6,024 3,125 23,049 24,080 25,598 13,529
1993 15,075 5,971 2,639 23,685 23,183 23,462 13,186
1992 13,653 4,617 1,524 19,794 20,169 19,977 12,833
1991 13,388 3,903 660 17,951 18,339 18,454 12,434
1990 9,863 2,316 486 12,666 13,736 14,187 12,081
1989 12,100 1,541 0 13,640 14,849 14,782 11,367
1988 10,489 770 0 11,259 11,747 11,572 10,878
1987* 8,944 161 0 9,105 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
INCOME & GROWTH - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 14,765 $ 7,234 $ 3,319 $ 25,318 $ 30,447 $ 31,938 $ 13,910
1994 14,157 6,136 3,182 23,475 24,080 25,598 13,529
1993 15,353 6,082 2,688 24,123 23,183 23,462 13,186
1992 13,906 4,701 1,552 20,159 20,169 19,977 12,833
1991 13,635 3,975 672 18,282 18,339 18,454 12,434
1990 10,046 2,359 495 12,900 13,736 14,187 12,081
1989 12,323 1,569 0 13,892 14,849 14,782 11,367
1988 10,683 784 0 11,467 11,747 11,572 10,878
1987* 9,110 163 0 9,273 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
INCOME & GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 15,400 $ 7,597 $ 3,462 $ 26,459 $ 30,447 $ 31,938 $ 13,910
1994 14,670 6,358 3,298 24,326 24,080 25,598 13,529
1993 15,910 6,302 2,786 24,998 23,183 23,462 13,186
1992 14,410 4,873 1,608 20,891 20,169 19,977 12,833
1991 14,130 4,119 696 18,945 18,339 18,454 12,434
1990 10,410 2,444 513 13,367 13,736 14,187 12,081
1989 12,770 1,626 0 14,396 14,849 14,782 11,367
1988 11,070 813 0 11,883 11,747 11,572 10,878
1987* 9,440 170 0 9,610 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH YIELD - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 11,404 $ 17,641 $ 1,046 $ 30,091 $ 31,158 $ 32,670 $ 13,910
1994 10,743 14,425 985 26,153 24,643 26,185 13,529
1993 11,500 13,490 490 25,480 23,725 23,999 13,186
1992 10,600 10,551 0 21,151 20,640 20,435 12,833
1991 9,690 7,653 0 17,343 18,768 18,877 12,434
1990 7,804 4,613 0 12,416 14,057 14,512 12,081
1989 8,589 3,399 0 11,988 15,196 15,121 11,367
1988 9,441 2,160 0 11,601 12,022 11,837 10,878
1987* 8,704 793 0 9,497 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH YIELD - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 11,493 $ 17,779 $ 1,054 $ 30,326 $ 31,158 $ 32,670 $ 13,910
1994 10,827 14,538 993 26,358 24,643 26,185 13,529
1993 11,590 13,596 494 25,680 23,725 23,999 13,186
1992 10,683 10,634 0 21,317 20,640 20,435 12,833
1991 9,766 7,712 0 17,478 18,768 18,877 12,434
1990 7,865 4,649 0 12,514 14,057 14,512 12,081
1989 8,656 3,426 0 12,082 15,196 15,121 11,367
1988 9,515 2,177 0 11,692 12,022 11,837 10,878
1987* 8,772 800 0 9,572 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH YIELD - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 11,890 $ 18,039 $ 1,090 $ 31,019 $ 31,158 $ 32,670 $ 13,910
1994 11,210 14,942 1,028 27,180 24,643 26,185 13,529
1993 12,010 14,089 512 26,611 23,725 23,999 13,186
1992 11,070 11,020 0 22,090 20,640 20,435 12,833
1991 10,120 7,992 0 18,112 18,768 18,877 12,434
1990 8,150 4,818 0 12,968 14,057 14,512 12,081
1989 8,970 3,550 0 12,520 15,196 15,121 11,367
1988 9,860 2,256 0 12,116 12,022 11,837 10,878
1987* 9,090 829 0 9,919 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH YIELD - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 11,760 $ 18,438 $ 1,078 $ 31,276 $ 31,158 $ 32,670 $ 13,910
1994 11,220 15,065 1,029 27,314 24,643 26,185 13,529
1993 12,010 14,089 512 26,611 23,725 23,999 13,186
1992 11,070 11,020 0 22,090 20,640 20,435 12,833
1991 10,120 7,992 0 18,112 18,768 18,877 12,434
1990 8,150 4,818 0 12,968 14,057 14,512 12,081
1989 8,970 3,550 0 12,520 15,196 15,121 11,367
1988 9,860 2,256 0 12,116 12,022 11,837 10,878
1987* 9,090 829 0 9,919 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,533 $ 934 $ 238 $ 11,704 $ 13,414 $ 13,400 $ 10,268
1994* 9,498 93 0 9,592 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 10,615 $ 941 $ 240 $ 11,796 $ 13,414 $ 13,400 $ 10,268
1994* 9,573 94 0 9,667 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 10,710 $ 871 $ 247 $ 11,828 $ 13,414 $ 13,400 $ 10,268
1994* 9,910 84 0 9,994 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 11,030 $ 983 $ 249 $ 12,262 $ 13,414 $ 13,400 $ 10,268
1994* 9,920 97 0 10,017 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
GOVERNMENT INVESTMENT - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,259 $ 8,111 $ 546 $ 17,916 $ 30,373 $ 31,879 $ 13,910
1994 8,579 6,506 506 15,591 24,022 25,550 13,529
1993 9,709 6,429 320 16,458 23,127 23,418 13,186
1992 9,316 5,309 0 14,625 20,120 19,940 12,833
1991 9,182 4,299 0 13,481 18,295 18,419 12,434
1990 8,761 3,206 0 11,968 13,703 14,160 12,081
1989 8,914 2,325 0 11,240 14,813 14,755 11,367
1988 8,866 1,410 0 10,277 11,719 11,551 10,878
1987* 8,809 590 0 9,399 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GOVERNMENT INVESTMENT - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 9,332 $ 8,174 $ 550 $ 18,056 $ 30,373 $ 31,879 $ 13,910
1994 8,646 6,557 510 15,713 24,022 25,550 13,529
1993 9,785 6,479 322 16,587 23,127 23,418 13,186
1992 9,389 5,351 0 14,740 20,120 19,940 12,833
1991 9,254 4,333 0 13,587 18,295 18,419 12,434
1990 8,830 3,231 0 12,061 13,703 14,160 12,081
1989 8,984 2,344 0 11,328 14,813 14,755 11,367
1988 8,936 1,421 0 10,357 11,719 11,551 10,878
1987* 8,878 595 0 9,473 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GOVERNMENT INVESTMENT - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 9,670 $ 8,275 $ 570 $ 18,515 $ 30,373 $ 31,879 $ 13,910
1994 8,950 6,737 528 16,215 24,022 25,550 13,529
1993 10,140 6,715 334 17,189 23,127 23,418 13,186
1992 9,730 5,545 0 15,275 20,120 19,940 12,833
1991 9,590 4,490 0 14,080 18,295 18,419 12,434
1990 9,150 3,349 0 12,499 13,703 14,160 12,081
1989 9,310 2,429 0 11,739 14,813 14,755 11,367
1988 9,260 1,473 0 10,733 11,719 11,551 10,878
1987* 9,200 616 0 9,816 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995 $ 9,670 $ 8,490 $ 570 $ 18,730 $ 30,373 $ 31,879 $ 13,910
1994 8,960 6,795 528 16,283 24,022 25,550 13,529
1993 10,140 6,715 334 17,189 23,127 23,418 13,186
1992 9,730 5,545 0 15,275 20,120 19,940 12,833
1991 9,590 4,490 0 14,080 18,295 18,419 12,434
1990 9,150 3,349 0 12,499 13,703 14,160 12,081
1989 9,310 2,429 0 11,739 14,813 14,755 11,367
1988 9,260 1,473 0 10,733 11,719 11,551 10,878
1987* 9,200 616 0 9,816 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
INTERMEDIATE BOND - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,868 $ 12,502 $ 236 $ 22,606 $ 41,199 $ 47,557 $ 14,092
1994 9,409 10,654 225 20,288 30,077 34,192 13,752
1993 10,216 10,334 244 20,795 29,766 32,779 13,376
1992 9,758 8,493 234 18,485 27,035 28,578 13,028
1991 9,675 7,045 232 16,951 22,814 24,302 12,642
1990 9,299 5,434 223 14,955 18,956 20,777 12,275
1989 9,547 4,273 228 14,048 19,640 21,131 11,550
1988 9,336 2,980 223 12,539 15,010 15,910 11,037
1987 9,400 1,899 225 11,524 12,171 13,310 10,587
1986 10,308 996 19 11,323 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INTERMEDIATE BOND - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,919 $ 12,567 237 22,723 $ 41,199 $ 47,557 $ 14,092
1994 9,458 10,709 226 20,393 30,077 34,192 13,752
1993 10,269 10,387 246 20,902 29,766 32,779 13,376
1992 9,808 8,537 235 18,580 27,035 28,578 13,028
1991 9,725 7,081 233 17,039 22,814 24,302 12,642
1990 9,347 5,461 224 15,032 18,956 20,777 12,275
1989 9,596 4,294 230 14,120 19,640 21,131 11,550
1988 9,384 2,995 225 12,604 15,010 15,910 11,037
1987 9,448 1,910 226 11,584 12,171 13,310 10,587
1986 10,361 1,002 19 11,382 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INTERMEDIATE BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 10,190 $ 12,650 $ 244 $ 23,084 $41,199 $ 47,557 $ 14,092
1994 9,716 10,919 233 20,868 30,077 34,192 13,752
1993 10,559 10,681 253 21,493 29,766 32,779 13,376
1992 10,085 8,779 241 19,105 27,035 28,578 13,028
1991 10,000 7,282 239 17,521 22,814 24,302 12,642
1990 9,611 5,616 230 15,547 18,956 20,777 12,275
1989 9,867 4,417 236 14,520 19,640 21,131 11,550
1988 9,649 3,081 231 12,961 15,010 15,910 11,037
1987 9,716 1,962 233 11,911 12,171 13,310 10,587
1986 10,654 1,030 20 11,704 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INTERMEDIATE BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 10,209 $ 13,235 $ 244 $ 23,688 $ 41,199 $ 47,577 $ 14,092
1994 9,735 11,233 233 21,201 30,077 34,192 13,752
1993 10,578 10,824 253 21,655 29,766 32,779 13,376
1992 10,085 8,809 241 19,135 27,035 28,578 13,028
1991 10,000 7,282 239 17,521 22,814 24,302 12,642
1990 9,611 5,616 230 15,457 18,956 20,777 12,275
1989 9,867 4,417 236 14,520 19,640 21,131 11,550
1988 9,649 3,081 231 12,961 15,010 15,910 11,037
1987 9,716 1,962 233 11,911 12,171 13,310 10,587
1986 10,654 1,030 20 11,704 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
SHORT FIXED-INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,328 $ 8,221 $ 0 $ 17,549 $ 23,674 $ 24,051 $ 13,365
1994 9,338 7,210 0 16,548 18,273 19,276 13,000
1993 9,939 6,646 0 16,585 18,026 17,668 12,670
1992 9,801 5,397 0 15,198 15,682 15,043 12,330
1991 9,722 4,165 0 13,887 14,260 13,896 11,948
1990 9,476 2,902 0 12,378 10,681 10,683 11,609
1989 9,801 1,921 0 11,722 11,545 11,132 10,922
1988 9,791 974 0 10,765 9,134 8,714 10,452
1987* 9,909 100 0 10,009 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
SHORT FIXED-INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,328 $ 8,221 $ 0 $ 17,549 $ 23,674 $ 24,051 $ 13,365
1994 9,338 7,210 0 16,548 18,273 19,276 13,000
1993 9,939 6,646 0 16,585 18,026 17,668 12,670
1992 9,801 5,397 0 15,198 15,682 15,043 12,330
1991 9,722 4,165 0 13,887 14,260 13,896 11,948
1990 9,476 2,902 0 12,378 10,681 10,683 11,609
1989 9,801 1,921 0 11,722 11,545 11,132 10,922
1988 9,791 974 0 10,765 9,134 8,714 10,452
1987* 9,909 100 0 10,009 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
SHORT FIXED-INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,470 $ 8,355 $ 0 $ 17,825 $ 23,674 $ 24,051 $ 13,365
1994 9,480 7,320 0 16,800 18,723 19,276 13,000
1993 10,090 6,748 0 16,838 18,026 17,668 12,670
1992 9,950 5,479 0 15,429 15,682 15,043 12,330
1991 9,870 4,228 0 14,098 14,260 13,896 11,948
1990 9,620 2,946 0 12,566 10,681 10,683 11,609
1989 9,950 1,951 0 11,901 11,545 11,132 10,922
1988 9,940 989 0 10,929 9,134 8,714 10,452
1987* 10,060 101 0 10,161 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH INCOME MUNICIPAL - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 11,375 $ 8,443 $ 504 $ 20,321 $ 23,674 $ 24,051 $ 13,365
1994 10,743 6,844 476 18,063 18,723 19,276 13,000
1993 12,179 6,611 431 19,222 18,026 17,668 12,670
1992 11,155 5,071 353 16,578 15,682 15,043 12,330
1991 10,925 3,923 332 15,180 14,260 13,896 11,948
1990 10,408 2,736 169 13,313 10,681 10,683 11,609
1989 10,360 1,768 54 12,183 11,545 11,132 10,922
1988 10,015 857 0 10,872 9,134 8,714 10,452
1987* 9,431 88 0 9,519 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH INCOME MUNICIPAL - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 11,464 $ 8,509 $ 508 $ 20,481 $ 23,674 $ 24,051 $ 13,365
1994 10,827 6,899 479 18,205 18,723 19,276 13,000
1993 12,275 6,663 435 19,373 18,026 17,668 12,670
1992 11,242 5,111 355 16,708 15,682 15,043 12,330
1991 11,011 3,954 334 15,299 14,260 13,896 11,948
1990 10,490 2,757 170 13,417 10,681 10,683 11,609
1989 10,441 1,782 55 12,278 11,545 11,132 10,922
1988 10,094 864 0 10,958 9,134 8,714 10,452
1987* 9,505 89 0 9,594 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH INCOME MUNICIPAL - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 11,860 $ 8,563 $ 525 $ 20,948 $ 23,674 $ 24,051 $ 13,365
1994 11,210 7,069 496 18,775 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987* 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
HIGH INCOME MUNICIPAL - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987* 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
INTERMEDIATE MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,769 $ 7,896 $ 1,475 $ 19,140 $ 41,199 $ 47,557 $ 14,092
1994 8,847 6,391 1,335 16,573 30,077 34,192 13,752
1993 9,844 6,293 1,453 17,590 29,766 32,779 13,376
1992 10,428 5,779 122 16,329 27,035 28,578 13,028
1991 10,164 4,705 119 14,988 22,814 24,302 12,642
1990 10,014 3,727 117 13,858 18,956 20,777 12,275
1989 9,986 2,845 116 12,947 19,640 21,131 11,550
1988 9,901 2,027 115 12,043 15,010 15,910 11,037
1987 9,769 1,292 114 11,175 12,171 13,310 10,587
1986 10,343 675 49 11,067 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INTERMEDIATE MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1995 $ 9,820 $ 7,939 $ 1,483 $ 19,242 $ 41,199 $ 47,557 $ 14,092
1994 8,893 6,426 1,343 16,662 30,077 34,192 13,752
1993 9,895 6,329 1,460 17,684 29,766 32,779 13,376
1992 10,482 5,812 122 16,416 27,035 28,578 13,028
1991 10,217 4,729 119 15,065 22,814 24,302 12,642
1990 10,066 3,747 117 13,930 18,956 20,777 12,275
1989 10,037 2,860 117 13,014 19,640 21,131 11,550
1988 9,952 2,038 116 12,106 15,010 15,910 11,037
1987 9,820 1,298 115 11,233 12,171 13,310 10,587
1986 10,397 677 50 11,124 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INTERMEDIATE MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,097 $ 7,936 $ 1,524 $ 19,557 $ 41,199 $ 47,557 $ 14,092
1994 9,144 6,542 1,380 17,066 30,077 34,192 13,752
1993 10,175 6,507 1,502 18,184 29,766 32,779 13,376
1992 10,778 5,976 126 16,880 27,035 28,578 13,028
1991 10,506 4,862 123 15,491 22,814 24,302 12,642
1990 10,350 3,852 121 14,323 18,956 20,777 12,275
1989 10,321 2,941 120 13,382 19,640 21,131 11,550
1988 10,233 2,096 119 12,448 15,010 15,910 11,037
1987 10,097 1,335 118 11,550 12,171 13,310 10,587
1986 10,691 697 51 11,439 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,078 $ 8,311 $ 1,522 $ 19,911 $ 41,199 $ 47,557 $ 14,092
1994 9,154 6,711 1,383 17,248 30,077 34,192 13,752
1993 10,175 6,562 1,502 18,239 29,766 32,779 13,376
1992 10,778 5,982 126 16,886 27,035 28,578 13,028
1991 10,506 4,862 123 15,491 22,814 24,302 12,642
1990 10,350 3,852 121 14,323 18,956 20,777 12,275
1989 10,321 2,941 120 13,382 19,640 21,131 11,550
1988 10,233 2,096 119 12,448 15,010 15,910 11,037
1987 10,097 1,335 118 11,550 12,171 13,310 10,587
1986 10,691 697 51 11,439 12,768 13,479 10,128
</TABLE>
* From month-end closest to initial investment date.
