SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-84776)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 26 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 (No. 811-3785) [x]
Amendment No. 26 [ ]
Fidelity Advisor Series I _
_ _ _
_
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109 _
_ _
_ _ _
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (617)563-7000
_ _ _ _
Arthur Loring, Esq.
82 Devonshire Street
Boston, Massachusetts 02109 _
_ _
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On ( ) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] On (February 24, 1995) 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 will file the notice required by such
Rule on or about January 30, 1995.
FIDELITY ADVISOR INSTITUTIONAL CLASS PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
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1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. *
3 a .............................. Expenses
b .............................. Financial Highlights
c .............................. Performance
d .............................. Cover Page
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; Charter
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. FMR and Its Affiliates
d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates; Breakdown of Expenses
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. FMR and Its Affiliates
c .............................. Charter
d .............................. Cover Page; Charter
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Transaction Details; Breakdown of Expenses
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
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* Not Applicable
FIDELITY ADVISOR FUNDS
INSTITUTIONAL CLASS
PROSPECTUS
Each fund is comprised of multiple classes of shares: Class A, Class B
and/or Institutional Class. Each class has a common investment objective
and investment portfolio.
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 a obtain copy of
the applicable fund's most recent financial report and portfolio listing or
a copy of the Statement of Additional Information (SAI) dated February 24,
1995. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity Distributors
Corporation (FDC) 82 Devonshire Street, Boston, MA 02109 at __________, or
contact your Investment Professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
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.
EQUITY FUNDS:
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH seeks capital appreciation by
investing primarily in common and preferred stock and securities
convertible into the common stock of companies with above average growth
characteristics.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME seeks a yield from dividend and
interest income which exceeds the composite dividend yield on securities
comprising the S&P 500. In addition, consistent with the primary objective
of obtaining dividend and interest income, the fund will consider the
potential for achieving capital appreciation.
FIXED-INCOME FUNDS:
FIDELITY ADVISOR LIMITED TERM BOND FUND seeks to provide a high rate of
income through investment primarily in investment-grade fixed-income
obligations.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND seeks the highest level of
income exempt from federal income taxes that can be obtained consistent
with the preservation of capital from a diversified portfolio of high
quality or upper-medium quality municipal obligations.
PROSPECTUS
FEBRUARY 24, 1995
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
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KEY FACTS WHO MAY WANT TO INVEST
EXPENSES Each fund's 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 DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
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KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to (i) banks and trust
institutions investing for their own accounts or for accounts of their
trust customers, (ii) plan sponsors meeting the ERISA definition of
fiduciary, (iii) government entities or authorities and (iv) corporations
with at least $100 million in annual revenues.
Shares are also offered to any investor who purchased Shares of the funds
prior to September 10, 1992. Any such investor will be exempt from the
investment minimum and account balance requirements currently in effect.
Further, this exemption is also available to any investor having opened an
Institutional Class account in the funds prior to January 29, 1993 through
a registered investment adviser not registered as a broker-dealer that
charges an account management fee.
Equity Portfolio Growth and Equity Portfolio Income are designed for
investors who are willing to ride out stock market fluctuations in pursuit
of potentially high long-term returns. Equity Portfolio Growth is designed
for those who want to be invested in the stock market for its long-term
growth potential but also want some income from equity and bond
investments. Equity Portfolio Income is designed for those who seek a
combination of growth and income from equity and some bond investments.
Limited Term Bond is designed for investors who seek high current income
from a portfolio of investment-grade debt securities. Limited Term
Tax-Exempt is designed for investors in higher tax brackets who seek high
current income that is free from federal income tax. Limited Term
Tax-Exempt and Limited Term Bond also invest consistent with the
preservation of capital.
A fund's level of risk and potential reward depend on the quality and
maturity of its investments. The value of each fund's investments and, as
applicable, the income they generate, vary from day to day, generally
reflecting changes in market conditions, interest rates, and other company,
political, and economic news. Stocks, although more volatile, have
historically shown greater growth potential than other types of securities.
In the shorter term, however, stock prices can fluctuate dramatically in
response to these factors. The prices of bonds typically move in the
opposite direction from interest rates. Limited Term Bond and Limited Term
Tax-Exempt's investments may be also subject to prepayments, which can
lower the fund's yield, particularly in periods of declining interest
rates. When you sell your fund shares, they may be worth more or less than
what you paid for them.
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.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
INSTITUTIONAL
CLASS
Maximum sales charge on purchases None
and reinvested distributions
Maximum deferred sales charge on None
redemptions
Redemption fee None
Exchange fee None
ANNUAL OPERATING EXPENSES are paid out of Institutional Class assets. Each
fund also pays a management fee to FMR and incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports.
The Institutional 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 following are projections based on historical expenses of the
Institutional Class of each fund, and are calculated as a percentage of
average net assets of the Institutional Class of each fund. A portion of
the brokerage commissions that certain of the funds paid was used to
reduce Institutional Class expenses. Without this reduction, the total
operating expenses of Institutional Class of each fund would have been
___% for Equity Portfolio Growth and ___% for Equity Portfolio Income.
Operating Expenses
EQUITY PORTFOLIO GROWTH Management fee %
12b-1 fee (Distribution fee) none
Other expenses %
Total operating expenses %
EQUITY PORTFOLIO INCOME Management fee %
12b-1 fee (Distribution fee) none
Other expenses %
Total operating expenses %
LIMITED TERM BOND Management fee %
12b-1 fee (Distribution fee) none
Other expenses %
Total operating expenses %
LIMITED TERM TAX-EXEMPT Management fee %
12b-1 fee (Distribution fee) none
Other expenses %
Total operating expenses %
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Institutional Class shares assuming a 5% annual return and
full redemption, at the end of each time period:
Examples
EQUITY PORTFOLIO GROWTH After 1 year $
After 3 years $
After 5 years $
After 10 years $
EQUITY PORTFOLIO INCOME After 1 year $
After 3 years $
After 5 years $
After 10 years $
LIMITED TERM BOND After 1 year $
After 3 years $
After 5 years $
After 10 years $
LIMITED TERM TAX-EXEMPT After 1 year $
After 3 years $
After 5 years $
After 10 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 the Institutional Class of Limited
Term Bond and Limited Term Tax-Exempt to the extent that total operating
expenses are in excess of an annual rate of 0.65% of average net assets.
If this agreement were not in effect, total operating expenses would be
___%, for Limited Term Tax-Exempt, respectively. Interest, taxes,
brokerage commissions, or extraordinary expenses are not included in these
expense limitations.
FINANCIAL HIGHLIGHTS
The financial highlights tables and each fund's financial statements are
included in each fund's Annual Reports and have been audited by
________________, independent accountants. Their reports on the financial
statements and financial highlights are included in each Annual Report.
The financial statements, the financial highlights, and the reports are
incorporated by reference into the funds' SAI, which may be obtained free
of charge from Fidelity Distributors Corporation (FDC).
[INSERT A TABLE FOR THE/EACH FUND HERE]
[THIS PAGE INTENTIONALLY LEFT BLANK.]
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. Bond fund
performance can be measured as TOTAL RETURN or YIELD.
Each class's performance is affected by the expenses of that class;
accordingly, performance may be different among the classes.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return
that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period. Average
annual total returns smooth out variations in performance; they are not the
same as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
In calculating yield, Equity Portfolio Growth and Equity Portfolio Income
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.
An equity fund may quote its adjusted NAV including all distributions paid.
This value may be averaged over specified periods and may be used to
calculate an equity fund'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, or call 1-800-___-____.
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 Portfolio Growth is a
diversified fund of Advisor Series I, a Massachusetts business trust
organized on June 24, 1983. Equity Portfolio Income is a diversified fund
of Advisor Series III, a Massachusetts business trust organized on May 17,
1982. Limited Term Bond is a diversified fund of Advisor Series IV, a
Massachusetts business trust organized on May 6, 1983. Limited Term
Tax-Exempt is a diversified fund of Advisor Series VI, a Massachusetts
business trust organized on June 1, 1983. There is a remote possibility
that one fund might become liable for a misstatement in the prospectus
about another fund.
Each fund is sold to both institutional and retail investors. This
prospectus offers shares to institutional investors (Institutional Class
shares). Investment professionals do not receive any compensation for
selling or providing shareholder support services to institutional
investors. Equity Portfolio Income, Limited Term Bond and Limited Term
Tax-Exempt offer two classes of shares to retail investors: Class A and
Class B. Equity Portfolio Growth offers one class of shares to retail
investors: Class A. Class A shares and Class B shares are offered through
a separate prospectus.
CLASS A. Each fund offers a class of shares with a maximum 4.75%
front-end sales charge to retail investors who engage an investment
professional for investment advice (Class A shares). The initial and
subsequent investment minimums for Class A shares are $2,500 and $250,
respectively. The minimum account balance for Class A investors is $1,000.
Reduced sales charges are applicable to purchases of $50,000 or more of
Class A shares of one fund alone or in combination with purchases of Class
A or Class B shares of other Fidelity Advisor Funds. Class A investors also
may qualify for a reduction in sales charge under the Rights of
Accumulation or Letter of Intent programs. Sales charges on Class A shares
are waived for certain groups of investors. In addition, Class A investors
may participate in various investment programs. Class A shares of each fund
may be exchanged for Class A shares of other Fidelity Advisor Funds or
initial shares of Daily Money Fund: U.S. Treasury Portfolio and Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund.
Transfer agent and shareholder services for Class A shares of Equity
Portfolio Growth, Equity Portfolio Income and Limited Term Bond are
performed by State Street Bank and Trust Company (State Street); and
shareholder services for Class A shares of Limited Term Tax-Exempt are
performed by United Missouri Bank, N.A. (UMB). State Street's address is
P.O. Box 8302, Boston, Massachusetts 02266-8302. UMB is located at 1010
Grand Avenue, Kansas City, Missouri 64106.
For the fiscal year ended November 30, 1994, total operating expenses as a
percentage of average net assets for Class A shares were as follows: ___%
for Equity Portfolio Growth; __% for Equity Portfolio Income; ___% for
Limited Term Bond (after reimbursement); and ___% for Limited Term
Tax-Exempt (after reimbursement).
Under the Class A Distribution and Service Plans, Class A shares of each
of Equity Portfolio Growth and Equity Portfolio Income pay an annual
distribution fee of 0.65% of average net assets; and each of Limited Term
Bond and Limited Term Tax-Exempt pay an annual distribution fee of 0.25% of
average net assets. Up to the full amount of the distribution fee paid by
Class A shares of each fund to FDC may be reallowed to investment
professionals based upon the level of marketing and distribution services
provided. Class A shares do not pay a shareholder service fee in addition
to the distribution fee. Investment professionals may receive different
levels of compensation with respect to one particular class of shares over
another class of shares in the funds.
CLASS B. Equity Portfolio Income, Limited Term Bond and Limited Term
Tax-Exempt each offer a class of shares with a contingent deferred sales
charge to retail investors who engage an investment professional for
investment advice (Class B shares). Class B shares are subject to an annual
distribution fee of 0.75% of average net assets, an annual service fee of
0.25% of average net assets and a contingent deferred sales charge upon
redemption within five years of purchase, which decreases from a maximum of
4% to 0%. At the end of six years, Class B shares of a fund automatically
convert to Class A shares of the same fund. The initial and subsequent
investment minimums for Class B shares are identical to those for Class A
shares. Class B shares of each fund may be exchanged only for Class B
shares of other Fidelity Advisor Funds or Class B shares of Daily Money
Fund: U.S. Treasury Portfolio.
Transfer agent and shareholder services for Class B shares of Equity
Portfolio Income and Limited Term Bond are performed by Fidelity
Investments Institutional Operations Company (FIIOC); and for Class B
shares of Limited Term Tax-Exempt are performed by UMB. FIIOC is located
at 82 Devonshire Street, Boston, Massachusetts, 02109.
For the fiscal year ended November 30, 1994, total operating expenses as a
percentage of average net assets for Class B shares were as follows: ___%
for Equity Portfolio Income; ___% for Limited Term Bond (after
reimbursement); and, ___% for Limited Term Tax-Exempt (after
reimbursement). Investment Professionals may receive different levels of
compensation with respect to one particular class of shares over another
class of shares in the funds.
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. Shareholders of
Equity Portfolio Growth and Limited Term Tax-Exempt are entitled to one
vote for each share they own. For shareholders of Equity Portfolio Income
and Limited Term Bond, 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, or each fund, if a matter
affects just that class of shares or fund, 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 operations.
The funds are managed by FMR, which chooses their investments and handles
their business affairs. Fidelity Management & Research (U.K.) Inc. (FMR
U.K.) in London, England, and Fidelity Management & Research (Far East)
Inc. (FMR Far East) in Tokyo, Japan, assist FMR with foreign investments.
As of __________, 1994, FMR advised funds having approximately million
shareholder accounts with a total value of more than $__ billion.
Robert E. Stansky is vice president and manager of Advisor Equity Portfolio
Growth which he has managed since April 1987. Mr. Stansky also manages
Growth Company. Previously, he managed Emerging Growth and Select Defense
and Aerospace. Mr. Stansky joined Fidelity in 1983.
Bettina E. Doulton has been manager of Advisor Equity Portfolio Income
since August 1993, and VIP Equity-Income since July 1993. Previously, she
managed Select Automotive Portfolio and assisted on Equity-Income Portfolio
and Magellan(registered trademark). Ms. Doulton also served as an analyst
following the domestic and European automotive and tire manufacturing
industry as well as the gaming and lodging industry. She joined Fidelity in
1985.
Michael S. Gray is vice president and manager of Advisor Limited Term Bond
which he has managed since September 1987. Mr. Gray also manages Investment
Grade Bond, Spartan Investment Grade Bond, and Intermediate Bond. Mr. Gray
joined Fidelity in 1982.
John (Jack) F. Haley, Jr., is vice president and manager of Advisor Limited
Term Tax-Exempt which he has managed since 1985. Mr. Haley also manages
California Tax-Free Insured, California Tax-Free High Yield, and Spartan
California Municipal High Yield. Mr. Haley joined Fidelity in 1981.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. FIIOC performs
transfer agent servicing functions for the Institutional Class shares of
each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Through ownership of voting common stock, members of the Edward C.
Johnson 3d family form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or disability,
which would result in changes in each individual family members' holding of
stock. Such changes could result in one or more family members becoming
holders of over 25% of the stock. FMR Corp. has received an opinion of
counsel that changes in the composition of the Johnson family group under
these circumstances would not result in the termination of the funds'
management or distribution contracts and, accordingly, would not require a
shareholder vote to continue operation under those contracts.
UMB is Limited Term Tax-Exempt's transfer agent, although it employs FIIOC
to perform these functions for Institutional Class shares of the fund. UMB
is located at 1010 Grand Avenue, Kansas City, Missouri.
A broker-dealer may use a portion of the commissions paid by Equity
Portfolio Growth and Equity Portfolio Income to reduce the fund's custodian
or transfer agent fees. FMR may use its broker-dealer affiliates and other
firms that sell fund shares to carry out a fund's transactions, provided
that the fund receives brokerage services and commission rates comparable
to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The value of each fund's investments varies based on many factors. Stock
values fluctuate in response to the activities of individual companies and
general market and economic conditions. Each of Equity Portfolio Growth and
Equity Portfolio Income spreads investment risk by limiting its holdings in
any one company or industry.
The value of bonds fluctuates based on changes in domestic and foreign
interest rates, and the credit quality of the issuer. In general, bond
prices rise when interest rates fall, and vice versa. This effect is
usually more pronounced for longer-term securities. Lower-quality
securities offer higher yields, but also carry more risk. Because many of
Equity Portfolio Growth's, Equity Portfolio Income's and Limited Term
Bond's investments are denominated in foreign currencies, changes in the
value of foreign securities can significantly affect the fund's share
price. General economic and political factors in the various world markets
can also impact the value of your investment.
FMR may use various investment techniques to hedge a fund's risks, but
there is no guarantee that these strategies will work as intended. When you
sell your shares, they may be worth more or less than what you paid for
them.