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,086 $ 717 $ 0 $ 10,803 $ 13,583 $ 13,775 $ 10,435
1994* 9,623 254 0 9,877 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,086 $ 717 $ 0 $ 10,803 $ 13,583 $ 13,775 $ 10,435
1994* 9,623 254 0 9,877 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL INDICES
CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 10,230 $ 734 $ 0 $ 10,964 $ 13,583 $ 13,775 $ 10,435
1994* 9,770 257 0 10,027 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
NEW YORK MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995* $ 9,958 $ 81 $ 0 $ 10,039 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
NEW YORK MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995* $ 10,036 $ 82 $ 0 $ 10,118 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
NEW YORK MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1995* $ 9,990 $ 75 $ 0 $ 10,065 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
NEW YORK MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1995* $ 10,400 $ 96 $ 0 $ 10,496 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
The yield for the S&P 500 for the year ended December 31, 1995 was 2.24%,
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, 1995. 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 Overseas and
Emerging Markets Income from the date each fund commenced operations
through the fiscal year ended 1995. 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>
<S> <C> <C>
FUND COMPARATIVE INDEX DESCRIPTION OF INDEX
Overseas Morgan Stanley Capital International An unmanaged index of 900 foreign common
Europe, Australia, Far East Index stocks
(EAFE)
Emerging Markets J.P. Morgan Emerging An unmanaged index of fixed-income securities
Income Market Bond Index from developing nations
J.P. Morgan Emerging An unmanaged index of fixed-income securities,
Market Bond Index Plus including U.S. dollar and other external
currency-denominated Brady bonds, loans,
Eurobonds, and local market instruments from
developing nations
</TABLE>
The following charts show the growth of a hypothetical $10,000 investment
in each class, assuming all distributions were reinvested and including the
effect of each funds Class T maximum front-end sales charge or Class
B applicable CDSC. 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 a class today. Tax consequences of different
investments have not been factored into the figures.
OVERSEAS - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 13,189 $ 476 $ 103 $ 13,768 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 13,322 481 0 13,803 13,786 16,208 16,684 11,598
1993 12,251 422 0 12,673 12,522 15,604 15,291 11,303
1992 8,594 199 0 8,793 9,110 13,575 13,020 11,001
1991 9,267 76 0 9,343 10,497 12,344 12,027 10,659
1990* 9,049 0 0 9,049 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
OVERSEAS - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 13,433 $ 484 $ 105 $ 14,022 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 13,568 489 0 14,057 13,786 16,208 16,684 11,598
1993 12,477 430 0 12,907 12,522 15,604 15,291 11,303
1992 8,753 202 0 8,955 9,110 13,575 13,020 11,001
1991 9,438 77 0 9,515 10,497 12,344 12,027 10,659
1990* 9,216 0 0 9,216 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
OVERSEAS - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 13,920 $ 502 $ 109 $ 14,531 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 14,060 507 0 14,567 13,786 16,208 16,684 11,598
1993 12,930 445 0 13,375 12,522 15,604 15,291 11,303
1992 9,070 210 0 9,280 9,110 13,575 13,020 11,001
1991 9,780 80 0 9,860 10,497 12,344 12,027 10,659
1990* 9,550 0 0 9,550 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
OVERSEAS - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 13,970 $ 504 $ 109 $ 14,583 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 14,060 507 0 14,567 13,786 16,208 16,684 11,598
1993 12,930 445 0 13,375 12,522 15,604 15,291 11,303
1992 9,070 210 0 9,280 9,110 13,575 13,020 11,001
1991 9,780 80 0 9,860 10,497 12,344 12,027 10,659
1990* 9,550 0 0 9,550 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
EMERGING MARKETS INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 8,886 $ 1,381 $ 231 $ 10,497 $ 11,477 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,115 459 237 9,811 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
EMERGING MARKETS INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 8,955 $ 1,392 $ 232 $ 10,579 $ 11,437 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,187 463 238 9,888 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
EMERGING MARKETS INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,021 $ 1,306 $ 240 $ 10,567 $ 11,437 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,520 430 246 10,196 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
EMERGING MARKETS INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9,280 $ 1,455 $ 241 $ 10,976 $ 11,437 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,520 480 247 10,247 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
The following table reflects the cost of the initial $10,000 investment in
each of the classes, together with the aggregate cost of reinvested
dividends and capital gain distributions, if any, for life of the fund or
the last ten years ended 1995 (their cash value at the time they were
reinvested). If distributions had not been reinvested, the amount of
distributions earned from the applicable class over time would have been
smaller, and cash payments from these classes for the periods noted would
have amounted 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.
(A) (B)
CAPITAL GAIN INCOME
FUND COST DISTRIBUTIONS DIVIDENDS AS OF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Overseas - Class A $10,424 $95 $322 October 1995
Overseas - Class T 10,432 97 328 October 1995
Overseas - Class B 10,448 100 340 October 1995
Overseas - Institutional 10,448 100 340 October 1995
Equity Growth - Class A 21,123 7,783 487 November 1995
Equity Growth - Class T 21,328 7,927 496 November 1995
Equity Growth - Institutional 22,226 8,215 803 November 1995
Natural Resources - Class A 16,803 5,448 76 October 1995
Natural Resources - Class T 16,928 5,549 77 October 1995
Natural Resources - Class B 17,179 5,750 80 October 1995
Natural Resources - Institutional 17,179 5,750 80 October 1995
Growth Opportunities - Class A 18,655 6,367 767 October 1995
Growth Opportunities - Class T 18,815 6,485 782 October 1995
Growth Opportunities - Institutional 19,135 6,720 810 October 1995
Strategic Opportunities - Class A 23,840 6,342 3,196 December 1995
Strategic Opportunities - Class T 24,096 6,460 3,255 December 1995
Strategic Opportunities - Class B 24,775 6,694 3,454 December 1995
Strategic Opportunities - Institutional 24,847 6,694 3,491 December 1995
Equity Income - Class A 20,876 2,942 4,408 November 1995
Equity Income - Class T 21,077 2,996 4,490 November 1995
Equity Income - Class B 21,407 3,105 4,619 November 1995
Equity Income - Institutional 22,021 3,105 4,904 November 1995
Income & Growth - Class A 18,786 2,094 4,539 October 1995
Income & Growth - Class T 18,949 2,133 4,622 October 1995
Income & Growth - Institutional 19,324 2,210 4,820 October 1995
Emerging Markets Income - Class A 11,591 249 1,226 December 1995
Emerging Markets Income - Class T 11,603 251 1,235 December 1995
Emerging Markets Income - Class B 11,526 260 1,163 December 1995
Emerging Markets Income - Institutional 11,674 260 1,291 December 1995
High Yield - Class A 26,256 469 9,012 October 1995
High Yield - Class T 26,385 473 9,083 October 1995
High Yield - Class B 26,637 490 9,282 October 1995
High Yield - Institutional 27,222 490 9,505 October 1995
Strategic Income - Class A 11,141 220 865 December 1995
Strategic Income - Class T 11,150 222 872 December 1995
Strategic Income - Class B 11,089 230 810 December 1995
Strategic Income - Institutional 11,198 230 910 December 1995
Government Investment - Class A 18,429 335 5,624 October 1995
Government Investment - Class T 18,495 338 5,668 October 1995
Government Investment - Class B 18,614 350 5,775 October 1995
Government Investment - Institutional 18,821 350 5,883 October 1995
Intermediate Bond - Class A 22,477 220 7,822 November 1995
Intermediate Bond - Class T 22,541 221 7,862 November 1995
Intermediate Bond - Class B 22,641 227 7,973 November 1995
Intermediate Bond - Institutional 23,199 227 8,217 November 1995
Short Fixed-Income - Class A 18,513 0 6,135 October 1995
Short Fixed-Income - Class T 18,513 0 6,135 October 1995
Short Fixed-Income - Institutional 18,651 0 6,233 October 1995
High Income Municipal - Class A 18,497 364 5,869 October 1995
High Income Municipal - Class T 18,563 367 5,915 October 1995
High Income Municipal - Class B 18,639 380 5,997 October 1995
High Income Municipal - Institutional 18,891 380 6,139 October 1995
Intermediate Municipal Income - Class A 19,433 960 5,723 November 1995
Intermediate Municipal Income - Class T 19,485 965 5,755 November 1995
Intermediate Municipal Income - Class B 19,534 992 5,804 November 1995
Intermediate Municipal Income - Institutional 19,913 992 5,999 November 1995
Short-Intermediate Municipal - Class A 10,702 0 679 November 1995
Short-Intermediate Municipal - Class T 10,702 0 679 November 1995
Short-Intermediate Municipal - Institutional 10,719 0 696 November 1995
New York Municipal Income - Class A 10,081 0 81 October 1995
New York Municipal Income - Class T 10,081 0 81 October 1995
New York Municipal Income - Class B 10,075 0 74 October 1995
New York Municipal Income - Institutional 10,095 0 95 October 1995
</TABLE>
INTERNATIONAL INDICES, MARKET CAPITALIZATION, AND NATIONAL STOCK MARKET
RETURN. The following tables show the total market capitalization of
certain countries according to the Morgan Stanley Capital International
(MSCI) Indices database the total market capitalization of the Latin
American countries according to the International Finance Corporation
Emerging Market database as of December 31, 1995 and the performance of
national stock markets as measured in U.S. dollars by the MSCI stock market
indices for the twelve months ended October 31, 1995. 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
MSCI, the size of the markets as measured in U.S. dollars grew from $2,011
billion in 1982 to $8,512 billion in 1995.
The following table measures the indexed market capitalization of certain
countries according to the MSCI indices database. The values of the markets
are measured in billions of U.S. dollars as of October 31, 1995.
MSCI INDEX MARKET CAPITALIZATION
Australia $ 183.9 Japan $ 1,935.2
Austria 17.0 Netherlands 23.7
Belgium 56.3 Norway 186.7
Canada 191.7 Singapore/Malaysia 73.2
Denmark 49.6 Spain 91.5
France 319.9 Sweden 101.2
Germany 333.7 Switzerland 296.7
Hong Kong 137.5 United Kingdom 836.4
Italy 112.4 United States 3,541.4
The following table measures the total market capitalization of certain
Latin American countries according to the International Finance Corporation
Emerging Markets database. The value of the markets is measured in billions
of U.S. dollars as of October 31, 1995.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 20.9
Brazil 78.6
Chile 36.4
Colombia 5.4
Mexico 52.9
Venezuela 3.9
NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents the
performance of national stock markets as measured in U.S. dollars by the
MSCI stock market indices for the twelve months ended October 31, 1995. The
second table shows the same performance as measured in local currency. Each
table measures total return based on the period's change in price,
dividends paid on stocks in the index, and the effect of reinvesting
dividends net of any applicable foreign taxes. These are unmanaged indices
composed of a sampling of selected companies representing an approximation
of the market structure of the designated country.
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN U.S. DOLLARS (INCLUDES NET DIVIDENDS REINVESTED MONTHLY)
12 MONTHS ENDED OCTOBER 31, 1995
Australia 4.92% Japan -13.12%
Austria -2.67% Netherlands 15.62%
Belgium 16.84% Norway 9.86%
Canada 8.54% Singapore/Malaysia -7.75%
Denmark 13.56% Spain 6.18%
France 5.12% Sweden 26.30%
Germany 10.66% Switzerland 37.36%
Hong Kong 0.77% United Kingdom 12.46%
Italy -7.36% United States 26.79%
The following table shows the average annualized stock market returns as of
October 31, 1995.
STOCK MARKET PERFORMANCE
<TABLE>
<CAPTION>
<S> <C> <C>
FIVE YEARS ENDED OCTOBER 31, 1995 TEN YEARS ENDED OCTOBER 31, 1995
Germany 8.83% 11.52%
Hong Kong 29.50% 26.14%
Japan 1.67% 12.27%
Spain 4.33% 16.69%
United Kingdom 10.96% 15.03%
United States 16.68% 14.39%
</TABLE>
PERFORMANCE COMPARISONS. 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 project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term Government bonds, long-term Government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the classes.
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 bond fund may compare its performance or the performance of
securities in which that bond fund may invest to averages published by IBC
USA (Publications), Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. The Bond Fund Report AveragesTM/All Taxable
(Emerging Markets Income, Strategic Income, Government Investment,
Intermediate Bond, High Yield, Short-Fixed Income) covers over 539 taxable
bond funds, The Bond Fund Report AveragesTM/Municipal (Intermediate
Municipal Income, High Income Municipal, New York Municipal Income,
California Municipal Income, and Short-Intermediate Municipal Income)
covers over 559 municipal funds. The averages are reported in the BOND FUND
REPORT(Registered trademark). Each class of a bond fund may also 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(Registered trademark), which covers over 1166 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,
however, invests in longer-term instruments and its share price changes
daily in response to a variety of factors.
A municipal fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike municipal mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many municipal mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; model portfolios or allocations; and saving for college or other
goals. In addition, Fidelity may quote or reprint financial or business
publications or periodicals as they relate to current economic and
political conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a particular
mutual fund, and Fidelity services and products.
Each fund may be advertised as part of certain asset allocation programs
involving other Fidelity or non-Fidelity mutual funds. These asset
allocation programs may advertise a model portfolio and its performance
results.
Each fund may be advertised as part of a no transaction fee (NTF) program
in which Fidelity and non-Fidelity mutual funds are offered. An NTF program
may advertise performance results.
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
willingness to continue purchasing shares during periods of low price
levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of December 31, 1995, FMR advised over $26.5 billion in tax-free fund
assets, $81 billion in money market fund assets, $240 billion in equity
fund assets, $49 billion in international fund assets, and $23 billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain
a worldwide information and communications network for the purpose of
researching and managing investments abroad.
In addition to performance rankings, each class of each bond fund may
compare its total expense ratio to the average total expense ratio of
similar funds tracked by Lipper. A class's total expense ratio is a
significant factor in comparing bond and money market investments because
of its effect on yield.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
CLASS T SHARES ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class T 's maximum 3.50% (the Equity Funds and the Bond Funds); 2.75%
(the Intermediate Bond Funds); or 1.50% (the Short Bond Funds) front-end
sales charge in connection with a fund's merger with or acquisition of any
investment company or trust. In addition, FDC has chosen to waive Class
T 's front-end sales charge in certain instances because of efficiencies
involved in those sales of shares. The sales charge will not apply:
1. to shares purchased 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
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 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;
6. 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;
7. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency;
8. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge;
9. to shares purchased by a trust institution or bank trust department,
excluding assets described in (11) and (12) below, that has executed a
Participation Agreement with FDC specifying certain asset minimums and
qualifications, and marketing program restrictions. Assets managed by third
parties do not qualify for this waiver;
10. to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. to shares purchased as part of an employee benefit plan having more
than (i) 200 eligible employees or a minimum of $1,000,000 in plan assets
invested in the Fidelity Advisor funds, or (ii) 25 eligible employees or
$250,000 in plan assets invested in Fidelity Advisor funds that subscribes
to Fidelity Advisor Retirement Connection or similar program sponsored by
Fidelity Investments Institutional Services Company, Inc.;
12. to shares purchased as part of an employee benefit plan through an
intermediary that has executed a Participation Agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions;
13. to shares purchased on a discretionary basis by a registered investment
adviser which is not part of an organization primarily engaged in the
brokerage business, that has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver; or
14. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined Trusts.
In order to qualify for waivers (9), (10) and (13), eligible investors with
existing Class T accounts will be required to sign and comply with a
participation agreement. Eligible investors that do not meet revised asset
requirements specified in the participation agreement will be allowed to
continue investing in Class T shares under the terms of their
current relationship until June 30, 1997, after which they will be
prevented from making new or subsequent purchases in Class T load
waived, except that employee benefit plans will be permitted to make
additional purchases of Class T shares load waived.
For the purposes of qualifying for waiver (11), employee benefit plans
subscribing to the Premiere Retirement Savings Plan Program offered by
National Financial Correspondent Services may be aggregated.
A sales load waiver form must accompany these transactions.
FINDERS FEE. On eligible purchases of Class T shares in amounts of
$1 million or more, investment professionals will be compensated with a fee
of 0.25%. Eligible purchases are the following purchases made through
broker-dealers and banks (excluding trust departments): an individual trade
of $1 million or more; a trade which brings the value of the accumulated
account(s) of an investor (including an employee benefit plan) past $1
million; a trade for an investor with an accumulated account value of $1
million or more; and an incremental trade toward an investor's $1 million
"Letter of Intent."
Any assets in relation to which an investment professional has received
such compensation will bear a contingent deferred sales charge ( Class
T CDSC) if they do not remain in Class T shares of the Fidelity
Advisor Funds, Initial Class shares of Daily Money Fund: U.S. Treasury
Portfolio or Daily Money Fund: Money Market Portfolio, or shares of Daily
Tax-Exempt Money Fund, for a period of at least one uninterrupted year. The
Class T CDSC will be 0.25% of the lesser of the cost of the shares
at the initial date of purchase or the value of the shares at redemption,
not including any reinvested dividends or capital gains. Class T
CDSC shares representing reinvested dividends or capital gains, if any,
will be redeemed first, followed by other Class T CDSC shares that
have been held for the longest period of time.
With respect to employee benefit plans, the Class T CDSC does not
apply to the following types of redemptions: (i) plan loans or
distributions or (ii) exchanges to non-Advisor fund investment options.
With respect to Individual Retirement Accounts, the Class T CDSC
does not apply to redemptions made for disability, payment of death
benefits, or required partial distributions starting at age 70 1/2.
CLASS 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 to the Internal Revenue Code.
A sales load waiver form must accompany these transactions.
CLASS A, CLASS T, AND CLASS B SHARES ONLY
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A or Class T shares, you or your investment professional must
notify the transfer agent at the time of purchase whenever a quantity
discount is applicable to your purchase. Upon such notification, you will
receive the lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company" as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Internal
Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A or Class T shares after you have reached a new
breakpoint in a fund's sales charge schedule. The value of currently held
(i) Fidelity Advisor fund Class A, Class T, and Class B
shares, (ii) Class B shares of Daily Money Fund: U.S. Treasury
Portfolio, and (iii) Initial Class shares of Daily Money Fund: U.S.