EQUITY PORTFOLIO GROWTH, under normal circumstances, will invest at least
65% of its total assets in common and preferred stock. The fund looks for
domestic and foreign companies with above-average growth characteristics
compared to the average of the companies included in the S&P 500. Growth
may be measured by factors such as earnings or gross sales. Companies with
strong growth potential often have new products, technologies, distribution
channels, or other opportunities. As a general rule, these companies may
include smaller, less well-known companies and companies whose stocks have
higher than average price/earnings (P/E) ratios. The market prices of these
stocks may be particularly sensitive to economic, market, or company news.
FMR may also pursue growth in larger or revitalized companies or companies
that hold a strong position in the market. These growth characteristics
may be found in mature or declining industries.
FMR normally invests Equity Portfolio Growth's assets according to its
investment strategy. The fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments for
temporary, defensive purposes.
EQUITY PORTFOLIO INCOME 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.
FMR normally invests Equity Portfolio Income's assets according to its
investment strategy. The fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments for
temporary, defensive purposes.
LIMITED TERM BOND FUND invests in domestic and foreign investment-grade
debt securities. Under normal circumstances, the fund will invest in the
following fixed-income securities: (i) obligations issued or guaranteed as
to interest and principal by the U.S. Government or any agency or
instrumentality thereof, and (ii) obligations (including certificates of
deposits and bankers' acceptances) of U.S. banks which at the date of
investment have capital gains, surplus, and undivided profits (as of the
date of their most recently published financial statements) in excess of
$100 million. When consistent with its primary objective, the fund may also
seek capital appreciation. Under normal conditions the fund maintains a
dollar-weighted average maturity of 10 years or less. In determining a
security's maturity for purposes of calculating the fund's average
maturity, estimates of the expected time for its principal to be repaid may
be used. This can be substantially shorter than its stated final maturity.
FMR normally invests Limited Term Bond's assets according to its investment
strategy. The fund also reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
LIMITED TERM TAX-EXEMPT FUND invests in municipal obligations judged by FMR
to be essentially the same quality as those rated within the three highest
rating categories by Moody's and S&P. Under normal conditions, at least 80%
of the fund's annual income will be exempt from federal income taxes and at
least 80% of the fund's net assets will be invested in obligations having
remaining maturities of 15 years or less. The fund maintains a
dollar-weighted average maturity of 10 years or less. In determining a
security's maturity for purposes of calculating the fund's average
maturity, estimates of the expected time for its principal to be repaid may
be used. This can be substantially shorter than its stated final maturity.
The fund may invest up to 25% of its total assets in the securities of a
single issuer. The fund may also invest 25% or more of its total assets in
securities whose revenue sources are from similar types of projects (e.g.,
education, electric utilities, health care, housing, transportation or
water, sewer, and gas utilities) or whose issuers share the same geographic
location. The fund currently does not intend to invest in taxable
obligations or in AMT bonds.
FMR normally invests Limited Term Tax-Exempt's assets according to its
investment strategy. Limited Term Tax-Exempt does not expect to invest in
federally taxable obligations. The fund, however, also reserves the right
to invest without limitation in short-term instruments, to hold a
substantial amount of uninvested cash, or to invest more than normally
permitted in federally taxable obligations for temporary, defensive
purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about each fund's investments
is contained in the SAI. Policies and limitations are considered at the
time of purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help a fund
achieve its goal. Current holdings and recent investment strategies are
described in a fund's financial reports, which are sent to shareholders
twice a year. For a free SAI or financial report, call [TELEPHONE NUMBER
WHICH ALSO APPEARS ON COVER PAGE].
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 Equity
Portfolio Income and Limited Term Bond may not purchase more than 10% of
the outstanding voting securities of a single issuer.
With respect to 100% of its assets, each of Equity Portfolio Growth and
Limited Term Tax-Exempt may not purtchase more than 10% of the outstanding
voting securities of a single issuer.
FISCAL 1994 DEBT HOLDINGS, BY RATING
Fiscal 1994 Debt Holdings, by Rating MOODY'S INVESTORS SERVICE, INC.
PERCENTAGE OF ASSETS IN EACH RATING CATEGORY
Equity Portfolio Growth Equity Portfolio Income Limited Term Bond Limited
Term Tax-Exempt
Rating Average [A] Rating Average [A] Rating Average [A] Rating Average
[B]
INVESTMENT GRADE
Highest quality Aaa Aaa Aaa Aaa
High quality Aa Aa Aa Aa
Upper-medium grade A A A A
Medium grade Baa Baa Baa Baa
LOWER QUALITY
Moderately speculative Ba Ba Ba Ba
Speculative B B B B
Highly speculative Caa Caa Caa Caa
Poor quality Ca Ca Ca Ca
Lowest quality, no interest C C C C %
In default, in arrears - - - - - -
%
FISCAL 1994 DEBT HOLDINGS, BY RATING
Fiscal 1994 Debt Holdings, by Rating STANDARD & POOR'S CORPORATION
PERCENTAGE OF ASSETS IN EACH RATING CATEGORY
Equity Portfolio Growth Equity Portfolio Income Limited Term Bond Limited
Term Tax-Exempt
Rating Average [A] Rating Average [A] Rating Average [A] Rating Average
[B]
INVESTMENT GRADE
Highest quality AAA AAA AAA AAA
High quality AA AA AA AA
Upper-medium grade A A A A
Medium grade BBB BBB BBB BBB
LOWER QUALITY
Moderately speculative BB BB BB BB
Speculative B B B B
Highly speculative CCC CCC CCC CCC
Poor quality CC CC CC CC
Lowest quality, no interest C C C C
In default, in arrears D D D D
[A] FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING
GOVERNMENT. THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED
DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P
AMOUNTED TO __% FOR EQUITY PORTFOLIO GROWTH AND ___% FOR EQUITY PORTFOLIO
INCOME. THIS MAY INCLUDE SECURITIES RATED
BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED
SECURITIES. FMR HAS DETERMINED THAT UNRATED
SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR __% OF EQUITY PORTFOLIO
GROWTH AND ___% FOR EQUITY PORTFOLIO INCOME'S TOTAL
SECURITY INVESTMENTS. REFER TO THE SAI FOR A MORE COMPLETE DISCUSSION OF
THESE RATINGS.
[B] THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S AND
S&P AMOUNTED TO __% FOR EQUITY PORTFOLIO
GROWTH AND __% FOR EQUITY PORTFOLIO INCOME. THIS MAY INCLUDE SECURITIES
RATED BY OTHER NATIONALLY RECOGNIZED RATING
SERVICES, AS WELL AS UNRATED SECURITIES. REFER TO THE SAI FOR A MORE
COMPLETE DISCUSSION OF THESE RATINGS.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securitieS, loans, and other direct debt have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds") are,
and tax-exempt lower-quality debt securities may be, considered to be
speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general economic difficulty.
Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes. These
risks are in addition to the general risks associated with foreign
securities.
The charts on page 12 provide a summary of ratings assigned to debt
holdings (not including money market instruments) in the funds' portfolios.
These figures are dollar-weighted averages of month-end portfolio holdings
during fiscal 1994, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
RESTRICTIONS: Purchase of a debt security is consistent with Equity
Portfolio Growth, Equity Portfolio Income and Limited Term Bond's quality
policy if is rated at or above the stated level by Moody's or rated in the
equivalent categories by any other nationally recognized rating service, or
is unrated but judged to be of equivalent quality by FMR.
Equity Portfolio Growth and Equity Portfolio Income, each currently intend
to limit its investments in lower than Baa-quality debt securities to 35%
of its assets.
Limited Term Bond currently intends to limit its investments in debt
securities to those of Baa-quality and above, and currently intends to
limit its investments in debt securities rated Baa to 5% of its net assets.
Purchase of a debt security is consistent with Limited Term Tax-Exempt's
debt quality policy if it is rated at or above the stated level by Moody's
or S&P, or with respect to 20% of total assets, is unrated but judged to be
of equivalent quality by FMR. The fund currently intends to limit its
investment in debt securities to those of A-quality or above.
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.
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.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
ASSET-BACKED SECURITIES may include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or residential
mortgages, and may include complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities. Mortgage
securities may be issued by the U.S. government or by private entities.
For example, Ginnie Mae 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.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile, and certain stripped
securities move in the same direction as interest rates.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other financial institution. A fund may own a
municipal security directly or through a participation interest.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations.
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.
VARIABLE- AND FLOATING-RATE SECURITIES may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
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.
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.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield.
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.
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 securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS. Each fund may not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid 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.
RESTRICTIONS: With respect to 100% of its assets, Equity Portfolio Growth
may not purchase a security if, as a result, more than 5% would be invested
in the securities of any issuer.
With respect to 75% of its total assets, each of Equity Portfolio Income,
Limited Term Bond and Limited Term Tax-Exempt may not purchase a security
if, as a result, more than 5% would be invested in the securities of such
issuer
These limitations do not apply to U.S. government securities.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering a fund's securities. A fund
may also lend money to other funds advised by FMR and to issuers in
connection with certain direct debt transactions.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of each fund's
total assets; however, Limited Term Tax-Exempt does 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.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above average growth characteristics.
EQUITY PORTFOLIO INCOME seeks a yield from dividend and interest income
which exceeds the composite dividend yield on securities comprising the S &
P 500. In addition, consistent with the primary objective of obtaining
dividend and interest income, the fund will consider the potential for
achieving capital appreciation.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt from
federal income taxes that can be obtained consistent with the preservation
of capital, from a diversified portfolio of high quality or upper-medium
quality municipal obligations. The fund may invest 25% or more of its
total assets in securities whose revenue sources are from similar types of
projects (e.g., education, electric utilities, health care, housing,
transportation or water, sewer, and gas utilities) or whose issuers share
the same geographic location. Under normal conditions, at least 80% of the
fund's annual income will be exempt from federal income tax and at least
80% of the fund's net assets will be invested in obligations having
remaining maturities of 15 years or less. The fund maintains a
dollar-weighted average maturity of 10 years or less. The fund invests in
municipal obligations judged by FMR to be essentially the same quality as
those rated within the three highest rating categories by Moody's and S&P.
The fund may invest up to 20% of its total assets in municipal obligations,
which are unrated by Moody's and S&P, if judged by FMR to meet the fund's
quality standard. The fund currently does not intend to invest in taxable
obligations or in AMT bonds. The fund may not purchase the securities of
any issuer if, as a result, more than 25% of its total assets would be
invested in industrial development bonds whose issuers are in any one
industry.
With respect to 75% of its total assets, each of Equity Portfolio Income,
Limited Term Tax-Exempt, and Limited Term Bond may not invest more than 5%
in any one issuer. With respect to 100% of its assets, Equity Portfolio
Growth may not invest more than 5% in any one issuer.
With respect to 75% of its total assets, each of Equity Portfolio Income
and Limited Term Bond may not purchase more than 10% of the outstanding
voting securities of a single issuer. With respect to 100% of its assets,
each of Equity Portfolio Growth and Limited Term Tax-Exempt may not
purchase more than 10% of the outstanding voting securities of a single
issuer.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in its
Institutional Class 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 each of Equity Portfolio Growth, Equity
Portfolio Income, Limited Term Bond and Limited Term Tax-Exempt. Each fund
also pays OTHER EXPENSES, which are explained on
page __.
FMR may, from time to time, agree to reimburse Equity Portfolio Growth and
Equity Portfolio Income for management fees and other expenses above a
specified limit. FMR retains the ability to be repaid by each fund if
expenses fall below the specified limit prior to the end of the fiscal
year. Reimbursement arrangements, which may be terminated at any time
without notice, can decrease each fund's expenses and boost its
performance.
MANAGEMENT FEE
The MANAGEMENT FEE is calculated and paid to FMR every month. The fee for
Equity Portfolio Growth, Limited Term Bond and Limited Term Tax-Exempt is
calculated by adding a group fee rate to an individual fee rate, and
multiplying the result by each fund's average net assets. Equity Portfolio
Income pays FMR a monthly management fee at an annual rate of 0.50% of its
average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. For Equity Portfolio Growth this rate cannot rise
above 0.52%, and it drops as total assets under management increase. For
Limited Term Bond and Limited Term Tax-Exempt this rate cannot rise above
0.37%, and it drops as total assets under management increase.
Equity Portfolio Income pays FMR a flat monthly management fee at an annual
rate of 0.50% of average net assets. For fiscal 1994, each fund paid the
following as a percentage of each fund's average net assets.
Total Fee
Individual (before Total Fee
Group Fund Fee reimbursement) (after reimbursement)
Fee Rate Rate
Equity Portfolio Growth
0.33% NA
Equity Portfolio Income NA NA NA 0.50%
Limited Term Bond 0.30%
Limited Term Tax-Exempt 0.25%
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on issuers
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services. The sub-advisers may also
provide investment management services for Limited Term Bond Fund. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to Limited Term Bond's investments that
the sub-adviser manages on discretionary basis.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for the Institutional shares of Equity Portfolio
Growth, Equity Portfolio Income and Limited Term Bond. Fidelity Service
Co. (FSC) calculates the NAV and dividends for the Institutional Class
shares, maintains the general accounting records of Equity Portfolio
Growth, Equity Portfolio Income and Limited Term Bond and administers the
securities lending program for each of Equity Portfolio Growth and Equity
Portfolio Income.
For fiscal 1994, Institutional Shares of each fund paid the following as a
percentage of each fund's average net assets:
FIIOC FSC
Equity Portfolio Growth % %
Equity Portfolio Income % %
Limited Term Bond % %
Limited Term Tax-Exempt % %
UMB has entered into sub-arrangements pursuant to which FIIOC performs
certain transfer agency, dividend disbursing and shareholder services for
the Institutional Class shares of Limited Term Tax-Exempt. UMB has entered
into sub-arrangements pursuant to which FSC calculates the NAV and
dividends for the Institutional Class shares of Limited Term Tax-Exempt and
maintains the fund's general accounting records. All of the fees are paid
to FIIOC by UMB, which is reimbursed by the Institutional Class shares for
such payments. In fiscal 1994, fees paid by UMB to FIIOC on behalf of the
Institutional Class shares of Limited Term Tax-Exempt amounted to ___% of
the Institutional Class share's average net assets, and fees paid by UMB to
FSC on behalf of Limited Term Tax-Exempt amounted to ___% of its average
net assets.
Each fund has adopted a Distribution and Service Plan on behalf of the
Institutional Class. Each plan recognizes that FMR may use its resources,
including management fees, to pay expenses associated with the sale of
Institutional Class shares. This may include payments to third parties,
such as banks or broker-dealers, that provide shareholder support services
or engage in the sale of the Institutional Class shares. The Board of
Trustees of each fund has authorized such payments. The Institutional Class
of each fund does not pay FMR separate fees for this service.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; 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 each fund to reduce its custodian or transfer agent
fees.
The portfolio turnover rate for fiscal 1994 was: ___% for Equity Portfolio
Growth; ___% for Equity Portfolio Income; ___% for Limited Term Bond; and,
___% for Limited Term Tax-Exempt. These rates vary from year to year. [IF
THE RATE EXCEEDS 100% FOR ONE OR MORE FUNDS: High turnover rates for [Fund
Name(s)] 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
The different ways to set up (register) your account with Fidelity are
listed below.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, tax-free funds are not available
for purchase in retirement accounts. If your employer offers a fund through
a retirement program, contact your employer for more information. Otherwise
call your Investment Professional directly.
WAYS TO SET UP YOUR ACCOUNT
THE RETIREMENT ACCOUNT OPTIONS BELOW ARE ONLY FOR THE TAXABLE FUNDS OFFERED
THROUGH THIS PROSPECTUS.
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
If you invest through an Investment Professional, read that Investment
Professional's program materials in conjunction with this prospectus for
additional service features or fees that may apply. Certain features of
the funds, such as minimum initial or subsequent investment amounts, may be
modified in these programs, and administrative charges may be imposed for
the services rendered.