Treasury Portfolio, Initial Class shares of Daily Money Fund: Money
Market Portfolio, and shares of 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 or Class T 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 or Class
T purchases. Each Class A or Class T investment you make after
signing the Letter will be entitled to the front-end sales charge
applicable to the total investment indicated in the Letter. For example, a
$2,500 purchase of Class A or Class T shares toward a $50,000 Letter
would receive the same reduced sales charge as if the $50,000 ($500,000 for
the Short-Term Bond Funds) had been invested at one time. To ensure that
you receive a reduced front-end sales charge on future purchases, you or
your investment professional must inform the transfer agent that the Letter
is in effect each time Class A or Class T shares are purchased.
Reinvested income and capital gain distributions do not count toward the
completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class
A or Class T shares held in escrow cannot be redeemed or exchanged
until the Letter is satisfied or the additional sales charges have been
paid. You will earn income dividends and capital gain distributions on
escrowed Class A or Class T shares. The escrow will be released when
your purchase of the total amount has been completed. You are not obligated
to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A or
Class T shares at the then-current offering price applicable to the
total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed
Class A or Class T shares will be redeemed to pay such charges.
CLASS A, CLASS T, CLASS B, AND INSTITUTIONAL CLASS SHARES
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A, Class T, Class B, or Institutional Class
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.
Your account will be drafted on or about the first business day of every
month. You may cancel your participation in the Systematic Investment
Program at any time without payment of a cancellation fee. You will receive
a confirmation from the transfer agent for every transaction, and a debit
entry will appear on your bank statement.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A,
Class T, or Institutional Class shares worth $10,000 or more, you can
have monthly, quarterly or semiannual checks sent from your account to you,
to a person named by you, or to your bank checking account. Your Systematic
Withdrawal Program payments are drawn from Class A, Class T, or
Institutional Class share redemptions. If Systematic Withdrawal Plan
redemptions exceed income dividends earned on your shares, your account
eventually may be exhausted.
Each fund is open for business and the NAV and, where applicable, the
offering price, 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 1996: New Year's Day, Washington's Birthday, 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.
FSC normally determines each class's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a class's NAV may be affected on days when investors do
not have access to 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 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of each fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that each 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
dividends-received deduction. For those funds that may earn other types of
income, such as interest, income from securities loans, non-qualifying
dividends, and short-term capital gains, the percentage of dividends from
the funds that qualify for the deduction will generally be less than 100%.
For those funds whose income is primarily derived from interest, dividends
will not qualify for the dividends-received deduction available to
corporate shareholders. Each fund will notify corporate shareholders
annually of the percentage of fund dividends that qualifies for the
dividends-received deduction. A portion of each fund's dividends derived
from certain U.S. Government 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, 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.
Each municipal fund purchases securities that are free of federal income
tax based on opinions of bond counsel regarding their 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 bond counsel may also be based on the
effect of the structure on the federal and state tax treatment of the
income.
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 Intermediate Municipal Income's,
Short-Intermediate Municipal Income's, and High Income Municipal's policies
of investing 80% of its net assets in securities whose interest is free
from federal income tax, and New York Municipal Income's and California
Municipal Income's policies of investing 80% of its net assets in
securities whose interest is free from federal and state 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 with market 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. 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 Intermediate Municipal Income's,
Short-Intermediate Municipal Income's, and High Income Municipal's policies
of investing 80% of its net assets in securities whose interest is free
from federal income tax, and New York Municipal Income's and California
Municipal Income's policies of investing 80% of its net assets in
securities whose interest is free from federal and state personal 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.
NEW YORK TAX MATTERS. It is not expected that New York Municipal Income
will incur New York income or franchise tax liability. In addition, New
York personal income tax law also provides that exempt-interest dividends
paid by a regulated investment company, or series thereof, from interest on
obligations which are exempt from tax under New York law are excludable
from gross income.
CALIFORNIA TAX MATTERS. As long as California Municipal Income continues to
qualify as a regulated investment company under the federal Internal
Revenue Code, it will incur no California income or franchise tax liability
on income and capital gains distributed to shareholders. California
personal income tax law provides that exempt-interest dividends paid by a
regulated investment company, or series thereof, from interest on
obligations that are exempt from California personal income tax are
excludable from gross income. For a fund to qualify to pay exempt-interest
dividends under California law, at least 50% of the value of its assets
must consist of such obligations at the close of each quarter of its fiscal
year. For purposes of California personal income taxation, distributions to
individual shareholders derived from interest on other types of obligations
and short-term capital gains will be taxed as dividends, and long-term
capital gain distributions will be taxed as long-term capital gains.
California has an alternative minimum tax similar to the federal AMT
described above. However, the California AMT does not include interest from
private activity municipal obligations as an item of tax preference.
Interest on indebtedness incurred or continued by a shareholder in
connection with the purchase of shares of a fund will not be deductible for
California personal income tax purposes.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a 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 the fiscal year ended October 31, 1995, Overseas hereby designates
approximately $312,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of the fiscal year ended November 30, 1995, Equity Growth hereby
designates approximately $11,073,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended October 31, 1995, Natural Resources
hereby designates approximately $273,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended October 31, 1995, Growth Opportunities hereby
designates approximately $7,717,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended November 30, 1995, Equity Income hereby
designates approximately $1,676,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended October 31, 1995, Income & Growth hereby
designates approximately $1,150,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended December 31, 1995, Strategic Opportunities
hereby designates approximately $1,313,000 as a capital gain dividend for
the purpose of the dividend-paid deduction.
As of the fiscal year ended December 31, 1995, Emerging Markets Income had
a capital loss carryforward aggregating approximately $6,212,000. This loss
carryforward, all of which will expire on December 31, 2003, is available
to offset future capital gains.
As of October 31, 1995, High Yield had a capital loss carryforward
aggregating approximately $5,281,000. This loss carryforward, all of which
will expire on October 31, 2002, is available to offset future capital
gains.
As of October 31, 1995, Government Investment had a capital loss
carryforward aggregating approximately $3,149,000. This loss carryforward,
all of which will expire on October 31, 2002, is available to offset future
capital gains.
As of November 30, 1995, Intermediate Bond had a capital loss carryforward
aggregating approximately $4,010,000. This loss carryforward, of which
$2,841,000, $1,035,000, and $134,000 will expire on November 30, 1998,
1999, and 2002, respectively, is available to offset future capital gains.
As of October 31, 1995, Short Fixed-Income had a capital loss carryforward
aggregating approximately $38,011,000. This loss carryforward, of which
$19,000, $128,000, $63,000, $286,000, $38,000, $336,000, $17,692,000, and
$19,449,000 will expire on October 31, 1996, 1997, 1998, 1999, 2000, 2001,
2002 and 2003, respectively, is available to offset future capital gains.
As of October 31, 1995, High Income Municipal had a capital loss
carryforward aggregating approximately $10,683,000. This loss carryforward,
of which $3,173,000 and $7,510,000 will expire on October 31, 2002 and
2003, respectively, is available to offset future capital gains.
As of November 30, 1995, Intermediate Municipal Income had a capital loss
carryforward aggregating approximately $1,069,000. This loss carryforward,
of which $627,000 and $442,000 will expire on November 30, 2002 and 2003,
respectively, is available to offset future capital gains.
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 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 the fund's portfolio. Because the income earned on most U.S.
Government securities in which each fund invests is exempt from state and
local income taxes, the portion of your dividends from each fund
attributable to these securities will also be free from income taxes. The
exemption from state and local income taxation does not preclude states
from assessing other taxes on the ownership of U.S. Government securities.
In a number of states, corporate franchise (income) tax laws do not exempt
interest earned on U.S. Government securities, whether such securities are
held directly or through a fund.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of a fund's
total assets are invested in securities of foreign issuers, the fund may
elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a "
regulated investment company" for tax purposes, so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and 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, if any, in
its trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a fund may be subject to
state and local taxes on fund distributions, and shares may also be subject
to state and local personal property taxes. Investors should consult their
tax advisers to determine whether a fund is suitable for their particular
tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class T is held predominantly by non-Johnson family
member employees of FMR Corp. and its affiliates and is entitled to 51% of
the vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the 1940 Act, control of a company is presumed where
one individual or group of individuals owns more than 25% of the voting
stock of that company. Therefore, through their ownership of voting common
stock and the execution of the shareholders' voting agreement, members of
the Johnson family may be deemed, under the 1940 Act, to form a controlling
group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
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 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
also serve in similar capacities for other funds advised by FMR. The
business address of each Trustee and officer who is an "interested person"
(as defined in the 1940 Act) is 82 Devonshire Street, Boston, Massachusetts
02109, which is also the address of FMR. The business address of all the
other Trustees is Fidelity Investments, P.O. Box 9235, Boston,
Massachusetts 02205-9235. Those Trustees who are "interested persons" by
virtue of their affiliation with either a trust 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), 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
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS, (64), 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), 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., and he
previously served as Director of Mechanics Bank (1971-1995).
E. BRADLEY JONES, (68), Trustee (1990). Prior to his retirement in 1984,
Mr. Jones was Chairman and Chief Executive Officer of LTV Steel Company. He
is a Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc. (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products, 1990),
and he previously served as a Director of NACCO Industries, Inc. (mining
and marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc.
(1985-1995). 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, (63), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and he previously served as Director of Valuation
Research Corp. (appraisals and valuations, 1993). In addition, he serves as
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).
*PETER S. LYNCH, (52), Trustee (1990) is Vice Chairman 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 (1989) 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), 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, (71), 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 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), 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).
WILLIAM O. McCOY (62), Member of the Advisory Board (1996), is the Vice
President of Finance for the University of North Carolina (16-school
system, 1995). Prior to his retirement in December 1994, Mr. McCoy was Vice
Chairman of the Board of BellSouth Corporation (telecommunications) and
President of BellSouth Enterprises. He is currently a Director of Liberty
Corporation (holding company), Weeks Corporation of Atlanta (real estate,
1994), and Carolina Power and Light Company (electric utility, 1996).
Previously, he was a Director of First American Corporation (bank holding
company, 1979-1996). In addition, Mr. McCoy serves as a member of the Board
of Visitors for the University of North Carolina at Chapel Hill (1994) and
for the Kenan Flager Business School (University of North Carolina at
Chapel Hill).
THOMAS R. WILLIAMS, (67), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of 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).
FRED L. HENNING (56), Vice President, is Vice President of Fidelity's money
market (1994) and fixed-income (1995) funds and senior Vice President of
FMR Texas Inc.
BETTINA E. DOULTON (31) is Vice President of Income & Growth
(199 6 ) , and other funds advised by FMR, and an employee
of FMR.
MARGARET L. EAGLE (46), is Vice President of High Yield and an employee of
FMR.
KEVIN E. GRANT (35), is Vice President of Income & Growth
(199 6 ), and other funds advised by FMR, and an employee of FMR.
LAWRENCE GREENBERG (33), is Vice President of Equity Growth (1996), and
other funds advised by FMR, and an employee of FMR.
HARRIS LEVITON (35), is Vice President of Strategic Opportunities (1996)
and an employee of FMR.
NORMAN U. LIND (39) is Vice President of Short-Intermediate Municipal
Income (1995), and other funds advised by FMR, and an employee of FMR.
RICHARD R. MACE Jr. (34), is Vice President of Overseas (1996), and
other funds advised by FMR, and an employee of FMR.
MALCOLM W. MacNAUGHT II (58), is Vice President of Natural Resources
(1991) and an employee of FMR.
GEORGE A. VANDERHEIDEN (50), is Vice President of Growth Opportunities
(1990), and other funds advised by FMR, and an employee of FMR.
ARTHUR S. LORING (48), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (48), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
JOHN H. COSTELLO (49), 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 fiscal year ended 1995.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Gary Ralph Phyllis Richard Edward C. E. Donald Peter S. Gerald C. Edward Marvin Thomas
Burkhead F. Cox Burke J. Flynn Johnson 3d Bradley J. Kirk Lynch McDonough H. L. Mann R.
(dagger) (dagger) (dagger)
Davis Jones Malone Williams
Overseas* $0 $ 296 $ 286 $ 375 $0 $ 296 $ 299 $0 $ 296 $ 296 $ 296 $ 293
Equity
Growth** 0 729 715 922 0 729 736 0 729 729 722 720
Natural
Resources * 0 92 89 117 0 92 93 0 92 92 92 91
Growth 0 2,534 2,458 3,219 0 2,534 2,556 0 2,536 2,534 2,533 2,498
Opportunities*
Strategic 0 211 209 262 0 211 215 0 213 211 211 208
Opportunities***
Equity
Income** 0 286 281 361 0 286 288 0 286 286 284 282
Income &
Growth* 0 1,450 1,398 1,832 0 1,450 1,466 0 1,450 1,450 1,450 1,433
Emerging
Markets 0 16 16 20 0 16 17 0 17 16 16 16
Income***
High Yield* 0 363 351 460 0 363 367 0 363 363 363 358
Strategic
Income*** 0 15 14 18 0 15 15 0 15 15 15 14
Government 0 64 62 82 0 64 65 0 64 64 64 63
Investment*
Intermediate
Bond** 0 154 151 194 0 154 156 0 154 154 152 152
Short Fixed- 0 301 288 380 0 301 305 0 300 301 301 298
Income*
High Income 0 242 233 306 0 242 246 0 242 242 243 240
Municipal*
Intermediate 0 31 31 39 0 31 32 0 31 31 31 31
Municipal
Income**
Short-
Intermediate 0 8 8 10 0 8 8 0 8 8 8 8
Municipal
Income**
New York 0 29 25 30 0 25 25 0 25 25 25 25
Municipal
Income*+
California 0 25 25 30 0 25 25 0 25 25 25 25
Municipal
Income*+
Mid Cap**+ 0 40 40 45 0 40 40 0 40 40 40 40
Large Cap**+ 0 30 30 35 0 30 30 0 30 30 30 30
</TABLE>
* Fiscal period ended October 31
** Fiscal period ended November 30
*** Fiscal period ended December 31
+ Estimated
(dagger) Interested trustees of each fund are compensated by FMR.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or Estimated Annual Total Compensation
Retirement Benefits Benefits Upon from the Fund
Accrued as part of Retirement Complex*
Fund Expenses from the
from Fund Complex*
the Fund Complex*
J. Gary Burkhead(dagger) $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 128,000
Phyllis Burke Davis 5,200 52,000 125,000
Richard J. Flynn 0 52,000 160,500
Edward C. Johnson 3d(dagger) 0 0 0
E. Bradley Jones 5,200 49,400 128,000
Donald J. Kirk 5,200 52,000 129,500
Peter S. Lynch(dagger) 0 0 0
Gerald C. McDonough 5,200 52,000 128,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 128,000
Thomas R. Williams 5,200 52,000 125,000
</TABLE>
* Information is as of December 31, 1995 for 219 funds in the complex.
(dagger) Interested Trustees of each fund are compensated by FMR.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
Each fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program that was adopted in July 1988, the
non-interested 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 is 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.
As of J uly 31, 1996, approximately 0.02% of High Income
Municipal, 0.33% of Short-Intermediate Municipal Income, 1.15% of Mid Cap,
7.55% of Large Cap, 9.45% of Emerging Markets Income, 31.23% of New York
Municipal Income, and 53.67% of California Municipal Income's total
outstanding shares were held by an FMR affiliate, FMR Corp. Mr. Edward C.
Johnson 3d, President and Trustee of the funds, is a member of a family
group which, by virtue of its owning approximately 49% of the voting
securities of FMR Corp., may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp. Therefore, based on his
membership in this family group, Mr. Edward C. Johnson 3d may be deemed to
own beneficially these shares. As of this date, with the exception of Mr.
Johnson 3d's ownership of the High Income Municipal, Short-Intermediate
Municipal Income, Mid Cap, Large Cap, Emerging Markets Income, New York
Municipal Income, and California Municipal Income's shares, the
Trustees and officers of the funds owned, in the aggregate, less than 1% of
each fund's total outstanding shares.
A shareholder owning of record or beneficially more than 25% of a fund's
outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders.
As of J uly 31, 1996, the following owned of record or beneficially
5% or more of the outstanding shares of the classes of the following
Fidelity Advisor funds:
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS A: Prudential Securities,
New York, NY (29.47%); Penn Mutual Equity Services, Philadelphia, PA
(12.36%); W.S. Griffith & Co., Inc., San Diego, CA (9.26%); FMR Corp.,
Boston, MA (7.09%); Fortis Financial Group, St. Paul, MN (5.77%); A.G.
Edwards & Sons, St. Louis, MO (5.19%); Smith, Barney, Lehman, New York, NY
(5.04%).
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS B: FMR Corp., Boston, MA
(19.79%); U.S. Life Equity Sales, New York, NY (18.36%); Prudential
Securities, New York, NY (14.21%); A.G. Edwards & Sons, St. Louis, MO
(10.25%); Piper Jaffry & Hopwood, Inc., Minneapolis, MN (10.14%);
Sunamerica Securities Inc., Phoenix, AZ (8.27%); Merrill Lynch Pierce
Fenner, Jacksonville, FL (7.81%); Securities America Inc., Omaha, NE
(5.08%).
ADVISOR CALIFORNIA MUNICIPAL INCOME - INSTITUTIONAL CLASS: FMR Corp.,
Boston, MA (99.31%).
ADVISOR EMERGING MARKETS INCOME - CLASS A: FMR Corp., Boston, MA (12.43%);
NFSC, New York, NY (6.58%); Royal Alliance Assoc., Inc., Birmingham, AL
(6.56%); Smith, Barney, Lehman, New York, NY (5.08%).
ADVISOR EMERGING MARKETS INCOME - CLASS B: Donaldson, Lufkin & Jenrette,
New York, NY (6.38%); NFSC, New York, NY (6.16%); Painewebber Inc.,
Weehawken, NJ (5.74%).
ADVISOR EMERGING MARKETS INCOME - INSTITUTIONAL CLASS: Robert E. Jones &
Associates, Denver, CO (92.19%).
ADVISOR EQUITY GROWTH - CLASS A: CIGNA Securities, Hartford, CT (8.36%);
Smith, Barney, Lehman, New York, NY (6.40%); Merrill Lynch Pierce Fenner,
Jacksonville, FL (6.34%).
ADVISOR EQUITY GROWTH - INSTITUTIONAL CLASS: First Hawaiian Bank, Honolulu,
HI (5.32%)
ADVISOR EQUITY INCOME - CLASS A: Smith, Barney, Lehman, New York, NY
(5.66%).