EACH FUND'S SHARE PRICE, called NAV, is calculated every business day. Each
fund's Institutional shares are sold without a sales charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted. NAV is normally calculated at 4:00 p.m. Eastern
time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the Transfer Agent before 4:00 p.m. Eastern time.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page __. If there is no account application
accompanying this prospectus, call your Investment Professional or
1-800-_______.
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 in an account application with a check, or
(small solid bullet) Wire money into your account, or
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund, or
(small solid bullet) Contact your Investment Professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $100,000
TO ADD TO AN ACCOUNT $2,500
MINIMUM BALANCE $40,000
For further information on opening an account, please consult your
Investment Professional or refer to the account application.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (small solid bullet) Exchange from another
Fidelity Advisor (small solid bullet) Exchange from another
Fidelity Advisor
[1-800-______/YOUR INVESTMENT fund account with the same registration, fund account with the same registration,
PROFESSIONAL] including name, address, and taxpayer ID including name, address, and taxpayer ID
number. number.
Mail (mail_graphic) (small solid bullet) Complete and sign
the account application. (small solid bullet) Make your check payable
to the complete
Make your check payable to the complete name of the fund of your choice. Indicate
name of the fund of your choice. Mail to
the your fund account number on your check
address indicated on the application. and mail to the address printed on your
account statement.
(small solid bullet) Exchange by mail:
call 1-800-______/or your
Investment Professional for instructions.
In Person (hand_graphic) (small solid bullet) Bring your account
application and check to (small solid bullet) Bring your check to
your Investment
your Investment Professional. Professional.
Wire (wire_graphic) (small solid bullet) Call 1-800-_______
to set up your account (small solid bullet) Not available for retirement
accounts.
and to arrange a wire transaction. Not (small solid bullet) Wire to: [A/PM GET FROM OPERATIONS]
available for retirement accounts.
(small solid bullet) Wire within 24
hours to:
[A/PM GET FROM OPERATIONS.] Specify the complete name of the fund of
your choice and include your account
number and your name.
Specify the complete name of the fund of
your choice and include your new account
number and your name.
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted. NAV is
normally calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to other eligible Fidelity funds,
which can be requested by phone or in writing. Call 1-800-843-3001 or your
Investment Professional for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $40,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity Advisor account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Unless otherwise instructed, the Transfer Agent will send a check to the
record address. Deliver your letter to your Investment Professional, or
mail it to:
ITS Group ZR5
164 Northern Avenue
Boston, MA 02210
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE All account types except (small solid bullet) Maximum check request: $100,000.
1-800-843-3001/YOUR INVESTMENT retirement
PROFESSIONAL
(phone_graphic) All account types (small solid bullet) You may exchange to the same class of other
Fidelity Advisor funds if both accounts are
registered with the same name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)
(hand_graphic) Individual, Joint Tenant,(small solid bullet) The letter of instruction must be signed by all
Sole Proprietorship, persons required to sign for transactions, exactly
UGMA, UTMA as their names appear on the account.
(small solid bullet) The account owner should complete a retirement
Retirement account distribution form. Call 1-800-_____ or your
Investment Professional to request one.
Trust (small solid bullet) The trustee must sign the letter indicating capacity
as trustee. If the trustee's name is not in the
account registration, provide a copy of the trust
document certified within the last 60 days.
Business or Organization (small solid bullet) At least one person authorized by corporate
resolution to act on the account must sign the
letter.
Executor, Administrator, (small solid bullet) Call 1-800-_____ or your Investment
Conservator/Guardian Professional for instructions.
Wire (wire_graphic) All account types except (small solid bullet) You must sign up for the wire feature before
retirement using it. To verify that it is in place, call
1-800-_______. Minimum wire: $____.
(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.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor Funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the Transfer Agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
your Investment Professional if you need additional copies of financial
reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional shares and buy shares
of other Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page __.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital gains
to shareholders each year. Normally, dividends and capital gains for
Equity Portfolio Growth are distributed in January and December. Normally,
dividends for Equity Portfolio Income are distributed in March, June,
September and December. Income dividends for Limited Term Bond and Limited
Term Tax-Exempt are normally declared daily and paid monthly. Each fund
pays capital gains, if any, in December and may pay additional capital
gains after the close of its fiscal year.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 1/2 years old, you can receive distributions in cash.
When each of Equity Portfolio Growth and Equity Portfolio Income deducts a
distribution from its NAV, the reinvestment price is the applicable fund's
NAV at the close of business that day. Dividends from Limited Term Bond and
Limited Term Tax-Exempt will be reinvested at the applicable funds NAV on
the last day of the month. Capital gain distributions from Limited Term
Bond and Limited Term Tax-Exempt 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.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option.
You may change your distribution option at any time by notifying the
Transfer Agent in writing.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the fund's tax implications. If your
account is not a tax-deferred retirement account, be aware of these tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that Limited Term Tax-Exempt earns
is distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed. Distributions
from Equity Portfolio Growth, Equity Portfolio Income and Limited Term
Bond, however, are subject to federal income tax and may also be subject to
state or local taxes. If you live outside the United States, your
distributions from Equity Portfolio Growth, Equity Portfolio Income and
Limited Term Bond, could also be taxed by the country in which you reside.
For federal tax purposes, Equity Portfolio Growth, Equity Portfolio Income
and Limited Term Bond's income and short-term capital gain distributions
are taxed as dividends; long-term capital gain distributions are taxed as
long-term capital gains.
Mutual fund dividends from U.S. government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not quality 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.
During fiscal 1994, ___% of Limited Term Tax-Exempt's and ___% of Limited
Term Bond's income distributions were from U.S. government securities.
However, for shareholders of Limited Term Tax-Exempt, gain on the sale of
tax-free bonds results in taxable distributions. Short-term capital gains
and a portion of the gain on bonds purchased at a discount are taxed as
dividends. Long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them. 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.
Limited Term Tax-Exempt does not currently intend to purchase any municipal
obligations whose interest is subject to the federal alternative minimum
tax.
A portion of Limited Term Tax-Exempt's dividends may be free from state or
local taxes. Income from investments in your state are often tax-free to
you. Each year, the Transfer Agent will send you a breakdown of Limited
Term Tax-Exempt's income from each state to help you calculate your taxes.
During fiscal 1994 , __% of Limited Term Tax-Exempt's income dividends
was free from federal income 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 [every
January/at least quarterly]. However, it is up to you or your tax preparer
to determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS;
the information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution or dividend distribution, as applicable, from its NAV,
you will pay the full price for the shares and then receive a portion of
the price back in the form of a taxable distribution.
CURRENCY CONSIDERATIONS. If each of Equity Portfolio Growth, Equity
Portfolio Income and Limited Term Bond'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 Equity Portfolio Growth, Equity Portfolio Income
and Limited Term Bond 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.
EFFECT OF FOREIGN TAXES. Each of Equity Portfolio Growth, Equity Portfolio
Income and Limited Term Bond sometimes pays withholding or other taxes to
foreign governments during the year. These taxes reduce each fund's
dividends, but are included in the taxable income reported on your tax
statement. You may be able to claim an offsetting tax credit or itemized
deduction for foreign taxes paid by each fund. Your tax statement will
generally show the amount of foreign tax for which a credit or deduction
may be available.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. NAV is normally calculated as of the close of business of the
NYSE, normally 4 p.m. Eastern time.
NAV is the value of a single share. The NAV of each class is computed by
adding that class's pro rata share of the value the applicable fund's
investments, cash, and other assets, subtracting that class's pro rata
share of the value of the applicable fund's liabilities, subtracting the
liabilities allocated to that class, and dividing by the number of shares
of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to
sell one share) of Institutional Class shares are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the Transfer
Agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the Transfer Agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the Transfer Agent for instructions.
Additional documentation may be required from corporations, associations
and certain fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, shares will be purchased at the next
NAV calculated after your order is received and accepted. 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
cancelled and you could be liable for any losses or fees a fund or the
Transfer Agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives payment.
(small solid bullet) Confirmed Purchases: You begin to earn dividends as
of the business day the fund receives payment.