ADVISOR EQUITY INCOME - CLASS B: Merrill Lynch Pierce Fenner, Jacksonville,
FL (9.21%); Smith, Barney, Lehman, New York, NY (7.79%).
ADVISOR EQUITY INCOME - INSTITUTIONAL CLASS: First National Bank of Ohio,
Akron, OH (17.63%); First Hawaiian Bank, Honolulu, HI (13.72%); First
National Bank, Gainesville, Gainesville, GA (6.29%).
ADVISOR GOVERNMENT INVESTMENT - CLASS A: Commonwealth Equity, Waltham, MA
(8.90%).
ADVISOR GOVERNMENT INVESTMENT - CLASS B: Royal Alliance Assoc., Inc.,
Birmingham, AL (7.94%); NFSC, New York, NY (5.64%); Merrill Lynch Pierce
Fenner, Jacksonville, FL (5.38%); Smith, Barney, Lehman, New York, NY
(5.07%).
ADVISOR GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS: First Hawaiian Bank,
Honolulu, HI (66.01%); United National Bank, Parkersburg, WV (8.35%).
ADVISOR GROWTH OPPORTUNITIES - CLASS A: CIGNA Securities, Hartford, CT
(17.01%); Smith, Barney, Lehman, New York, NY (7.26%); A.G. Edwards & Sons,
St. Louis, MO (5.17%); Merrill Lynch Pierce Fenner, Jacksonville, FL
(5.11%).
ADVISOR GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS: Frost National Bank,
San Antonio, TX (19.14%); First Hawaiian Bank, Honolulu, HI (7.47%); Wells
Fargo Bank, San Francisco, CA (5.94%); First National Bank, Gainesville,
Gainesville, GA (5.94%);
ADVISOR HIGH INCOME MUNICIPAL - CLASS A: Smith, Barney, Lehman, New York,
NY (9.93%); A.G. Edwards & Sons, St. Louis, MO (6.95%); Royal Alliance
Assoc., Inc., Birmingham, AL (5.53%).
ADVISOR HIGH INCOME MUNICIPAL - CLASS B: Donaldson, Lufkin & Jenrette, New
York, NY (8.89%); Merrill Lynch Pierce Fenner, Jacksonville, FL (8.45%);
NFSC, New York, NY (5.17%).
ADVISOR HIGH INCOME MUNICIPAL - INSTITUTIONAL CLASS: Charles Schwab and
Co., Inc., San Francisco, CA (44.71%); Tompkins County Trust Company,
Ithaca, NY (17.04%); Bank West, Pierre, SD (8.41%); FMR Corp., Boston, MA
(7.06%); First National Bank of Springfield, Springfield, IL (6.06%);
University Bank, Houston, TX (5.28%).
ADVISOR HIGH YIELD - CLASS A: Smith, Barney, Lehman, New York, NY (6.69%).
ADVISOR HIGH YIELD - CLASS B: Merrill Lynch Pierce Fenner, Jacksonville, FL
(18.62%); Prudential Securities, New York, NY (7.03%); Smith, Barney,
Lehman, New York, NY (6.68%); Painewebber Inc., Weehawken, NJ (5.07%).
ADVISOR HIGH YIELD - INSTITUTIONAL CLASS: Charles Schwab and Co., Inc., San
Francisco, CA (39.96%); Norwest Bank Minnesota, Minneapolis, MN (11.35%).
ADVISOR INCOME & GROWTH - CLASS A: CIGNA Securities, Hartford, CT (21.49%);
Smith, Barney, Lehman, New York, NY (5.07%).
ADVISOR INCOME & GROWTH - INSTITUTIONAL CLASS: Whitney National Bank, New
Orleans, LA (42.27%); Charles Schwab and Co., Inc., San Francisco, CA
(9.25%); Moss Lawton, Chicago, IL (8.81%).
ADVISOR INTERMEDIATE BOND - CLASS A: Painewebber Inc., Weehawken, NJ
(7.40%); Merrill Lynch Pierce Fenner, Jacksonville, FL (6.60%); Smith,
Barney, Lehman, New York, NY (5.02%).
ADVISOR INTERMEDIATE BOND - CLASS B: Royal Alliance Assoc., Inc.,
Birmingham, AL (7.62%); Donaldson, Lufkin & Jenrette, New York, NY (6.16%);
Smith, Barney, Lehman, New York, NY (5.39%).
ADVISOR INTERMEDIATE BOND - INSTITUTIONAL CLASS: Mercantile Bank, N.A., St.
Louis, MO (11.51%); Homeland Bank NA, Waterloo, IA (6.39%); Amivest
Corporation, New York, NY (5.39%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME- CLASS A: Merrill Lynch Pierce
Fenner, Jacksonville, FL (11.40%); Royal Alliance Assoc., Inc., Birmingham,
AL (8.45%); Smith Barney, Lehman, New York, NY (6.91%);Commonwealth Equity,
Waltham, MA (5.73%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - CLASS B: Donaldson, Lufkin &
Jenrette, New York, NY (9.69%); Merrill Lynch Pierce Fenner, Jacksonville,
FL (9.13%); Royal Alliance Assoc., Inc., Birmingham, AL (7.47%); A.G.
Edwards & Sons, St. Louis, MO (6.55%); Prudential Securities, New York, NY
(6.42%).
ADVISOR INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS: Laird Norton
Co., Seattle, WA (40.82%); Liberty National Bank & Trust Co., Oklahoma
City, OK (9.57%); Citizens State Bank, Corpus Christi, TX (8.89%); Wells
Fargo Bank, San Francisco, CA (8.67%), South Holland Bancorp, South
Holland, IL (5.85%).
ADVISOR LARGE CAP FUND - CLASS A: North American Management Co., Sioux
Falls, SD (5.97%); Smith, Barney, Lehman, New York, NY (5.32%).
ADVISOR LARGE CAP FUND - CLASS B: Prudential Securities, New York, NY
(10.61%); Merrill Lynch Pierce Fenner, Jacksonville, FL (6.73%); A.G.
Edwards & Sons, St. Louis, MO (5.89%); Financial Network Invest Corp.,
Torrance, CA (5.56%).
ADVISOR LARGE CAP FUND - INSTITUTIONAL CLASS: Union Planters National Bank,
Memphis, TN (72.38%); FMR Corp., Boston, MA (27.00%).
ADVISOR MID CAP FUND - CLASS A: Dain Bosworth, Inc., Minneapolis, MN
(9.25%); Securities America, Inc., Omaha, NE (7.45%); Smith, Barney,
Lehman, New York, NY (6.05%); A.G. Edwards & Sons, St. Louis, MO (5.68%).
ADVISOR MID CAP FUND - CLASS B: Dain Bosworth, Inc., Minneapolis, MN
(13.51%); Merrill Lynch Pierce Fenner, Jacksonville, FL (11.04%); Smith,
Barney, Lehman, New York, NY (9.39%); Piper Jaffry & Hopwood, Inc.,
Minneapolis, MN (6.01%); Prudential Securities, New York, NY (5.09%).
ADVISOR MID CAP FUND - INSTITUTIONAL CLASS: FMR Corp., Boston, MA (79.04%);
First National Bank & Trust Co., Newtown, PA (12.72%).
ADVISOR NATURAL RESOURCES - CLASS A: Smith, Barney, Lehman, New York, NY
(8.21%); Royal Alliance Assoc., Inc., Birmingham, AL (5.90%).
ADVISOR NATURAL RESOURCES - CLASS B: Merrill Lynch Pierce Fenner,
Jacksonville, FL (20.96%); Smith, Barney, Lehman, New York, NY (9.75%);
Royal Alliance Assoc. Inc., Birmingham, AL (7.74%);
ADVISOR NATURAL RESOURCES - INSTITUTIONAL CLASS: Charles Schwab and Co.,
Inc., San Francisco, CA (40.13%); Moss Lawton, Chicago, IL (17.70%); First
Hawaiian Bank, Honolulu, HI (12.14%); The Benefit Center, Inc., Concord, NH
(5.39%).
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS A: FMR Corp., Boston, MA
(18.43%); A.G. Edwards & Sons, St. Louis, MO (15.33%); North Ridge
Securities Corp., Hauppauge, NY (8.74%); Chemical Investor Services, New
York, NY (8.12%); Nathan & Lewis Securities, New York, NY (6.36%); First
Albany, Albany, NY, (5.37%); Prudential Securities, New York, NY (5.23%);
HRC Services Inc., Glenwood Landing, NY (5.11%).
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS B: FMR Corp., Boston, MA
(33.18%); NFSC, New York, NY (18.36%); Prudential Securities, New York, NY
(10.45%); W.S. Griffith & Co., Inc., San Diego, CA (6.00%).
ADVISOR NEW YORK MUNICIPAL INCOME - INSTITUTIONAL CLASS: FMR Corp., Boston,
MA (100.39%).
ADVISOR OVERSEAS - CLASS A: Smith, Barney, Lehman, New York, NY (8.53%);
Royal Alliance Assoc., Inc. (5.53%).
ADVISOR OVERSEAS - CLASS B: Merrill Lynch Pierce Fenner, Jacksonville, FL
(14.73%); Painewebber Inc., Weehawken, NJ (8.75%); Royal Alliance Assoc.,
Inc., (8.07%); Smith, Barney, Lehman, New York, NY (7.28%);
ADVISOR OVERSEAS - INSTITUTIONAL CLASS: First Hawaiian Bank, Honolulu, HI
(25.37%); Bank West, Pierre, SD (11.13%); One Valley Bank, N.A.,
Charleston, WV (11.08%); Tompkins County Trust Company, Ithaca, NY (8.69%);
Thumb National Bank and Trust, Pigeon, MI (6.94%); Whitney National Bank,
New Orleans, LA (6.38%).
ADVISOR SHORT FIXED-INCOME - CLASS A: NFSC, New York, NY (7.85%); Smith,
Barney, Lehman, New York (5.85%); Royal Alliance Assoc., Inc., Birmingham,
AL (5.29%).
ADVISOR SHORT FIXED-INCOME - INSTITUTIONAL CLASS: First Hawaiian Bank,
Honolulu, HI (76.44%); First National Bank of Springfield, Springfield, IL
(6.41%).
ADVISOR SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A: Securities Service
Network, Knoxville, TN (9.10%); NFSC, New York, NY (7.46%); CIGNA Life,
Hartford, CT (5.53%); Key/Society Corp., Cleveland, OH (5.44%).
ADVISOR SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS:
University Bank, Houston, TX (29.80%); FMR Corp., Boston, MA (26.35%),
First Busey Trust & Investment Co., Urbana, IL (13.53%); Valley National
Bank, Clifton, NJ (11.27%); First American Bank & Trust, Fort Atkinson, WI
(9.71%); The Fauquier Bank, Warrenton, VA (7.40%); Tompkins County Trust
Company, Ithaca, NY (6.59%).
ADVISOR STRATEGIC INCOME - CLASS A: Financial Network Invest Corp.,
Torrance, CA (6.89%); Royal Alliance Assoc., Inc., Birmingham, AL (6.26%);
Merrill Lynch Pierce Fenner, Jacksonville, FL (5.15%);
ADVISOR STRATEGIC INCOME - CLASS B: G.W. & Wade, Wellesley, MA (38.21%).
ADVISOR STRATEGIC INCOME - INSTITUTIONAL CLASS: Charles Schwab and Co.,
Inc., San Francisco, CA (97.41%).
ADVISOR STRATEGIC OPPORTUNITIES - CLASS A: Merrill Lynch Pierce Fenner,
Jacksonville, FL (11.52%); CIGNA Securities, Hartford, CT (7.91%); A.G.
Edwards & Sons, St. Louis, MO (5.89%).
ADVISOR STRATEGIC OPPORTUNITIES - CLASS B: Merrill Lynch Pierce Fenner,
Jacksonville, FL (7.15%); Smith, Barney, Lehman, New York, NY (6.11%); Dain
Bosworth Inc., Minneapolis, MN (5.72%).
ADVISOR STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS: First Hawaiian Bank,
Honolulu, HI (83.87%).
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.
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 fund, 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 dated and
approved by shareholders on the dates shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND DATE OF MANAGEMENT CONTRACT DATE OF SHAREHOLDER APPROVAL
Overseas 1/1/93 12/1/92
Mid Cap 1/18/96 1/18/96
Equity Growth 12/1/90 11/14/90
Natural Resources 12/1/94 11/16/94
Growth Opportunities 1/1/95 12/14/94
Strategic Opportunities 11/29/90 9/19/90
Large Cap 1/18/96 1/18/96
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 1/1/95 12/14/94
Intermediate Bond 1/1/95 12/14/94
Short Fixed-Income 1/195 12/14/94
High Income Municipal 12/1/94 11/16/94
Intermediate Municipal Income 7/1/95 6/14/95
Short-Intermediate Municipal Income 7/1/95 6/14/95
New York Municipal Income 11/17/94 12/8/94
California Municipal Income 12/14/95 12/14/95
</TABLE>
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 services of FMR under each contract, Mid Cap, Equity Growth,
Natural Resources , Large Cap, Income & Growth, Emerging Markets
Income, High Yield, Strategic Income, Government Investment, Intermediate
Bond, Short Fixed-Income, High Income Municipal, Intermediate Municipal
Income, Short-Intermediate Municipal Income, New York Municipal Income, and
California Municipal Income each pays 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 each pays FMR a monthly
management fee composed of the sum of two elements: a basic fee rate and a
performance adjustment based on a comparison of the performance of Growth
Opportunities, and Strategic Opportunities to that of the S&P 500 and the
performance of Overseas to that of the capitalization-weighted EAFE. The
capitalization weighted (cap-weighted) EAFE is an approximate
representation of each country's share of the stock market value of all
countries in the index.
COMPUTING THE BASIC FEE. The basic fee rate for each fund (except Equity
Income) is 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 $366.9 billion of group net
assets - the approximate level for December 1995 - was 0.3097% for equity
funds and 0.1482% for fixed-income funds, which is the weighted average of
the respective fee rates for each level of group net assets up $366.9
billion.
BOND FUNDS
The following fee schedule is the current fee schedule for all bond funds
except Emerging Markets Income and California Municipal Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
This fee schedule has been approved by the shareholders of each bond fund
except Emerging Markets Income and California Municipal Income.
EMERGING MARKETS INCOME. The following fee schedule is the current fee
schedule for Emerging Markets Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
On August 1, 1994, FMR voluntarily revised the group fee rate schedule for
Emerging Markets Income, and added new breakpoints, pending shareholder
approval of a new management contract reflecting the additional
breakpoints. The revised group fee rate schedule is identical to the above
schedule for average group assets under $156 billion. For average group
assets in excess of $156 billion, the group fee rate schedule voluntarily
adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 120 - 156 billion .1450% $150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
Over 372 .1200 325 .1514
350 .1494
375 .1476
400 .1459
On January 1, 1996, FMR voluntarily added new breakpoints to the (revised,
in the case of Emerging Markets Income) schedule for average group assets
in excess of $372 billion, pending shareholder approval of a new management
contract reflecting the additional breakpoints. The (revised, in the case
of Emerging Markets Income) group fee rate schedule and its extension
provide for lower management fee rates as FMR's assets under management
increase. For average group assets in excess of $372 billion, the group fee
rate schedule voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 372 - 408 billion .1200% $ 400 billion .1459
408 - 444 .1175 425 .1443
444 - 480 .1150 450 .1427
480 - 516 .1125 475 .1413
Over 516 .1100 500 .1399
525 .1385
550 .1372
CALIFORNIA MUNICIPAL INCOME. The following fee schedule is the current fee
schedule for California Municipal Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
The fee schedule has been approved by the shareholders of California
Municipal Income.
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity funds
(except Mid Cap, Large Cap, Strategic Opportunities, Equity Income, Equity
Growth, and Overseas).
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
This fee schedule has been approved by shareholders of each equity fund
except Mid Cap, Large Cap, Overseas, Equity Growth, Strategic
Opportunities, and Equity Income (see chart indicating date of management
contract and date of shareholder approval).
On January 1, 1996, FMR voluntarily added new breakpoints to the schedule
for average group assets in excess of $390 billion, pending shareholder
approval of a new management contract reflecting the additional
breakpoints. The revised group fee rate schedule and its extensions provide
for lower management fee rates as FMR's assets under management increase.
The revised group fee rate schedule for average group assets in excess of
$210 billion and up to $390 billion with additional breakpoints voluntarily
adopted by FMR for average group assets in excess of $390 billion is as
follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 174 - 210 billion .3000% $150 billion .3371%
210 - 246 .2950 175 .3325
246 - 282 .2900 200 .3284
282 - 318 .2850 225 .3249
318 - 354 .2800 250 .3219
354 - 390 .2750 275 .3190
390 - 426 .2700 300 .3163
426 - 462 .2650 325 .3137
462 - 498 .2600 350 .3113
498 - 534 .2550 375 .3090
Over 534 .2500 400 .3067
425 .3046
450 .3024
475 .3003
500 .2982
525 .2962
550 .2942
EQUITY GROWTH AND STRATEGIC OPPORTUNITIES. The following fee schedule is
the current fee schedule for Equity Growth and Strategic Opportunities.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
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
Under each fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .3100% for average group
assets in excess of $102 billion. The group fee rate breakpoints shown
above for average group assets in excess of $138 billion and under $228
billion were voluntarily adopted by FMR on January 1, 1992. The additional
breakpoints shown above for average group 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 for average group assets
in excess of $210 billion and under $390 billion as shown in the schedule
below. The revised group fee rate schedule was identical to the above
schedule for average group assets under $210 billion. For average group
assets in excess of $210 billion, the group fee rate schedule voluntarily
adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 138 - 174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $390 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. The revised group fee rate schedule for average
group assets in excess of $210 billion and up to $390 billion with
additional breakpoints voluntarily adopted by FMR for average group assets
in excess of $390 billion is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 174 - 210 billion .3000% $150 billion .3371%
210 - 246 .2950 175 .3325
246 - 282 .2900 200 .3284
282 - 318 .2850 225 .3249
318 - 354 .2800 250 .3219
354 - 390 .2750 275 .3190
390 - 426 .2700 300 .3163
426 - 462 .2650 325 .3137
462 - 498 .2600 350 .3113
498 - 534 .2550 375 .3090
Over 534 .2500 400 .3067
425 .3046
450 .3024
475 .3003
500 .2982
525 .2962
550 .2942
OVERSEAS. The following fee schedule is the current fee schedule for
Overseas.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
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
Under the fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .3000% for average group
assets in excess of $174 billion. Prior to January 1, 1993, the group fee
rate breakpoints shown above for average group assets in excess of $138
billion and under $228 billion were voluntarily adopted by FMR on January
1, 1992. The additional breakpoints shown above for average group 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. The revised group fee
rate schedule is identical to the above schedule for average group assets
under $210 billion. For average group assets in excess of $210 billion, the
group fee rate schedule voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 138 - 174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $390 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of of $210
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 174 - 210 billion .3000% $150 billion .3371%
210 - 246 .2950 175 .3325
246 - 282 .2900 200 .3284
282 - 318 .2850 225 .3249
318 - 354 .2800 250 .3219
354 - 390 .2750 275 .3190
390 - 426 .2700 300 .3163
426 - 462 .2650 325 .3137
462 - 498 .2600 350 .3113
498 - 534 .2550 375 .3090
Over 534 .2500 400 .3067
425 .3046
450 .3024
475 .3003
500 .2982
525 .2962
550 .2942
MID CAP AND LARGE CAP. The following fee schedule is the current fee
schedule for Mid Cap and Large Cap.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000 425 .3046
210 - 246 .2950 450 .3024
246 - 282 .2900 475 .3003
282 - 318 .2850 500 .2982
318 - 354 .2800 525 .2962
354 - 390 .2750 550 .2924
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
Over 534 .2500
This fee schedule has been approved by the shareholders of each of Mid Cap
and Large Cap.
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 1995, the annual basic fee rate would be
calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
Overseas .3097% + 0.45% = .7597%
Mid Cap .3097% + 0.30% = .6097%
Equity Growth .3097% + 0.30%* = .6097%
Natural Resources .3097% + 0. 30 % ** = . 6097 %
Growth Opportunities .3097% + 0.30% = .6097%
Strategic Opportunities .3097% + 0.30% = .6097%
Large Cap .3097% + 0.30% = .6097%
Income & Growth .3097% + 0. 15 % *** = . 4597 %
Emerging Markets Income .1482% + 0.55% = .6982%
High Yield .1482% + 0.45% = .5982%
Strategic Income .1482% + 0.45% = .5982%
Government Investment .1482% + 0.30% = .4482%
Intermediate Bond .1482% + 0.30% = .4482%
Short Fixed-Income .1482% + 0.30% = .4482%
High Income Municipal .1482% + 0.25% = .3982%
Intermediate Municipal Income .1482% + 0.25% = .3982%
Short-Intermediate Municipal .1482% + 0.25% = .3982%
Income
New York Municipal Income .1482% + 0.25% = .3982%
California Municipal Income .1482% + 0.25% = .3982%
</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 the fiscal years ended 1995, the total management fee would
have been 0.64%.
** Effective September 1, 1996, FMR voluntarily agreed to reduce the
individual fund fee rate from 0.45% to 0.30%. If this reduction were not in
effect the total management fee would have been 0.76%.
*** Effective August 1, 1996, FMR voluntarily agreed to reduce the
individual fund fee rate from 0.20% to 0.15%. If this reduction were not in
effect the total management fee would have been 0.51%.
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 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 each applicable fund for the performance period
exceeds, or is exceeded by, the record of the S&P 500 (Strategic
Opportunities and Growth Opportunities), or the cap-weighted EAFE
(Overseas) (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 (plus/minus)10.00) is multiplied by a performance
adjustment rate of 0.02%. Thus, the maximum annualized adjustment rate is
(plus/minus)0.20%. This performance comparison is made at the end of each
month. One-twelfth of this rate is then applied to each fund's average net
assets for the entire performance period, giving the dollar amount which
will be added to (or subtracted from) the basic fee. For each fund,
investment performance will be measured separately for each class of shares
offered by that fund and the least of the results obtained will be used in
calculating the performance adjustment to the management fee paid by the
fund.
Each class's performance is calculated based on change in NAV. For purposes
of calculating the performance adjustment, any dividends or capital gain
distributions paid by each class are treated as if reinvested in that
class's shares at the NAV as of the record date for payment. The record of
each Index is based on change in value and is adjusted for any cash
distributions from the companies whose securities compose the Index.
Because the adjustment to the basic fee is based on each fund's performance
compared to the investment record of the applicable Index, the controlling
factor is not whether each fund's performance is up or down per se, but
whether it is up or down more or less than the record of the Index.
Moreover, the comparative performance of each fund is based solely on the
relevant performance period without regard to the cumulative performance
over a longer or shorter period of time.
The table below shows the management fees paid to FMR (including the amount
of the performance adjustment); the dollar amount of negative or positive
performance adjustments, if applicable; and the net management fee as a
percentage of each fund's average net assets for the three most recent
fiscal years.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL YEAR MANAGEMENT FEE+ PERFORMANCE ADJUSTMENT MANAGEMENT FEE
ENDED AS A PERCENTAGE OF
AVERAGE NET ASSETS
OVERSEAS 10/31
1995 $ 5,589,729 $ 307,727 (upward) 0.81%
1994 3,435,695 133,032 (upward) 0.80
1993 503,110 3,885 (downward) 0.77
EQUITY GROWTH 11/30
1995 12,057,390 N/A 0.61
1994 6,567,305 N/A 0.64
1993 2,646,631 N/A 0.66
NATURAL RESOURCES 10/31
1995 1,730,945 N/A 0.76
1994 890,892 N/A 0.77
1993 111,465 N/A 0.77
GROWTH OPPORTUNITIES 10/31
1995 46,903,758 5,210,490 (upward) 0.69
1994 22,087,985 2,130,192 (upward) 0.69
1993 8,250,306 709,376 (upward) 0.68
STRATEGIC OPPORTUNITIES+++ 12/31
1995 3,510,812 91,269 (upward) 0.62
10/1/94 - 12/31/94 682,856 37,843 (upward) 0.67***
10/1/93 - 9/30/94 2,582,584 359,674 (upward) 0.72
1993 1,291,906 81,040 (upward) 0.54
EQUITY INCOME 11/30
1995 4,257,045 N/A 0.50
1994 1,392,206 N/A 0.50
1993 933,830 N/A 0.50
INCOME & GROWTH 10/31
1995 17,383,377 N/A 0.51
1994 13,325,884 N/A 0.52
1993 4,578,813 N/A 0.53
EMERGING MARKETS INCOME 12/31
1995 283,122 N/A 0.70
1994++ 122,088 N/A 0.70
HIGH YIELD 10/31
1995 5,796,415 N/A 0.60
1994 3,737,959 N/A 0.60
1993 1,539,682 N/A 0.51
STRATEGIC INCOME 12/31
1995 277,990 N/A 0.60
1994++ 10,348 N/A 0.60
GOVERNMENT INVESTMENT 10/31
1995 766,114 N/A 0.45
1994 422,255 N/A 0.46
1993 186,973 N/A 0.46
INTERMEDIATE BOND 11/30
1995 1,703,722 N/A 0.45
1994 1,180,785 N/A 0.41
1993 818,426 N/A 0.42
FISCAL YEAR MANAGEMENT FEE+ PERFORMANCE ADJUSTMENT MANAGEMENT FEE
ENDED AS A PERCENTAGE OF
AVERAGE NET ASSETS
SHORT FIXED-INCOME 10/31
1995 $ 2,889,187 N/A 0.45%
1994 3,713,144 N/A 0.46
1993 1,674,841 N/A 0.47
HIGH INCOME MUNICIPAL 10/31
1995 2,289,466 N/A 0.40
1994 2,257,113 N/A 0.41
1993 1,314,060 N/A 0.42
INTERMEDIATE MUNICIPAL 11/30
INCOME
1995 292,469 N/A 0.40
1994 286,027 N/A 0.41
1993 156,087 N/A 0.42
SHORT-INTERMEDIATE 11/30
MUNICIPAL INCOME
1995 79,349 N/A 0.40
1994++ 31,109 N/A 0.41
NEW YORK MUNICIPAL 10/31
INCOME
1995* 2,203** N/A 0.39***
</TABLE>
* From August 21, 1995 (commencement of operations)
** Before reimbursement
*** Annualized
+ Management fee includes performance adjustments for Overseas, Growth
Opportunities, and Strategic Opportunities.
++ Emerging Markets Income, Strategic Income, Short-Intermediate Municipal
Income, and New York Municipal Income commenced operations on March 10,
1994, October 31, 1994, March 16, 1994, and August 21, 1995, respectively.
Management fee percentages for these funds are annualized.
+++ Strategic Opportunities' fiscal year end changed from September 30 to
December 31 as of November 9, 1994.
FMR may, from time to time, voluntarily reimburse all or a portion of a
class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursement
by FMR will increase each class's total returns and yield and repayment of
the reimbursement by each class will lower its total returns and yield.
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that the 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 Equity Growth, Natural Resources , Growth
Opportunities, Strategic Opportunities, Equity Income, Income & Growth,
High Yield, Intermediate Bond, Mid Cap, Large Cap, 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 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 Overseas, Natural Resources , Growth Opportunities, Mid
Cap, Large Cap, Strategic Income, Income & Growth, High Yield, Intermediate
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 focuses
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 Overseas, Natural Resources , Growth Opportunities, Mid
Cap, Large Cap, Strategic Income, Income & Growth, Emerging Markets Income,
High Yield, Short Fixed-Income, and Intermediate 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 1995, 1994, and 1993.
The other funds paid no investment sub-advisory fees for the fiscal periods
ended 1995, 1994, and 1993.
FEES PAID TO FOREIGN SUB-ADVISERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FUND FEES PAID BY FMR TO FMR U.K. FEES PAID BY FMR TO FMR FAR EAST
1995 1994 1993 1995 1994 1993
Overseas $ 364,803 $ 153,288 $ 14,363 $ 352,004 $ 174,129 $ 22,357
Equity Growth 31,519 13,191 3,144 30,883 15,192 5,021
Natural
Resources 9,872 2,598 N/A 9,721 2,932 N/A
Growth Opportunities 212,175 67,818 N/A 203,140 82,741 N/A
Strategic
Opportunities 5,261 7,794* N/A 5,862 7,712* N/A
7,352** 4,560 7,701** 11,267
Equity Income 23,713 12,197 4,669 23,140 13,970 7,199
Income & Growth 330,971 248,936 N/A 304,870 299,094 N/A
TOTAL $ 978,314 $ 513,174 $ 26,736 $ 929,620 $ 603,471 $ 45,844
</TABLE>
* From 10/1/93 - 9/30/94.
** From 10/1/94 - 12/31/94.
No fees were paid to FIJ, FIIA, and FIIAL U.K. for fiscal periods ended
1995, 1994 and 1993.
CONTRACTS WITH FMR AFFILIATES
State Street is transfer, dividend disbursing, and shareholder servicing
agent for Class T shares of the taxable funds. FIIOC, an affiliate
of FMR, is transfer, dividend disbursing, and shareholder servicing agent
for Class A, Class B , and Institutional Class shares of the
taxable funds. State Street has entered into sub-contracts with FIIOC
pursuant to which FIIOC performs certain transfer, dividend disbursing and
shareholder services for Class T shares of the taxable funds. UMB is
the transfer, dividend disbursing, and shareholder servicing agent for
Class A, Class T , Class B , and Institutional Class shares of
the municipal funds. UMB has entered into sub-contracts with FIIOC pursuant
to which FIIOC performs transfer, dividend disbursing, and shareholder
services for Class A, Class T , Class B, and Institutional Class
shares of the municipal funds. Under these arrangements, FIIOC receives an
annual account fee and an asset-based fee each based on account size and
fund type for each retail account and certain institutional accounts. With
respect to certain institutional retirement accounts, FIIOC receives an
annual account fee and an asset-based fee based on account type or fund
type. These annual account fees are subject to increase based on postal
rate changes. The asset-based fees of the growth and growth and income
funds are subject to adjustment if the year-to-date total return of the
Standard & Poor's 500 Index is greater than positive or negative
15%. FIIOC also collects small account fees from certain accounts with
balances of less than $2,500.
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. Also,
State Street and FIIOC, as applicable, pay out-of-pocket expenses
associated with providing transfer agent services.
FSC, an affiliate of FMR, performs the calculations necessary to
determine NAV and dividends for Class A, Class T, 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 an additional sub-contract with FSC pursuant to which FSC
performs the calculations necessary to determine the NAV and dividends for
the Class A, Class T, Class B, and Institutional Class of each municipal
fund, and maintains the accounting records for each municipal fund. The
annual fee rates for these pricing and bookkeeping services are based on
each fund's average net assets, specifically, 0.0600% (equity funds),
0.0750% (international funds), 0.0400% (fixed-income funds), or 0.0750%
(high yield funds) for the first $500 million of average net assets and
0.0300% (equity funds) 0.0375% (international funds), 0.0200% (fixed-income
funds) or 0.0375% (high yield funds) for average net assets in excess of
$500 million. Prior to January 1, 1996, the annual fee rates for pricing
and bookkeeping services for the international funds and high yield funds
were based on each fund's average net assets, specifically, 0.0600% and
0.0400% respectively, for the first $500 million of average net assets, and
0.0300% and 0.0200%, respectively, for average net assets in excess of $500
million. The fee is limited to a minimum of $60,000 and a maximum of
$800,000 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FUND 1995 1994 1993
Overseas $ 358,827 $ 251,241 $ 57,711
Equity Growth 680,671 461,039 234,813
Natural Resources 136,434 73,164 45,425
Growth Opportunities 764,407 758,343 513,950
Strategic Opportunities 315,623 61,356** N/A
215,648*** 145,494
Equity Income 404,628 168,364 113,026
Income & Growth 758,290 750,743 410,561
Emerging Markets Income 45,004 36,412* N/A
High Yield 296,724 223,567 121,204
Strategic Income 45,067 7,500* N/A
Government Investment 68,665 46,218 46,457
Intermediate Bond 151,940 118,125 81,106
Short Fixed-Income 231,369 264,455 143,813
High Income Municipal 229,551 220,222 157,559
Intermediate Municipal Income 48,976 48,062 45,724
New York Municipal Income 8,710* N/A N/A
Short-Intermediate Municipal Income 46,467 31,953* N/A
</TABLE>
* Emerging Markets Income, Strategic Income, and Short-Intermediate
Municipal Income commenced operations on March 10, 1994, October 31, 1994,
and March 16, 1994, respectively. New York Municipal Income commenced
operations on August 21, 1995.
** From 10/1/94 - 12/31/94.
*** From 10/1/93 - 9/30/94.
FSC also receives fees for administering each taxable fund's securities
lending program. Securities lending fees are based on the number and
duration of individual securities loans. For the fiscal years ended 1995,
1994, and 1993, the taxable funds incurred no securities lending fees.
For the municipal funds, the transfer agent fees and charges, and pricing
and bookkeeping fees described above are paid to FIIOC and FSC,
respectively, by UMB, which is entitled to reimbursement from the class or
the fund, as applicable, for these expenses.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements call
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FDC. The table below shows the sales
charge revenue paid to FDC, and retained by FDC, for the following fiscal
periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SALES CHARGE REVENUE CDSC REVENUE
FISCAL YEAR AMOUNT PAID AMOUNT RETAINED AMOUNT PAID AMOUNT RETAINED
ENDED TO FDC BY FDC TO FDC BY FDC
OVERSEAS Oct. 31, 1995 $ 4,446,941 $ 692,471 $ 333 $ 333
1994 9,596,831 1,436,765 N/A N/A
1993 3,895,423 567,983 N/A N/A
EQUITY GROWTH Nov. 30, 1995 13,514,763 2,048,524 N/A N/A
1994 9,353,000 1,397,000 N/A N/A
1993 10,102,208 1,523,036 N/A N/A
NATURAL RESOURCES Oct. 31, 1995 2,777,231 431,130 247 247
1994 3,854,629 567,671 N/A N/A
1993 890,154 130,927 N/A N/A
GROWTH OPPORTUNITIES Oct. 31, 1995 73,545,428 11,459,421 N/A N/A
1994 47,564,000 7,108,000 N/A N/A
1993 27,663,060 4,141,156 N/A N/A
STRATEGIC OPPORTUNITIES Dec. 31, 1995 1,885,188 146,708 40,916 40,916
Dec. 31, 1994 553,970* 231,911 12,307 12,307
Sep. 30, 1994 2,986,131** 447,011 409 409
Sep. 30, 1993 1,299,291 196,365 N/A N/A
EQUITY INCOME Nov. 30, 1995 10,583,118 1,676,479 127,493 127,493
1994 2,450,544 352,678 30,093 30,093
1993 792,962 117,757 N/A N/A
INCOME & GROWTH Oct. 31, 1995 10,070,941 1,674,121 N/A N/A
1994 37,018,000 6,291,000 N/A N/A
1993 28,877,882 4,215,606 N/A N/A
EMERGING MARKETS INCOME Dec. 31, 1995 465,187 245,371 12,203 12,203
1994 406,046 59,134 2,877 2,877
1993 N/A N/A N/A N/A
HIGH YIELD Oct. 31, 1995 8,787,240 1,328,830 75,583 75,583
1994 8,980,127 1,342,482 15,765 15,765
1993 10,465,950 1,524,348 N/A N/A
STRATEGIC INCOME Dec. 31, 1995 842,000 100,905 23,689 23,689
1994 197,904 0 9,542 9,542
1993 N/A N/A N/A N/A
GOVERNMENT INVESTMENT Oct. 31, 1995 954,672 144,831 10,268 10,268
1994 996,242 168,939 978 978
1993 993,386 145,628 N/A N/A
INTERMEDIATE BOND Nov. 30, 1995 1,297,536 198,826 20,310 20,310
1994 1,598,883 237,647 1,279 1,279
1993 1,436,859 210,713 N/A N/A
SHORT FIXED-INCOME Oct. 31, 1995 786,085 167,907 N/A N/A
1994 4,396,909 877,639 N/A N/A
1993 5,308,796 968,759 N/A N/A
HIGH INCOME MUNICIPAL Oct. 31, 1995 2,247,388 353,128 39,695 39,695
1994 6,327,614 1,038,989 0 0
1993 9,918,856 1,417,733 N/A N/A
INTERMEDIATE MUNICIPAL Nov. 30, 1995 375,591 141,432 1,449 1,449
INCOME
1994 635,031 96,813 0 0
1993 669,395 97,441 N/A N/A
SHORT INTERMEDIATE Nov. 30, 1995 316,185 239,796 N/A N/A
MUNICIPAL INCOME
1994 122,128 13,369 N/A N/A
1993 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SALES CHARGE REVENUE CDSC REVENUE
FISCAL YEAR AMOUNT PAID AMOUNT RETAINED AMOUNT PAID AMOUNT RETAINED
ENDED TO FDC BY FDC TO FDC BY FDC
NEW YORK Oct. 31, 1995*** $ 0 $ 0 N/A N/A
MUNICIPAL INCOME
</TABLE>
* For the fiscal period October 1, 1994 through December 31, 1994
** For the fiscal period October 1, 1993 through September 30, 1994
*** For the fiscal period August 21, 1995 through October 31, 1995
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 T , 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 each of Overseas, Mid Cap, Equity Growth, Natural Resources, Growth
Opportunities, Strategic Opportunities, Large Cap, Equity Income, and
Income and Growth (the Equity Funds); and up to 0.40% for each of Emerging
Markets Income, High Yield, Strategic Income, Government Investment, High
Income Municipal, California Municipal Income, and New York Municipal
Income (the Bond Funds), Intermediate Bond and Intermediate Municipal
Income (the Intermediate-Term Bond Funds), Short-Intermediate Municipal
Income and Short Fixed-Income (the Short-Term Bond Funds). Pursuant to
the Class T Plans, FDC is paid a distribution fee as a percentage of
Class T 's average net assets at an annual rate of up to 0.75% for
each of Equity Growth, Mid Cap, Large Cap, and Equity Income; up to 0.65%
for each of Overseas, Growth Opportunities, Natural Resources ,
Strategic Opportunities, and Income & Growth; up to 0.40% for each of
Emerging Markets Income, High Yield, Strategic Income, Intermediate Bond,
Government Investment, High Income Municipal, Short-Intermediate Municipal
Income, Intermediate Municipal Income, New York Municipal Income, and
California Municipal Income; and up to 0.15% for Short Fixed-Income.