(small solid bullet) Automated Order Purchases: You begin to earn
dividends as of the business day your order is received and accepted.
(small solid bullet) You begin to earn dividends on your shares of Limited
Term Bond and Limited Term Tax-Exempt as of the first business day
following the dapy of your purchase.
CONFIRMED PURCHASES. For Limited Term Bond and Limited Term Tax-Exempt,
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 the close of business on the first business
day following the day your order is received and accepted. If payment is
not received by such date, the order will be cancelled and the Financial
Institution will be liable for any losses.
AUTOMATED ORDER PURCHASES. 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.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
Federal Reserve check, or direct deposit instead.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order is received and accepted. 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 Limited Term Bond and Limited Term
Tax-Exempt will earn dividends through the date of redemption; however,
shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $40,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the Transfer Agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professional who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of Investment Professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to Investment Professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As an Institutional Class shareholder, you have the privilege of exchanging
your Institutional Class shares for Institutional Class shares of other
Fidelity Advisor funds or for shares of other Fidelity funds. However, you
should note the following:
(small solid bullet) If you exchange into a fund with an applicable sales
charge, you pay that fund's sales charge.
(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) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincide
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.
FIDELITY ADVISOR INSTITUTIONAL CLASS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page; Table of Contents
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a ............................ *
b ............................ **
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management and Other Services
b,c,d ............................ Management and Other Services
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trust
i ............................ Management and Other Services
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 Distributions and Taxes
21 a, b ............................ The Distributor; Management Contracts and Other
Services
c ............................ *
22 ............................ Performance
23 ............................ **
</TABLE>
* Not Applicable
** To Be Filed By Amendment
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH: INSTITUTIONAL CLASS
A FUND OF FIDELITY ADVISOR SERIES I
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME: INSTITUTIONAL CLASS
A FUND OF FIDELITY ADVISOR SERIES III
FIDELITY ADVISOR LIMITED TERM BOND FUND: INSTITUTIONAL CLASS
A FUND OF FIDELITY ADVISOR SERIES IV
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND: INSTITUTIONAL CLASS
A FUND OF FIDELITY ADVISOR SERIES VI
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 24, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated February 24, 1995) for Institutional
Class shares. Please retain this document for future reference. Each
class' financial statements and financial highlights, included in their
respective Annual Reports for the most recent fiscal period, are separate
reports, which are incorporated herein by reference.
Additional copies of this Statement, any Prospectus, Annual or Semiannual
Report are available without charge upon request from Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts, 02109 or from
your Investment Professional.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND LIMITATIONS 2
PORTFOLIO TRANSACTIONS 18
VALUATION OF PORTFOLIO SECURITIES 20
PERFORMANCE 20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 29
DISTRIBUTIONS AND TAXES 31
FMR 32
TRUSTEES AND OFFICERS 32
MANAGEMENT AND OTHER SERVICES 34
THE DISTRIBUTOR 40
DISTRIBUTION AND SERVICE PLANS 40
DESCRIPTION OF THE TRUST 41
FINANCIAL STATEMENTS 43
INVESTMENT ADVISER
FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
INVESTMENT SUB-ADVISERS
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR FAR EAST)
DISTRIBUTOR
FIDELITY DISTRIBUTORS CORPORATION (FDC)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectuses. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other assets, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of a fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with a fund's investment
policies and limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 (the 1940 Act)) of the fund.
EQUITY PORTFOLIO GROWTH
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the Government of the United States, its agencies or
instrumentalities) if, as a result (a) more than 5% of the 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.
(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 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 (NYSE) or
the American Stock Exchange (AMEX). 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 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 assets.
(vii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the fund and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(viii) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
EQUITY PORTFOLIO INCOME
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 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);
(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;
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 of (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation). 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 securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) 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 (a) by 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 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 NYSE or AMEX. Warrants acquired by
the fund in units or attached to securities are not subject to these
restrictions.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
LIMITED TERM BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer.
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment), in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings.) Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation.
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities.
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry.
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements);
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
Investment limitation (___) is construed in conformity with the 1940 Act,
and, accordingly, "three days" means three days, exclusive of Sundays and
holidays.
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 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 (5)). 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.
(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 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.)
(iv) 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.
(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 invest in real estate
investment trusts that are not readily marketable or 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 would exceed 10% of the
fund's net assets.
(viii) 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.
(ix) 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.
(x) 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.
(xi) 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.
(xii) The fund does nor currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
FMR or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page ___.
LIMITED TERM TAX-EXEMPT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS AND
POLICIES SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
(a) more than 5% of its total assets would be invested in the securities of
such issuer; provided, however, that up to 25% of its total assets may be
invested without regard to such 5% limitation (as used in this Prospectus,
the entity which has the ultimate responsibility for the payment of
interest and principal on a particular security will be treated as its
issuer); and (b) the fund would hold more than 10% of the voting securities
of such issuer;
(2) make short sales of securities; 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 (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 (within 3 days) reduced to the extent
necessary to comply with the 33 1/3% limitation (the fund will not purchase
securities for investment while borrowings equal to 5% or more of its total
assets are outstanding);
(5) underwrite any issue of securities, except to the extent that the
purchase of municipal bonds in accordance with the fund's investment
objective, policies and limitations, either directly from the issuer, or
from an underwriter for an issuer, may be deemed to be underwriting;
(6) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
more than 25% of the fund's total assets would be invested in industrial
development bonds whose issuers are in any one industry;
(7) purchase or sell real estate, but this shall not prevent the fund from
investing in bonds or other obligations secured by real estate or interests
therein;
(8) make loans, except (a) by the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies and
limitations, and (b) by engaging in repurchase agreements;
(9) purchase the securities of other investment companies or investment
trusts;
(10) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
more than 5% of its total assets would be invested in securities, such as
industrial development bonds, where payment of principal and interest are
the responsibility of a company with less than three years' operating
history;
(11) invest in oil, gas or other mineral exploration or development
programs;
(12) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
the fund would hold the securities of any issuer other than the securities
of the fund where the Trustees and officers of the Trust, or of the
Manager, together own beneficially more than 5% of such outstanding
securities; or
(13) invest in companies for the purpose of exercising control or
management.
Investment limitation (4) is construed in conformity with the Investment
Company Act of 1940 (1940 Act) accordingly, "three days" means three days
exclusive of Sundays and holidays.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell 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
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 engage in repurchase agreements
or make loans but this limitation does not apply to purchases of debt
securities.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions"
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 (the Trustees) has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUNDS' RIGHTS AS A SHAREHOLDER. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of a fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
company's direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing third party
takeover efforts. This area of corporate activity is increasingly prone to
litigation and it is possible that a fund could be involved in lawsuits
related to such activities. FMR will monitor such activities with a view
to mitigating, to the extent possible, the risk of litigation against the
fund and the risk of actual liability if a fund is involved in litigation.
No guarantee can be made, however, that litigation against the fund will
not be undertaken or liabilities incurred.
LOWER-QUALITY DEBT SECURITIES. A fund may purchase lower-quality debt
securities (those rated below Baa by Moody's Investors Service, Inc. or BBB
by Standard and Poor's Corporation, and unrated securities judged by FMR to
be of equivalent quality) that have poor protection with respect to the
payment of interest and repayment of principal, or may be in default.