Pursuant to the Class B Plans, FDC is paid a distribution fee as a
percentage of Class B's average net assets at an annual rate of up to 0.75%
for each fund with Class B shares. 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 T shares of Equity Growth, Equity Income,
Emerging Markets Income, Strategic Opportunities, and Overseas purchased
more than 144 months prior to such day. Currently, the Trustees have
approved a distribution fee for Class A at an annual rate of 0.25% for each
of the Equity Funds and 0.15% for each of the Bond Funds, the
Intermediate-Term Bond Funds, and Short-Term Bond Funds. Currently, the
Trustees have approved a distribution fee for Class T at an annual
rate of 0.50% for the Equity Funds; 0.25% for the Bond Funds and the
Intermediate -Term Bond Funds; and 0.15% for the Short -Term
Bond Funds. Currently, the Trustees have approved a distribution fee for
Class B at an annual rate of 0.75% for Overseas, Mid Cap, Large Cap,
Natural Resources , Strategic Opportunities and Equity Income and
0.65% for the Bond Funds and the Intermediate -Term Bond Funds. These
fees may be increased only when, in the opinion of the Trustees, it is in
the best interests of the shareholders of the applicable class to do so.
Class B of each fund also pays investment professionals a service fee at an
annual rate of 0.25% of its average daily net assets determined at 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 T shares
for the fiscal years ended 1995, 1994, and 1993, and for Class B shares for
the fiscal periods ended 1995 and 1994. (Class B shares were not offered
prior to June 30, 1994.)
CLASS T DISTRIBUTION FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995
FUND PAID TO RETAINED TOTAL FEES PAID TO RETAINED TOTAL FEES PAID TO RETAINED TOTAL FEES
INVESTMENT BY FDC INVESTMENT BY FDC INVESTMENT BY FDC
PROFESSION PROFESSION PROFESSION
ALS ALS ALS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas $ 325,181 $ 97,554 $ 422,735 $ 2,139,864 $ 641,958 $ 2,781,822 $ 3,452,001 $ 1,049,755 $ 4,501,756
Equity
Growth 258,713 883,141 1,141,854 3,312,525 999,987 4,312,512 6,750,062 2,123,261 8,873,323
Global 69,457 23,643 93,100 577,607 173,281 750,888 1,133,430 340,109 1,473,539
Resources
Growth 5,996,770 1,799,030 7,795,800 16,056,714 4,817,016 20,873,730 33,781,082 10,228,188 44,009,270
Opportunities
Strategic 1,092,965 330,491 1,423,456 470,225 141,067 611,292 2,377,409 804,604 3,182,013
Opportunities
Equity
Income 94,623 28,435 123,058 441,208 132,362 573,570 2,339,815 710,240 3,050,055
Income & 4,330,092 1,299,026 5,629,118 13,406,000 3,203,000 16,608,814 16,748,635 5,165,858 21,914,493
Growth
Emerging N/A N/A N/A 31,604 8,331 39,935 71,061 12,300 83,361
Markets
Income
High
Yield 745,985 0 745,985 1,526,214 0 1,526,214 2,185,795 33,785 2,219,580
Strategic N/A N/A N/A 1,626 488 2,144 62,957 6,002 68,959
Income
Government 101,721 0 101,721 227,532 0 227,532 391,918 7,088 399,006
Investment
Intermediate 56,220 0 56,220 264,949 0 264,949 463,806 0 463,806
Bond
Short
Fixed- 538,933 0 538,933 1,212,008 0 1,212,008 933,777 18,975 952,752
Income
High
Income 789,518 0 789,518 1,374,438 0 1,374,438 1,358,027 8,150 1,366,177
Municipal
Intermediate 38,552 0 38,552 138,512 0 138,512 143,424 1,599 145,023
Municipal
Income
Short- N/A N/A N/A 11,446 0 11,446 27,895 1,646 29,541
Intermediate
Municipal
Income
New York N/A N/A N/A N/A N/A N/A 368 0 368
Municipal
Income
</TABLE>
CLASS B DISTRIBUTION FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1994 1995
FUND SHAREHOLDER RETAINED BY TOTAL FEES SHAREHOLDER RETAINED BY TOTAL FEES
SERVICE FEES FDC SERVICE FEES FDC
Overseas N/A N/A N/A $ 1,155 $ 3,566 $ 4,721
Natural Resources N/A N/A N/A 1,047 3,141 4,188
Strategic Opportunities $ 7,964 $ 23,892 $ 31,856 116,312 359,793 476,105
Equity Income 16,215 54,580 70,795 332,413 996,566 1,328,979
Emerging Markets 3,215 9,771 12,986 17,429 52,283 69,712
Income
High Yield 7,052 21,157 28,209 179,328 537,580 716,908
Strategic Income 2,155 6,465 8,620 46,578 139,735 186,313
Government Investment 817 2,449 3,266 16,159 48,662 64,821
Intermediate Bond 1,689 5,070 6,759 21,738 65,218 86,956
High Income Municipal 3,238 9,713 12,951 54,382 163,013 217,395
Intermediate Municipal 965 2,893 3,858 9,498 28,714 38,212
Income
New York Municipal N/A N/A N/A 432 1,298 1,730
Income
</TABLE>
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
shares, such payment is authorized by the Plans. Each Class T and
Class B Plan specifically recognizes that FMR may use its management fee
revenue, as well as its past profits or its other resources to reimburse
FDC for expenses incurred in connection with the distribution of the
applicable class, including payments made 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. Each Class A
Plan specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for expenses
incurred in connection with the distribution of Class A shares including
payments made to third parties that assist in selling Class A shares of
each fund or to third parties, including banks, that render shareholder
support services. Each Institutional Plan specifically recognizes that
FMR may use its resources, including management fees, to pay expenses
associated with the sale of Institutional Class shares. This may include
reimbursing FDC for payments to third parties, such as banks or
broker-dealers, that provide shareholder support services or engage in the
sale of Institutional Class shares. The Trustees have authorized such
payments for all classes of the funds.
For the fiscal year ended 1995, payments made by FMR either directly or
indirectly through FDC to third parties amounted to $7,752 and $44, on
behalf of Class T and Class B respectively, of Emerging Markets
Income, and $89 on behalf of Class T of Strategic Income. No third
party payments were made by FMR in the fiscal year ended 1995 on behalf of
the applicable classes of the other funds.
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 of each fund 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.
The Class A, Class T, 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>
<S> <C> <C> <C>
DATE OF SHAREHOLDER APPROVAL
Fund CLASS T CLASS B INSTITUTIONAL
Overseas 10/18/90 06/30/95 06/30/95
Mid Cap 1/18/96 1/18/96 1/18/96
Equity Growth 09/25/86 N/A 09/25/86
Natural Resources 12/01/94 06/30/95 06/30/95
Growth Opportunities 01/01/95 N/A 06/30/95
Strategic Opportunities 08/25/87 06/26/94 06/30/95
Large Cap 1/18/96 1/18/96 1/18/96
Equity Income 07/23/86 06/26/94 07/23/86
Income & Growth 01/01/95 N/A 06/30/95
Emerging Markets Income 02/10/94 05/26/95 06/30/95
High Yield 01/01/95 01/01/95 06/30/95
Strategic Income 10/14/94 10/14/94 06/30/95
Government Investment 01/01/95 01/01/95 12/23/87
Intermediate Bond 01/01/95 01/01/95 12/23/87
Short Fixed-Income 01/01/95 N/A 06/30/95
High Income Municipal 12/01/94 12/01/94 06/30/95
Intermediate Municipal Income 07/01/95 06/26/94 10/21/87
Short-Intermediate Municipal Income 07/01/95 N/A 06/30/95
New York Municipal Income 12/08/94 12/08/94 06/30/95
California Municipal Income 11/18/94 11/18/94 06/30/95
</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 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 Growth, Mid Cap, and Large Cap are funds of
Fidelity Advisor Series I, an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust dated
June 24, 1983, as amended and restated July 18, 1991, and as supplemented
April 15, 1993. On July 18, 1991, the name was changed from Equity 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
to Fidelity Advisor Series I.
Short Fixed-Income Fund, Government Investment Fund, High Yield Fund,
Growth Opportunities Fund, and Income & Growth Fund are funds of Fidelity
Advisor Series II, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated April 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 fund of Fidelity Advisor Series III, an open-end
management investment company organized as a Massachusetts business trust
by a Declaration of Trust dated May 17, 1982. On January 29, 1986, the name
was changed from Equity Portfolio: Income to Fidelity Franklin Street
Trust. On April 15, 1993 the trust's name was again changed to Fidelity
Advisor Series III.
Intermediate Bond Fund is a fund of Fidelity Advisor Series IV, an open-end
management investment company organized as a Massachusetts business trust
by a Declaration of Trust dated May 6, 1983. On January 29, 1992 the name
of the trust was changed from Income Portfolios to Fidelity Income Trust,
and on April 15, 1993, the Board of Trustees voted to change the trust's
name to Fidelity Advisor Series IV. An amended and restated Declaration of
Trust, dated March 16, 1995, was filed on April 12, 1995.
Natural Resources Fund, High Income Municipal Fund, California
Municipal Income, and New York Municipal Income are funds of Fidelity
Advisor Series V, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated April 23,
1986, as amended and restated July 18, 1991, and as supplemented April 15,
1993. On July 18, 1991, the Board of Trustees voted to change the name of
the trust from Plymouth Investment Series to Fidelity Investment Series,
and on April 15, 1993, the Board voted to change the trust's name to
Fidelity Advisor Series V. An amended and restated Declaration of Trust
dated March 16, 1995 was filed on April 12, 1995.
Short-Intermediate Municipal Income Fund and Intermediate Municipal Income
Fund are funds of Fidelity Advisor Series VI, an open-end management
investment company organized as a Massachusetts business trust by a
Declaration of Trust dated June 1, 1983, as amended and restated 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 fund 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 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 funds of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business trust
by a Declaration of Trust dated September 23, 1983, as amended and restated
October 1, 1986 and as supplemented November 29, 1990. On April 15, 1993
the name of the trust was changed from Fidelity Special Situations Fund to
Fidelity Advisor Series VIII.
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. There is a remote possibility that one fund might become liable
for any misstatement in the prospectus or statement of additional
information about another fund.
The assets of each trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general liabilities of their respective trusts. Expenses with respect to
each trust are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of each trust, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. Each Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or its Trustees shall include a provision limiting the obligations
created thereby to the trust and its assets. Each Declaration of Trust
provides for indemnification out of each fund's property of any shareholder
held personally liable for the obligations of the fund. Each Declaration of
Trust also provides that its funds shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their office. Claims asserted against
one class of shares may subject the holders of another class of shares to
certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive rights, and Class T 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 Prospectus.
Shareholders of Natural Resources , Growth Opportunities, Equity
Income, Income & Growth, High Yield, High Income Municipal, Government
Investment, Intermediate Bond, Intermediate Municipal Income, California
Municipal Income, New York Municipal Income, Short Fixed-Income, and
Short-Intermediate Municipal Income 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 the
trust, fund or class, as applicable, for any purpose related to the trust,
fund, or class, as the case may be, including, in the case of meeting of an
entire trust, the purpose of voting on removal of one or more Trustees.
Each trust or fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the outstanding shares of the funds of Advisor Series I, VI,
VII, and VIII, or, as determined by the current value of each shareholder's
investment in the funds of Advisor Series II, III, IV, and V. If not so
terminated, each trust and funds will continue indefinitely. Natural
Resources , Growth Opportunities, Income & Growth, Emerging Markets
Income, Strategic Opportunities, High Yield, Strategic Income, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
California Municipal Income, New York Municipal Income, Mid Cap, Large Cap,
and Intermediate Municipal Income may invest all of their assets in another
investment company.
CUSTODIANS. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of Mid Cap, Natural
Resources , Growth Opportunities, Strategic Opportunities, and Large
Cap. The Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York,
New York, is custodian of the assets of Overseas, Equity 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, Intermediate Bond, and
Short Fixed-Income. UMB Bank, n.a., 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of High Income Municipal, Intermediate
Municipal Income, California Municipal Income, New York Municipal Income,
and Short-Intermediate Municipal Income. 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. The Bank of New York and Chemical Bank, each
headquartered in New York, also may serve as a special purpose custodian of
certain assets in connection with pooled repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. The Boston branch of the custodian bank of Natural 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 include mortgages and personal and general business loans. In the
judgment of FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, L.L.P., serves as the independent accountant
for Mid Cap, Equity Growth, Natural Resources , Growth Opportunities,
Strategic Opportunities, Large Cap, Equity Income, Income & Growth,
Emerging Markets Income, High Yield, New York Municipal Income, California
Municipal Income, Strategic Income, Government Investment, Intermediate
Bond, Short Fixed-Income, High Income Municipal, Intermediate Municipal
Income, and Short-Intermediate Municipal Income. Price Waterhouse LLP,
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 audited financial statements and financial highlights
for the fiscal period ended October 31, November 30, or December 31, 1995,
as appropriate, are included in the Annual Reports, which are separate
reports supplied with the Statement of Additional Information (SAI).
Each fund's unaudited financial statements and financial highlights for the
semi-annual period ended April 30, May 31, or June 30, 1996 as appropriate,
are included in the Semiannual Reports, which are separate reports supplied
with the SAI. Each fund's audited and unaudited 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 time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds. Also, the maturities of mortgage-backed securities,
including collateralized mortgage obligations, and some asset-backed
securities, are determined on a weighted average life basis, which is the
average time for principal to be repaid. For a mortgage security, this
average time is calculated by estimating the timing of principal payments,
including unscheduled prepayments, during the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (1) Financial Statements and Financial Highlights included
in the Annual Reports for Fidelity Advisor Series VI on behalf of Fidelity
Advisor Intermediate Municipal Income Fund and Fidelity Advisor
Short-Intermediate Municipal Income Fund for the fiscal year ended November
30, 1995 are incorporated by reference into the fund's Statement of
Additional Information, and were filed on January 31, 1996 pursuant to Rule
30d-1 under the Investment Company Act of 1940. The fund's unaudited
financial statements and financial highlights included in the Semi-Annual
Reports for the period ended May 31, 1996 are incorporated by reference
into the funds' Statement of Additional Information and were filed on July
19, 1996 pursuant to Rule 30d-1 under the Investment Company Act of 1940.
Each fund's audited and unaudited financial statements and financial
highlights are incorporated herein by reference.
(b) Exhibits:
(1) Amended and Restated Declaration of Trust dated September 14, 1995,
was electronically filed and is incorporated herein by reference to Exhibit
1 to Post-Effective Amendment No. 39.
(2) Amended and Restated By-Laws of the Trust were electronically filed
and are incorporated herein by reference to Exhibit 2 to Post-Effective
Amendment No. 39.
(3) Not applicable.
(4) Form of Share Certificate was electronically filed and is
incorporated herein by reference to Exhibit 4 to Post-Effective Amendment
No. 38.
(5) (a) Amended Management Contract between Fidelity Advisor Limited
Term Tax-Exempt Portfolio and Fidelity Management & Research Company was
electronically filed and is incorporated herein by reference to Exhibit
5(a) to Post-Effective Amendment No. 39.
(b) Form of Management Contract, dated January 29, 1993, between
Fidelity Advisor North American Government Portfolio and Fidelity
Management & Research Company was electronically filed and is incorporated
herein by reference to Exhibit 5(b) to Post-Effective Amendment No. 38.
(c) Amended Management Contract between Fidelity Advisor
Short-Intermediate Tax-Exempt Fund and Fidelity Management & Research
Company dated July 1, 1995, was electronically filed and is incorporated
herein by reference to Exhibit 5(c) to Post-Effective Amendment No. 39.
(6) (a) General Distribution Agreement between Limited Term Series and
Fidelity Distributors Corporation, dated April 1, 1987, was electronically
filed and is incorporated herein by reference to Exhibit 6(a) to
Post-Effective Amendment No. 38.
(b) Amendments to the General Distribution Agreement for Limited
Term Series, dated January 1, 1988 were electronically filed and are
incorporated herein by reference to Exhibit 6(b) to Post-Effective
Amendment No. 38.
(c) Form of General Distribution Agreement, dated January 29,
1993, between Fidelity Distributors Corporation and Fidelity Advisor North
American Government Portfolio was electronically filed and is incorporated
herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 38.
(d) General Distribution Agreement Between Fidelity Advisor
Short-Intermediate Tax-Exempt Fund and Fidelity Distributors Corporation,
dated January 20, 1994, was electronically filed and is incorporated herein
by reference to Exhibit 6(d) to Post-Effective Amendment No. 37.
(e) Form of Bank Agency Agreement (most recently revised May
1994) was electronically filed and is incorporated herein by reference to
Exhibit 6(e) to Post-Effective Amendment No. 37.
(f) Form of Selling Dealer Agreement (most recently revised May
1994) was electronically filed and is incorporated herein by reference to
Exhibit 6(f) to Post-Effective Amendment No. 37.
(g) Form of Selling Dealer Agreement for Bank Related
Transactions (most recently revised June 1994) was electronically filed and
is incorporated herein by reference to Exhibit 6(g) to Post-Effective
Amendment No. 37.
(7) (a) Retirement Plan for Non Interested Person Trustees, Directors
or General Partners, effective November 1, 1989 was electronically filed
and is incorporated herein by reference to Exhibit 7 to Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(b) The Fee Deferral plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of December 1, 1995 was
electronically filed and is incorporated herein by reference to Exhibit
7(b) to Fidelity School Street Trust's (File No. 2-57167) Post-Effective
Amendment No. 47.
(8) (a) Custodian Agreement, Appendix A, Appendix B, and Appendix C,
dated December 1, 1994, between UMB Bank, n.a. and the Registrant is
incorporated herein by reference to Exhibit 8 of Fidelity California
Municipal Trust's Post-Effective Amendment No. 28 (File No. 2-83367).
(b) Form of Custodian Contract on behalf of Fidelity Advisor
North American Government Portfolio, dated January 29, 1993, to be filed by
amendment.
(9) Not applicable.
(10) Not applicable.
(11) Consent of Coopers & Lybrand, L.L.P. is electronically filed herein
as Exhibit 11.
(12) Not applicable.
(13) Not applicable.
(14) (a) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(d) of Fidelity Union Street Trust's Post-Effective Amendment No. 87.
(b) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, was electronically filed and is
incorporated herein by reference to Exhibit 14(o) of Fidelity's
Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No. 57.
(c) The Institutional Prototype Plan Basic Plan Document,
Standardized Adoption Agreement, as currently in effect, was electronically
filed and is incorporated herein by reference to Exhibit 14(o) of
Fidelity's Securities Fund's (File No. 2-93601) Post-Effective Amendment
No. 33.
(d) Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, were
electronically filed and are incorporated herein by reference to Exhibit
14(b) of Fidelity Advisor Series V Trust's (File No. 33-9148)
Post-Effective Amendment No. 20.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Intermediate Municipal Income Fund: Class T (formerly
Class A), is electronically filed herein as Exhibit 15(a).
(b) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor North American Government Portfolio - Institutional Class
was electronically filed and is incorporated herein by reference to Exhibit
15(b) to Post-Effective Amendment No. 38.
(c) Form of Distribution and Service Plan pursuant to Rule 12b-1
for Fidelity Advisor North American Government Portfolio - Retail Class was
electronically filed and is incorporated herein by reference to Exhibit
15(c) to Post-Effective Amendment No. 38.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Short-Intermediate Municipal Income Fund (formerly
Fidelity Advisor Short-Intermediate Tax-Exempt Fund): Class T (formerly
Class A) is electronically filed herein as Exhibit 15(d).
(e) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Intermediate Municipal Income Fund (formerly Fidelity
Advisor Limited Term Tax-Exempt Fund): Class B, is electronically filed
herein as Exhibit 15(e).
(f) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Short-Intermediate Tax-Exempt Fund: Institutional Class,
was electronically filed and is incorporated herein by reference to Exhibit
15(f) to Post-Effective Amendment No. 38.
(g) Distribution and Service Plan pursuant to Rule 12b-1 for
Limited Term Series (currently Advisor Intermediate Municipal Income Fund:
Institutional Class) was electronically filed and is incorporated herein by
reference to Exhibit 15(g) to Post-Effective Amendment No. 40.
(h) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Intermediate Municipal Income Fund (formerly Fidelity
Advisor Limited Term Tax-Exempt Fund): Class A is electronically filed
herein as Exhibit 15(h).
(i) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Short-Intermediate Municipal Income Fund (formerly
Fidelity Advisor Short-Intermediate Tax-Exempt Fund): Class A is
electronically filed herein as Exhibit 15(i).
(16) Schedules for computation of cumulative total returns, average
annual returns, 30-day yield, tax equivalent yield, and adjusted net asset
value for all bond funds were electronically filed and are incorporated
herein by reference to Exhibit 16(a) to Post-Effective Amendment No. 38.
(17) Financial Data Schedules for each fund are electronically filed
herein as Exhibit 27.
(18) Rule 18f-3, dated August 1, 1996, is electronically filed herein as
Exhibit 18.
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. In
addition, the officers of these funds are substantially identical.
Nonetheless, Registrant takes the position that it is not under common
control with these other funds since the power residing in the respective
Boards and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
July 31, 1996
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Advisor Intermediate Municipal
Income Fund: Institutional Class 102
Fidelity Advisor Intermediate Municipal
Income Fund: Class A 0
Fidelity Advisor Intermediate Municipal
Income Fund: Class T 3,239
Fidelity Advisor Intermediate Municipal
Income Fund: Class B 344
Fidelity Advisor Short-Intermediate Municipal
Income Fund: Class A 0
Fidelity Advisor Short-Intermediate Municipal
Income Fund: Class T 1,539
Fidelity Advisor Short-Intermediate Municipal
Income Fund: Institutional Class 21
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit, or
proceeding in which he is involved by virtue of his service as a Trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the
obligations and duties under the Distribution Agreement.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR 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.
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.
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 C. Habermann 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.
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
Robert F. Hill Vice President of FMR; Director of Technical
Research.
Curtis Hollingsworth Vice President of FMR (1993).
Stephen P. Jonas Treasurer and Vice President of FMR (1993));
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); 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; Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit 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).
Richard Spillane Vice President of FMR; Senior Vice President and
Director of Operations and Compliance of FMR U.K.
(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;
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
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; Growth Group Leader.
Arthur S. Loring Senior Vice President (1993), Clerk, and General
Counsel of FMR; Vice President, Legal of FMR Corp.;
Secretary of funds advised by FMR.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
Mark Peterson Director None
Neal Litvak President None
Arthur S. Loring Vice President and Clerk Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' custodian: UMB
Bank, n.a., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of Fidelity Advisor Intermediate Municipal
Income Fund and Fidelity Advisor Short-Intermediate Municipal Income Fund,
provided the information required by Item 5A is contained in the annual
report, undertakes to furnish to 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.
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
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 42 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and the Commonwealth of Massachusetts, on the 26th
day of August, 1996.
Advisor Series VI
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 August 26, 1996
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Kenneth A. Rathgeber Treasurer August 26, 1996
Kenneth A. Rathgeber
/s/J. Gary Burkhead Trustee August 26, 1996
J. Gary Burkhead
/s/Ralph F. Cox * Trustee August 26, 1996
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee August 26, 1996
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee August 26, 1996
Richard J. Flynn
/s/E. Bradley Jones * Trustee August 26, 1996
E. Bradley Jones
/s/Donald J. Kirk * Trustee August 26, 1996
Donald J. Kirk
/s/Peter S. Lynch * Trustee August 26, 1996
Peter S. Lynch
/s/Edward H. Malone * Trustee August 26, 1996
Edward H. Malone
/s/Marvin L. Mann_____* Trustee August 26, 1996
Marvin L. Mann
/s/Gerald C. McDonough* Trustee August 26, 1996
Gerald C. McDonough
/s/Thomas R. Williams * Trustee August 26, 1996
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.
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Prospectus
and Statement of Additional Information constituting part of Post-Effective
Amendment No. 42 to the Registration Statement on Form N-1A of Fidelity
Advisor Series VI: Fidelity Advisor Intermediate Municipal Income Fund
(formerly Fidelity Advisor Limited Term Tax-Exempt Fund) and Fidelity
Advisor Short-Intermediate Municipal Income Fund (formerly Fidelity Advisor
Short-Intermediate Tax-Exempt Fund) of our reports dated January 11, 1996
on the financial statements and financial highlights included in the
November 30, 1995 Annual Reports to Shareholders of Fidelity Advisor
Intermediate Municipal Income Fund and Fidelity Advisor Short-Intermediate
Municipal Income Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Auditor" in the Statement of
Additional Information.
/s/COOPERS & LYBRAND, L.L.P.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
August 26, 1996
Exhibit 15(a)
Note: Class A will be renamed Class T effective August 30, 1996
DISTRIBUTION AND SERVICE PLAN
Fidelity Advisor Intermediate Municipal Income Fund
Class A Shares
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Class A shares of Fidelity
Advisor Intermediate Municipal Income Fund ("Class A") a class of shares of
Fidelity Advisor Intermediate Municipal Income Fund, (the "Fund"), a
portfolio of Fidelity Advisor Series VI (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than the existing shareholders of
the Fund; (4) obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Distributor may, from time
to time, deem advisable; (5) making payments to securities dealers and
others engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such dealers
with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Class A Shares, Class A shall pay
to the Distributor a fee at the annual rate of .40% (or such lesser amount
as the Trustees may, from time to time, determine) of the average daily net
assets of Class A throughout the month. The determination of daily net
assets shall be made at the close of business each day throughout the month
and computed in the manner specified in the Fund's then current Prospectus
for the determination of the net asset value of the Fund's Class A Shares.
The Distributor may use all or any portion of the fee received pursuant to
this Plan to compensate securities dealers or other persons who have
engaged in the sale of Class A Shares or in shareholder support services
pursuant to agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraph 2 hereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Class A Shares, including the activities referred
to in paragraph 2 hereof. To the extent that the payment of management
fees by the Fund to the Adviser should be deemed to be indirect financing
of any activity primarily intended to result in the sale of Class A Shares
within the meaning of Rule 12b-1, then such payment shall be deemed to be
authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Class A, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to the Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until April 30, 1997, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Class A, in the case of this Plan, or upon approval by
a vote of a majority of the outstanding voting securities of the Fund, in
the case of the Management Contract, and (b) any material amendment of this
Plan shall be effective only upon approval in the manner provided in the
first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of Class A.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of shares of Class A (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Class A Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, obligation assumed by Class A pursuant
to this Plan and any agreement related to this Plan shall be limited in all
cases to Class A and its assets and shall not constitute an obligation of
any shareholder of the Trust or of any other class of the Fund, series of
the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(d)
Note: Class A will be renamed Class T effective August 30, 1996
DISTRIBUTION AND SERVICE PLAN
Fidelity Advisor Short-Intermediate Municipal Income Fund
Class A Shares
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Class A shares of Fidelity
Advisor Short-Intermediate Municipal Income Fund ("Class A") a class of
shares of Fidelity Advisor Short-Intermediate Municipal Income Fund, (the
"Fund"), a portfolio of Fidelity Advisor Series VI (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than the existing shareholders of
the Fund; (4) obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Distributor may, from time
to time, deem advisable; (5) making payments to securities dealers and
others engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such dealers
with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Class A Shares, Class A shall pay
to the Distributor a fee at the annual rate of .40% (or such lesser amount
as the Trustees may, from time to time, determine) of the average daily net
assets of Class A throughout the month. The determination of daily net
assets shall be made at the close of business each day throughout the month
and computed in the manner specified in the Fund's then current Prospectus
for the determination of the net asset value of the Fund's Class A Shares.
The Distributor may use all or any portion of the fee received pursuant to
this Plan to compensate securities dealers or other persons who have
engaged in the sale of Class A Shares or in shareholder support services
pursuant to agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraph 2 hereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Class A Shares, including the activities referred
to in paragraph 2 hereof. To the extent that the payment of management
fees by the Fund to the Adviser should be deemed to be indirect financing
of any activity primarily intended to result in the sale of Class A Shares
within the meaning of Rule 12b-1, then such payment shall be deemed to be
authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Class A, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to the Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until April 30, 1997, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Class A, in the case of this Plan, or upon approval by
a vote of a majority of the outstanding voting securities of the Fund, in
the case of the Management Contract, and (b) any material amendment of this
Plan shall be effective only upon approval in the manner provided in the
first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of Class A.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of shares of Class A (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Class A Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, obligation assumed by Class A pursuant
to this Plan and any agreement related to this Plan shall be limited in all
cases to Class A and its assets and shall not constitute an obligation of
any shareholder of the Trust or of any other class of the Fund, series of
the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(e)
DISTRIBUTION AND SERVICE PLAN
Fidelity Advisor Intermediate Municipal Income Fund
Class B Shares
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") for
Class B Shares of Fidelity Advisor Intermediate Municipal Income Fund
("Class B"), a class of shares of Fidelity Advisor Intermediate Municipal
Income Fund (the "Fund"), a series of Advisor Series VI (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor")
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or in shareholder support services
("Investment Professionals"); and (6) providing training, marketing and
support to Investment Professionals with respect to the sale of Shares.
3. In accordance with such terms as the Trustees may, from time to time
establish, and in conjunction with its services under the General
Distribution Agreement with respect to Class B Shares, the Distributor is
hereby expressly authorized to make payments to Investment Professionals in
connection with the sale of Class B Shares. Such payments may be paid as a
percentage of the dollar amount of purchases of Class B Shares attributable
to a particular Investment Professional, or may take such other form as may
be approved by the Trustees.
4. In consideration of the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraphs 2 and 3 hereof, all with respect to Class B Shares:
(a) Class B shall pay to the Distributor a monthly distribution fee at
the annual rate of 0.75% (or such lesser amount as the Trustees may, from
time to time, determine) of the average daily net assets of Class B
throughout the month. The determination of daily net assets shall be made
at the close of business each day throughout the month and computed in the
manner specified in the Fund's then current Prospectus for the
determination of the net asset value of Class B Shares, but shall exclude
assets attributable to any other class of Shares of the Fund. The
Distributor may, but shall not be required to, use all or any portion of
the distribution fee received pursuant to the Plan to compensate Investment
Professionals who have engaged in the sale of Class B Shares or in
shareholder support services with respect to Class B Shares pursuant to
agreements with the Distributor, or to pay any of the expenses associated
with other activities authorized under paragraphs 2 and 3 hereof; and
(b) In addition, the Plan recognizes that the Distributor may, in
accordance with such terms as the Trustees may from time to time establish,
receive all or a portion of any sales charges, including contingent
deferred sales charges, which may be imposed upon the sale or redemption of
Class B Shares.
5. Separate from any payments made as described in paragraph 4 hereof,
Class B shall also pay to the Distributor a service fee at the annual rate
of 0.25% (or such lesser amount as the Trustees may, from time to time,
determine) of the average daily net assets of Class B throughout the month.
The determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner specified
in the Fund's then current Prospectus for the determination of the net
asset value of Class B Shares, but shall exclude assets attributable to any
other class of Shares of the Fund. In accordance with such terms as the
Trustees may from time to time establish, the Distributor may use all or a
portion of such service fees to compensate Investment Professionals for
personal service and/or the maintenance of shareholder accounts, or for
other services for which "service fees" lawfully may be paid in accordance
with applicable rules and regulations.
6. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Class B Shares, including the activities referred
to in paragraphs 2 and 3 hereof. To the extent that the payment of
management fees by the Fund to the Adviser should be deemed to be indirect
financing of any activity primarily intended to result in the sale of Class
B Shares within the meaning of Rule 12b-1, then such payment shall be
deemed to be authorized by this Plan.
7. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Class B, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related
to the Plan (the "Independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
8. This Plan shall, unless terminated as hereinafter provided, remain in
effect until June 30, 1996, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fees
provided for in paragraphs 4 and 5 hereof or any amendment of the
Management Contract to increase the amount to be paid by the Fund
thereunder shall be effective only upon approval by a vote of a majority of
the outstanding voting securities of Class B, in the case of this Plan, or
upon approval by a vote of the majority of the outstanding voting
securities of the Fund, in the case of the Management Contract, and (b) any
material amendment of this Plan shall be effective only upon approval in
the manner provided in the first sentence of this paragraph 8.
9. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of Class B.
10. During the existence of this Plan, the Trust shall require the
Adviser and/or the Distributor to provide the Trust, for review by the
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of Class B Shares (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
11. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Class B Shares.
12. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by Class B
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to Class B and its assets and shall not constitute an
obligation of any shareholder of the Trust or of any other class of the
Fund, series of the Trust or class of such series.
13. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall
not be affected thereby.
Exhibit 15(h)
DISTRIBUTION AND SERVICE PLAN
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME FUND
CLASS A SHARES
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Class A shares of Fidelity
Advisor Intermediate Municipal Income Fund ("Class A") a class of shares of
Fidelity Advisor Intermediate Municipal Income Fund, (the "Fund"), a
portfolio of Fidelity Advisor Series VI (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such dealers
and others with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Class A Shares, Class A shall pay
to the Distributor a fee at the annual rate of 0.40% (or such lesser amount
as the Trustees may, from time to time, determine) of the average daily net
assets of Class A throughout the month. The determination of daily net
assets shall be made at the close of business each day throughout the month
and computed in the manner specified in the Fund's then current Prospectus
for the determination of the net asset value of the Fund's Class A Shares.