These securities are often considered to be speculative and involve greater
risk of loss or price changes due to changes in the issuer's capacity to
pay. The market prices of lower-quality debt securities may fluctuate more
than those of higher-quality debt securities and may decline significantly
in periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past
experience may not provide an accurate indication of the future performance
of the high-yield bond market, especially during periods of economic
recession. In fact, from 1989 to 1991, the percentage of lower-quality
securities that defaulted rose significantly above prior levels, although
the default rate decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-quality debt
securities and a fund's ability to sell these securities.Since the risk of
default is higher for lower-quality debt securities, FMR's research and
credit analysis are an especially important part of managing securities of
this type held by a fund. In considering investments for the 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. The tax-free bond funds may invest a
portion of their assets in lower-quality municipal securities as described
in the investment policies and risks section in the Prospectus.While the
market for municipals is considered to be substantial, adverse publicity
and changing investor perceptions may affect the ability of outside pricing
services used by a fund to value its portfolio securities, and a fund's
ability to dispose of lower-quality bonds. The outside pricing services
are monitored by FMR and reported to the Board to determine whether the
services are furnishing prices that accurately reflect fair value. The
impact of changing investor perceptions may be especially pronounced in
markets where municipal securities are thinly traded. Each fund may
choose, at its expense or in conjunction with others, to pursue litigation
or otherwise exercise its rights as a security holder to seek to protect
the interests of security holders if it determines this to be in the best
interest of the fund's shareholders.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If a fund does not receive scheduled interest or
principal payments on such indebtedness, the fund's share price and yield
could be adversely affected. Loans that are fully secured offer a fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to a fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, each fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, each fund has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against
a borrower. If assets held by the agent for the benefit of a fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by each 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.
Each 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 fundamental
investment limitations). For purposes of these limitations, each 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 each fund and the
borrower, if the participation does not shift to the fund the direct
debtor-creditor relationship with the borrower, SEC interpretations require
the fund, in appropriate circumstances, to treat both the lending bank or
other lending institution and the borrower as "issuers" for these purposes.
Treating a financial intermediary as an issuer of indebtedness may restrict
a fund's ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to a fund
in connection with bankruptcy proceedings), it is each fund's (except
Equity Portfolio Growth) current policy to engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR. Equity Portfolio Growth limits repurchase
agreement transactions to banks of the Federal Reserve System and primary
dealers in U.S. government securities.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may include
agreements to purchase and sell foreign securities in exchange for fixed
U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of the
security purchased by the fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of a
default by the counterparty, the fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the
fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve
higher credit risks than repurchase agreements in U.S. markets, as well as
risks associated with currency fluctuations. In addition, as with other
emerging market investments, repurchase agreements with counterparties
located in emerging markets or relating to emerging market securities may
involve issuers or counterparties with lower credit ratings than typical
U.S. repurchase agreements.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. A fund will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of a fund's assets and may be
viewed as a form of leverage.
DELAYED-DELIVERY TRANSACTIONS. A fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. A fund may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
a fund's other investments. If a fund remains substantially fully invested
at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, a fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, a fund does not participate in further gains or losses with respect
to the security. If the other party to a delayed-delivery transaction fails
to deliver or pay for the securities, a fund could miss a favorable price
or yield opportunity, or could suffer a loss.
A fund may renegotiate delayed-delivery transactions after they are entered
into, and may sell underlying securities before they are delivered, which
may result in capital gains or losses.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Trustees, FMR determines the
liquidity of a fund's investments and, through reports from FMR, the Board
monitors investments in illiquid instruments. In determining the liquidity
of a fund's investments, FMR may consider various factors including (1) the
frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make
a market, (4) the nature of the security (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, 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 a fund may have to close out the
option before expiration.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the NYSE and a subsidiary of
FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1) a
fund must receive 100% collateral in the form of cash or cash equivalents
(e.g., U.S. Treasury bills or notes) from the borrower; (2) the borrower
must increase the collateral whenever the market value of the securities
loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, a fund must be able to terminate the
loan at any time; (4) a fund must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) a fund may pay only reasonable custodian
fees in connection with the loan; and (6) the Board of Trustees must be
able to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names. A fund is not limited
to any particular form of swap agreement if FMR determines it is consistent
with a fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains
the rights to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease a fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, a fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. A fund expects to be able to
reduce its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of a fund's accrued
obligations under the swap agreement over the accrued amount a fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of a fund's accrued obligations under the
agreement.
INDEXED SECURITIES. A fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects. The considerations noted above generally are
intensified for investments in developing countries. Developing countries
may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally
not as developed as those in the United States, and securities of some
foreign issuers (particularly those located in developing countries) may be
less liquid and more volatile than securities of comparable U.S. issuers.
Foreign security trading practices, including those involving securities
settlement where fund assets may be released prior to receipt of payment,
may expose a fund to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer, and may involve substantial delays.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than for
U.S. 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.
Each fund may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to such transfer restrictions may be marketable abroad, they may be
less liquid than foreign securities of the same class that are not subject
to such restrictions.
A fund may invest in American Depository Receipts and European Depository
Receipts (ADRs and EDRs), which are certificates evidencing ownership of
shares of a foreign-based issuer held in trust by a bank or similar
financial institution. Designed for use in the U.S. and European securities
markets, respectively, ADRs and EDRs are alternatives to the purchase of
the underlying securities in their national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. A fund will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a fund at one rate, while offering a lesser rate
of exchange should a fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
A fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by a fund. A fund may also use swap agreements, indexed securities,
and options and futures contracts relating to foreign currencies for the
same purposes.
When a fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, a fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." A fund may also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. A fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling - for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a fund held investments denominated in
Deutschemarks, a fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased much as if a fund had sold a security denominated in one currency
and purchased an equivalent security denominated in another. Cross-hedges
protect against losses resulting from a decline in the hedged currency, but
will cause a fund to assume the risk of fluctuations in the value of the
currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management
strategies may substantially change a fund's investment exposure to changes
in currency exchange rates, and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a currency's
value rose at a time when FMR had hedged a fund by selling that currency in
exchange for dollars, a fund would be unable to participate in the
currency's appreciation. If FMR hedges currency exposure through proxy
hedges, a fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in
tandem. Similarly, if FMR increases a fund's exposure to a foreign
currency, and that currency's value declines, a fund will realize a loss.
There is no assurance that FMR's use of currency management strategies will
be advantageous to the fund or that it will hedge at an appropriate time.
REFUNDING CONTRACTS. A fund may purchase securities on a when-issued basis
in connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts require the issuer to sell and a Fund to buy refunded
municipal obligations at a stated price and yield on a settlement date that
may be several months or several years in the future. A fund generally will
not be obligated to pay the full purchase price if it fails to perform
under a refunding contract. Instead, refunding contracts generally provide
for payment of liquidated damages to the issuer (currently 15-20% of the
purchase price). A fund may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the
liquidated damages provisions of the refunding contract. When required by
SEC guidelines, a fund will place liquid assets in a segregated custodial
account equal in amount to its obligations under refunding contracts.
INVERSE FLOATERS. A fund may invest in inverse floaters, which are
instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value. A fund may invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held in trust or otherwise. These 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. A fund considers variable rate
instruments structured in this way (Participating VRDOs) to be essentially
equivalent to other VRDOs it purchases. The Internal Revenue Service (IRS)
has not ruled whether the interest on Participating VRDOs is tax-exempt
and, accordingly, a fund intends to purchase these instruments based on
opinions of bond counsel.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for a fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. A fund may acquire
standby commitments to enhance the liquidity of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, a fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
FEDERALLY TAXABLE OBLIGATIONS. A tax-exempt fund does not intend to invest
in securities whose interest is federally taxable; however, from time to
time, a tax-exempt fund may invest a portion of its assets on a temporary
basis in fixed-income obligations whose interest is subject to federal
income tax. For example, a tax-exempt fund may invest in obligations whose
interest is federally taxable pending the investment or reinvestment in
municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should a tax-exempt fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These would
include obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The tax-exempt fund's standards for high quality,
taxable obligations are essentially the same as those described by Moody's
Investors Service, Inc. (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. If such proposals were enacted, the availability of municipal
obligations and the value of the tax-exempt fund's holdings would be
affected and the Trustees would reevaluate the tax-exempt fund's investment
objectives and policies.
The tax-exempt fund anticipates being as fully invested as practicable in
municipal securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of fund shares, or in order to
meet redemption requests, the tax-exempt fund may hold cash that is not
earning income. In addition, there may be occasions when, in order to raise
cash to meet redemptions, the tax-exempt fund may be required to sell
securities at a loss.