The Distributor may use all or any portion of the fee received pursuant to
this Plan to compensate securities dealers or other persons who have
engaged in the sale of Class A Shares or in shareholder support services
pursuant to agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraph 2 hereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to make payment to the Distributor with respect to any expenses
incurred in connection with the distribution of Class A Shares, including
the activities referred to in paragraph 2 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed to
be indirect financing of any activity primarily intended to result in the
sale of Class A Shares within the meaning of Rule 12b-1, then such payment
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Class A, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to the Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until April 30, 1997, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Class A, in the case of this Plan, or upon approval by
a vote of a majority of the outstanding voting securities of the Fund, in
the case of the Management Contract, and (b) any material amendment of this
Plan shall be effective only upon approval in the manner provided in the
first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of Class A.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of shares of Class A (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Class A Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by Class A
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to Class A and its assets and shall not constitute an
obligation of any shareholder of the Trust or of any other class of the
Fund, series of the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(i)
DISTRIBUTION AND SERVICE PLAN
FIDELITY ADVISOR SHORT-INTERMEDIATE MUNICIPAL INCOME FUND
CLASS A SHARES
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") for the Class A shares of Fidelity
Advisor Short-Intermediate Municipal Income Fund ("Class A") a class of
shares of Fidelity Advisor Short-Intermediate Municipal Income Fund, (the
"Fund"), a portfolio of Fidelity Advisor Series VI (the "Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor"),
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or who engage in shareholder support
services; and (6) providing training, marketing and support to such dealers
and others with respect to the sale of Shares.
3. In consideration for the services provided and the expenses incurred by
the Distributor pursuant to the General Distribution Agreement and
paragraph 2 hereof, all with respect to Class A Shares, Class A shall pay
to the Distributor a fee at the annual rate of 0.40% (or such lesser amount
as the Trustees may, from time to time, determine) of the average daily net
assets of Class A throughout the month. The determination of daily net
assets shall be made at the close of business each day throughout the month
and computed in the manner specified in the Fund's then current Prospectus
for the determination of the net asset value of the Fund's Class A Shares.
The Distributor may use all or any portion of the fee received pursuant to
this Plan to compensate securities dealers or other persons who have
engaged in the sale of Class A Shares or in shareholder support services
pursuant to agreements with the Distributor, or to pay any of the expenses
associated with other activities authorized under paragraph 2 hereof.
4. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management & Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to make payment to the Distributor with respect to any expenses
incurred in connection with the distribution of Class A Shares, including
the activities referred to in paragraph 2 hereof. To the extent that the
payment of management fees by the Fund to the Adviser should be deemed to
be indirect financing of any activity primarily intended to result in the
sale of Class A Shares within the meaning of Rule 12b-1, then such payment
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Class A, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to the Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until April 30, 1997, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 3 hereof or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of Class A, in the case of this Plan, or upon approval by
a vote of a majority of the outstanding voting securities of the Fund, in
the case of the Management Contract, and (b) any material amendment of this
Plan shall be effective only upon approval in the manner provided in the
first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of Class A.
8. During the existence of this Plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of shares of Class A (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of Class A Shares.
10. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by Class A
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to Class A and its assets and shall not constitute an
obligation of any shareholder of the Trust or of any other class of the
Fund, series of the Trust or class of such series.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 18
MULTIPLE CLASS OF SHARES PLAN
FOR
FIDELITY ADVISOR FUNDS
DATED AUGUST 1, 1996
This Amended and Restated Multiple Class of shares Plan (the "Plan"),
when effective in accordance with its provisions, shall be the written plan
contemplated by Rule 18f-3 under the Investment Company Act of 1940 (the
"1940 Act") for the portfolios (each a "Fund"), of the respective Fidelity
Trust (each, a "Trust") as listed on Schedule I to this Plan.
1. Classes Offered. Each Fund may offer up to five classes of its shares:
Class A, Class T, Class B, Institutional Class, and Initial Class (each, a
"Class").
2. Distribution and Shareholder Service Fees. Distribution fees and/or
shareholder service fees shall be calculated and paid in accordance with
the terms of the then-effective plan pursuant to Rule 12b-l under the 1940
Act for the applicable class. Distribution and shareholder service fees
currently authorized are as set forth in Schedule I to this Plan.
3. Conversion Privilege. After a maximum holding period of six years from
the initial date of purchase, Class B shares convert automatically to Class
T shares of the same Fund. Simultaneously, a portion of the Class B shares
purchased through the reinvestment of Class B dividends or capital gains
distributions ("Dividend Shares") will also convert to Class T shares. The
portion of Dividend Shares that will convert at that time is determined by
the ratio of converting Class B non-Dividend Shares held by a shareholder
to that shareholder's total Class B non-Dividend Shares. All conversions
pursuant to this paragraph 3 shall be made on the basis of the relative net
asset values of the two classes, without the imposition of any sales load,
fee, or other charge.
4. Exchange Privileges.
Class A: Shares of Class A may be exchanged for shares of (i) any other
Fidelity Advisor Fund: Class A; (ii) Daily Money Fund: U.S. Treasury
Portfolio: Initial Class; (iii) Daily Money Fund: Money Market Portfolio:
Initial Class; and (iv) Daily Tax-Exempt Money Fund.
Class T: Shares of Class T may be exchanged for shares of (i) any other
Fidelity Advisor Fund: Class T; (ii) Daily Money Fund: U.S. Treasury
Portfolio: Initial Class; (iii) Daily Money Fund: Money Market Portfolio:
Initial Class; and (iv) Daily Tax-Exempt Money Fund.
Class B: Shares of Class B may be exchanged for shares of (i) any other
Fidelity Advisor Fund: Class B; and (ii) Daily Money Fund: U.S. Treasury
Portfolio: Class B.
Institutional Class: Shares of Institutional Class may be exchanged for
shares of (i) any other Fidelity Advisor Fund: Institutional Class; and
(ii) any Fidelity Retail Fund offering an exchange privilege to other
Fidelity Retail Funds.
Initial Class: Shares of Initial Class may be exchanged for shares of any
Fidelity Retail Fund offering an exchange privilege to other Fidelity
Retail Funds.
5. Expense Allocations. Expenses shall be allocated under this Plan as
follows:
A. Class expenses: The following expenses shall be allocated exclusively
to the applicable specific class of shares: (i) distribution and
shareholder service fees; (ii) transfer agent fees; and (iii) Blue Sky
state registration fees.
B. Fund expenses: Expenses not allocated to specific classes as specified
above shall be charged to the Fund and allocated daily to each class on the
basis of the net asset value of that class in relation to the net asset
value of the Fund.
6. Voting Rights. Each class of shares governed by this Plan (i) shall
have exclusive voting rights on any matter submitted to shareholders that
relates solely to its arrangement; and (ii) shall have separate voting
rights on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class.
7. Effective Date of Plan. This Plan shall become effective upon the
first business day of the month following approval by a vote of at least a
majority of the Trustees of the Trust, and a majority of the Trustees of
the Trust who are not "interested persons" of the Trust, which vote shall
have found that this Plan as proposed to be adopted, including expense
allocations, is in the best interests of each class individually and of the
Fund as a whole; or upon such other date as the Trustees shall determine.
8. Amendment of Plan. Any material amendment to this Plan shall become
effective upon the first business day of the month following approval by a
vote of at least a majority of the Trustees of the Trust, and a majority of
the Trustees of the Trust who are not "interested persons" of the Trust,
which vote shall have found that this Plan as proposed to be amended,
including expense allocations, is in the best interests of each class
individually and of the Fund as a whole; or upon such other date as the
Trustees shall determine.
9. Severability. If any provision of this Plan shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Plan shall not be affected thereby.
10. Limitation of Liability. Consistent with the limitation of
shareholder liability as set forth in each Trust's Declaration of Trust or
other organizational document, any obligations assumed by any Fund or class
thereof, and any agreements related to this Plan shall be limited in all
cases to the relevant Fund and its assets, or class and its assets, as the
case may be, and shall not constitute obligations of any other Fund or
class of shares. All persons having any claim against the Fund, or any
class thereof, arising in connection with this Plan, are expressly put on
notice of such limitation of shareholder liability, and agree that any such
claim shall be limited in all cases to the relevant Fund and its assets, or
class and its assets, as the case may be, and such person shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Trust, class or Fund; nor shall such person seek
satisfaction of any such obligation from the Trustees or any individual
Trustee of the Trust.
SCHEDULE I DATED AUGUST 1, 1996 TO MULTIPLE CLASS OF SHARES PLAN FOR
FIDELITY ADVISOR FUNDS DATED AUGUST 1, 1996
TRUST/FUND/CLASS SALES CHARGE DISTRIBUTION FEE SHAREHOLDER
(AS A PERCENTAGE OF SERVICE FEE
AVERAGE NET ASSETS) (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisor Series VII
Overseas:
Class A front-end 0.25 none
Class T front-end 0.50 none
Class B contingent deferred 0.75 0.25
Institutional Class none none none
Advisor Series I
Equity Growth:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series V
Global Resources Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Class B contingent deferred 0.75 0.25
Institutional Class none none none
Advisor Series II
Growth Opportunities Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series III
Equity Income Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Class B contingent deferred 0.75 0.25
Institutional Class none none none
Advisor Series II
Income & Growth Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series I
Large Cap Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Class B contingent deferred 0.75 0.25
Institutional Class none none none
Advisor Series I
Mid Cap Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Class B contingent deferred 0.75 0.25
Institutional Class none none none
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TRUST/FUND/CLASS SALES CHARGE DISTRIBUTION FEE SHAREHOLDER
(AS A PERCENTAGE OF SERVICE FEE
AVERAGE NET ASSETS) (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisor Series VIII
Strategic Opportunities Fund:
Initial Class front-end none none
Class A front-end 0.25 none
Class T front-end 0.50 none
Class B contingent deferred 0.75 0.25
Institutional Class none none none
</TABLE>
Advisor Series VII
Consumer Industries Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series VII
Cyclical Industries Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series VII
Financial Services Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series VII
Health Care Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series VII
Technology Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series VII
Utilities Growth Fund:
Class A front-end 0.25 none
Class T front-end 0.50 none
Institutional Class none none none
Advisor Series IV
Intermediate Bond Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TRUST/FUND/CLASS SALES CHARGE DISTRIBUTION FEE SHAREHOLDER
(AS A PERCENTAGE OF SERVICE FEE
AVERAGE NET ASSETS) (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Advisor Series VI
Intermediate Municipal Income Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
Advisor Series II
Short Fixed-Income Fund:
Class A front-end 0.15 none
Class T front-end 0.15 none
Institutional Class none none none
Advisor Series VI
Short-Intermediate Municipal Income
Fund:
Class A front-end 0.15 none
Class T front-end 0.15 none
Institutional Class none none none
Advisor Series VIII
Emerging Markets Income Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
Advisor Series II
High Yield Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
Advisor Series VIII
Strategic Income Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
Advisor Series II
Government Investment Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
Advisor Series V
High Income Municipal Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
TRUST/FUND/CLASS SALES CHARGE DISTRIBUTION FEE SHAREHOLDER
(AS A PERCENTAGE OF SERVICE FEE
AVERAGE NET ASSETS) (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
</TABLE>
Advisor Series V
California Municipal Income Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
Advisor Series V
New York Municipal Income Fund:
Class A front-end 0.15 none
Class T front-end 0.25 none
Class B contingent deferred 0.65 0.25
Institutional Class none none none
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720318
<NAME> Fidelity Advisor Series VI
<SERIES>
<NUMBER> 11
<NAME> Fidelity Advisor Intermediate Municipal Income Fund - Class A
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 82,610
<INVESTMENTS-AT-VALUE> 82,980
<RECEIVABLES> 1,297
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,327
<PAYABLE-FOR-SECURITIES> 3,009
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 270
<TOTAL-LIABILITIES> 3,279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,833
<SHARES-COMMON-STOCK> 6,086
<SHARES-COMMON-PRIOR> 6,058
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,155)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 370
<NET-ASSETS> 81,048
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,187
<OTHER-INCOME> 0
<EXPENSES-NET> 415
<NET-INVESTMENT-INCOME> 1,772
<REALIZED-GAINS-CURRENT> 334
<APPREC-INCREASE-CURRENT> (2,456)
<NET-CHANGE-FROM-OPS> (350)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,377
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,476
<NUMBER-OF-SHARES-REDEEMED> 1,543
<SHARES-REINVESTED> 96
<NET-CHANGE-IN-ASSETS> 884
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,489)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 447
<AVERAGE-NET-ASSETS> 63,416
<PER-SHARE-NAV-BEGIN> 10.380
<PER-SHARE-NII> .229
<PER-SHARE-GAIN-APPREC> .260
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .229
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.120
<EXPENSE-RATIO> 100
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720318
<NAME> Fidelity Advisor Series VI
<SERIES>
<NUMBER> 12
<NAME> Fidelity Advisor Intermediate Municipal Income Fund - Class B
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 82,610
<INVESTMENTS-AT-VALUE> 82,980
<RECEIVABLES> 1,297
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,327
<PAYABLE-FOR-SECURITIES> 3,009
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 270
<TOTAL-LIABILITIES> 3,279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,833
<SHARES-COMMON-STOCK> 721
<SHARES-COMMON-PRIOR> 600
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,155)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 370
<NET-ASSETS> 81,048
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,187
<OTHER-INCOME> 0
<EXPENSES-NET> 415
<NET-INVESTMENT-INCOME> 1,772
<REALIZED-GAINS-CURRENT> 334
<APPREC-INCREASE-CURRENT> (2,456)
<NET-CHANGE-FROM-OPS> (350)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 130
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 233
<NUMBER-OF-SHARES-REDEEMED> 120
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 884
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,489)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 447
<AVERAGE-NET-ASSETS> 6,995
<PER-SHARE-NAV-BEGIN> 10.380
<PER-SHARE-NII> .196
<PER-SHARE-GAIN-APPREC> .270
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .196
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.110
<EXPENSE-RATIO> 166
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720318
<NAME> Fidelity Advisor Series VI
<SERIES>
<NUMBER> 13
<NAME> Fidelity Advisor Intermediate Municipal Income Fund - Institutional
Class
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 82,610
<INVESTMENTS-AT-VALUE> 82,980
<RECEIVABLES> 1,297
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,327
<PAYABLE-FOR-SECURITIES> 3,009
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 270
<TOTAL-LIABILITIES> 3,279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,833
<SHARES-COMMON-STOCK> 1,205
<SHARES-COMMON-PRIOR> 1,070
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,155)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 370
<NET-ASSETS> 81,048
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,187
<OTHER-INCOME> 0
<EXPENSES-NET> 415
<NET-INVESTMENT-INCOME> 1,772
<REALIZED-GAINS-CURRENT> 334
<APPREC-INCREASE-CURRENT> (2,456)
<NET-CHANGE-FROM-OPS> (350)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 264
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 358
<NUMBER-OF-SHARES-REDEEMED> 226
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 884
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,489)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 447
<AVERAGE-NET-ASSETS> 11,441
<PER-SHARE-NAV-BEGIN> 10.360
<PER-SHARE-NII> .243
<PER-SHARE-GAIN-APPREC> .250
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .243
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.110
<EXPENSE-RATIO> 75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720318
<NAME> Fidelity Advisor Series VI
<SERIES>
<NUMBER> 21
<NAME> Fidelity Advisor Short-Intermediate Municipal Income Fund-Class A
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 31,889
<INVESTMENTS-AT-VALUE> 31,973
<RECEIVABLES> 566
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,541
<PAYABLE-FOR-SECURITIES> 1,825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 1,874
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,508
<SHARES-COMMON-STOCK> 3,004
<SHARES-COMMON-PRIOR> 2,860
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 75
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84
<NET-ASSETS> 30,667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 693
<OTHER-INCOME> 0
<EXPENSES-NET> 127
<NET-INVESTMENT-INCOME> 566
<REALIZED-GAINS-CURRENT> 107
<APPREC-INCREASE-CURRENT> (436)
<NET-CHANGE-FROM-OPS> 237
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 561
<DISTRIBUTIONS-OF-GAINS> 84
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,278
<NUMBER-OF-SHARES-REDEEMED> 1,187
<SHARES-REINVESTED> 53
<NET-CHANGE-IN-ASSETS> 1,258
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 74
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 57
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 217
<AVERAGE-NET-ASSETS> 3,004
<PER-SHARE-NAV-BEGIN> 10.240
<PER-SHARE-NII> .202
<PER-SHARE-GAIN-APPREC> (.130)
<PER-SHARE-DIVIDEND> .202
<PER-SHARE-DISTRIBUTIONS> .030
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.080
<EXPENSE-RATIO> 90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720318
<NAME> Fidelity Advisor Series VI
<SERIES>
<NUMBER> 22
<NAME> Fidelity Advisor Short-Intermediate Municipal Income Fund-
Institutional Class
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 31,889
<INVESTMENTS-AT-VALUE> 31,973
<RECEIVABLES> 566
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,541
<PAYABLE-FOR-SECURITIES> 1,825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 1,874
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,508
<SHARES-COMMON-STOCK> 37
<SHARES-COMMON-PRIOR> 13
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 75
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84
<NET-ASSETS> 30,667
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 693
<OTHER-INCOME> 0
<EXPENSES-NET> 127
<NET-INVESTMENT-INCOME> 566
<REALIZED-GAINS-CURRENT> 107
<APPREC-INCREASE-CURRENT> (436)
<NET-CHANGE-FROM-OPS> 237
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,258
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 74
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 57
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 217
<AVERAGE-NET-ASSETS> 37
<PER-SHARE-NAV-BEGIN> 10.230
<PER-SHARE-NII> .198
<PER-SHARE-GAIN-APPREC> (.110)
<PER-SHARE-DIVIDEND> .198
<PER-SHARE-DISTRIBUTIONS> .030
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.090
<EXPENSE-RATIO> 75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