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 LEASE OBLIGATIONS. A fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, a fund will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
the fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
INTERFUND BORROWING PROGRAM. Certain funds have received permission from
the SEC to lend money to and borrow money from other funds advised by FMR
or its affiliates, but will participate in the interfund borrowing program
only as a borrower. Interfund loans normally will extend overnight, but can
have a maximum duration of seven days. A fund will borrow through the
program only when the costs are equal to or lower than the costs of bank
loans. Loans may be called on one day's notice, and a fund may have to
borrow from a bank at a higher interest rate if an interfund loan is called
or not renewed.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities sponsored by government and non-government entities such as
banks, mortgage lenders, or other financial institutions. A
mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as 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 the fund may invest in them if FMR
determines they are consistent with the fund's investment objective and
policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
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 those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. A fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining, and closing short sales.
SHORT SALES "AGAINST THE BOX." If a fund enters into a short sale against
the box, it will be required to set aside securities equivalent in kind and
amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. A fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
WARRANTS. A fund may invest in warrants which entitle the holder to buy
equity securities at a specific price for a specific period of time.
Warrants may be considered more speculative then certain other types of
investments in that they do not entitle a holder to dividends or voting
rights with respect to the securities which may be purchased, nor do they
represent any rights in the assets of the issuing company. The value of a
warrant may be more volatile than the value of the securities underlying
the warrants. 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 the expiration date.
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, before engaging in any purchases or sales of futures
contracts or options on futures contracts. Each fund intends to comply
with Rule 4.5 under the Commodity Exchange Act, which limits the extent to
which the fund can commit assets to initial margin deposits and option
premiums.
In addition to the above limitations, a fund will not: (a) sell futures
contracts, purchase put options, or write call options if, as a result,
more than 25% of a fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or write
put options if, as a result, a fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by
a fund would exceed 5% of a fund's total assets. These limitations do not
apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate
features similar to options.
The above limitations on a fund's investments in futures contracts and
options, and a fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date.
When a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when a fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Index of 500
Stocks (S&P 500). Futures can be held until their delivery dates, or can
be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, a 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 a
fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, a 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,
a fund will lose the entire premium it paid. If a 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, a 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, a fund
must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult
to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows a fund
greater flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of a fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to: the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and for equity funds, arrangements for
payment of fund expenses. Generally, commissions for foreign investments
traded will be higher than for U.S. investments and may not be subject to
negotiation.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). Generally, FMR selects such broker-dealers
for equity funds (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff, and for other funds, based upon the
quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts. Subject to applicable
limitations of the federal securities laws, broker-dealers may receive
commissions for agency transactions that are in excess of the amount of
commissions charged by other broker-dealers in recognition of their
research and execution services. In order to cause each fund to pay such
higher commissions, FMR must determine in good faith that such commissions
are reasonable in relation to the value of the brokerage and research
services provided by such executing broker-dealers, viewed in terms of a
particular transaction or FMR's overall responsibilities to the funds and
its other clients. In reaching this determination, FMR will not attempt to
place a specific dollar value on the brokerage and research services
provided, or to determine what portion of the compensation should be
related to those services.
FMR is authorized to use research services provided by, and to place
portfolio transactions with, brokerage firms that have provided 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, Ltd. (FBSL), subsidiaries of
FMR Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. Prior to September 4, 1992, FBSL operated under the name
Fidelity Portfolio Services, Ltd. (FPSL) as a wholly owned subsidiary of
Fidelity International Limited (FIL). Edward C. Johnson 3d is Chairman of
FIL. Mr. Johnson 3d, Johnson family members, and various trusts for the
benefit of the Johnson family own, directly or indirectly, more than 25% of
the voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by Equity Portfolio Growth and Equity
Portfolio Income toward payment of each 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 1993 and 1994, respectively, each fund's
portfolio turnover rates are shown in the chart below. Because a high
turnover rate increases transaction costs and may increase taxable gains,
FMR carefully weighs the anticipated benefits of short-term investing
against these consequences. An increased turnover rate is due to a greater
volume of shareholder purchase orders, short-term interest rate volatility
and other special market conditions.
Fiscal Period Ended 1993 1994
Equity Portfolio Growth: November 30
Equity Portfolio Income November 30
Limited Term Bond Fund: November 30
Limited Term Tax-Exempt: November 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% of % of
Transactions Transactions
% Paid to % of % of Effected Effected
Firms Commissions Commissions through through
Total Providing To FBSI To FBSL To FPSL Paid to FBSI Paid to FBSL To FBSI FBSL
FISCAL PERIOD Research
ENDED 11/30
</TABLE>
EPG
1994
1993
1992
EPI
1994
1993
1992
LIMITED
TERM BOND
1994
1993
1992
LIMITED
TERM
TAX-EXEMPT
1994
1993
1992
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 OF PORTFOLIO SECURITIES
Limited Term Bond and Limited Term Tax-Exempt value securities and other
assets for which market quotations are readily available at market values
determined by their most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which such securities
normally are traded as furnished by recognized dealers in such securities
or assets. Futures contracts and options are valued on the basis of
available market quotations if available.
Securities of the above-mentioned funds may also be valued on the basis of
valuations furnished by a pricing service which utilizes both
dealer-supplied valuations and evaluations based on expert analysis of the
market data and other factors if such valuations are believed to reflect
more accurately the fair value of such securities. Use of a pricing service
has been approved by the Board of Trustees. There are a number of pricing
services available, and the Trustees, on the basis of an on-going
evaluation of these services, may use other pricing services or discontinue
the use of any pricing service in whole or in part. Securities and other
assets not valued by a pricing service or for which market quotations are
not readily available (including restricted securities, if any) are
appraised at their fair value in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
For Limited Term Tax-Exempt, valuations of portfolio securities furnished
by the pricing service employed by a fund are based upon a computerized
matrix system and/or appraisals by the pricing service, in each case in
reliance upon information concerning market transactions and quotations
from recognized municipal securities dealers. The methods used by the
pricing service and the quality of valuations so established are reviewed
by officers of the Trust and Fidelity Service Company under the general
supervision of the Trustees or officers acting on behalf of the Board of
Trustees.
Portfolio securities of Equity Portfolio Growth and Equity Portfolio Income
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. Short-term
securities (securities having a maturity of one year or less) are valued
either at amortized cost or at original cost plus accrued interest, both of
which approximate current value. Convertible securities and fixed-income
securities are valued primarily by a pricing service that uses a vendor
security valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. This two-fold
approach is believed to more accurately reflect fair value because it takes
into account appropriate factors such as institutional trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data, without exclusive reliance
upon quoted, exchange, or over-the counter prices. Use of pricing services
has been approved by the Board of Trustees. All other securities and other
assets are appraised at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Generally, the valuation of portfolio securities and other assets held by a
fund is substantially completed each day at the close of the NYSE. The
values of any such securities or other assets held by a fund are determined
as of such time for the purpose of computing the fund's net asset value.
PERFORMANCE
Institutional 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. Each fund's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of fund shares when redeemed may be more or
less than their original cost.
YIELD CALCULATIONS. Yields for a 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 NAV or offering
price at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate.
Yields do not reflect any contingent deferred sales charge. 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 after taxes to equal the class's tax-free yield.
Tax-equivalent yields are calculated by dividing a class's yield by the
result of one minus a stated federal or combined federal and state tax
rate. If any portion of a class's yield is tax-exempt, only that portion
is adjusted in the calculation.
1995 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Federal State Single Return Joint Return
Taxable Income* Income Tax Marginal Combined Income Combined Income
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket Rate Tax Bracket** Tax Bracket**
</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.
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1995. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from _% to _%. Of course, no assurance can
be given that a class will achieve any specific tax-exempt yield. While
the funds invests principally in obligations whose interest is exempt from
federal income tax, other income received by the funds may be taxable.
1995 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
Income Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
8.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Single Return Joint Return* Bracket Then taxable-equivalent yield is:
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A tax-free fund may invest a portion of its assets in obligations that are
subject to federal income tax. When the fund invests in these obligations,
its tax-equivalent yields will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the NAV over a stated
period. Average annual total returns are calculated by determining the
growth or decline in value of a hypothetical historical investment over a
stated period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
total return of 100% over ten years would produce an average annual return
of 7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. For class's less than one year
old, average annual returns covering periods of less than one year are
calculated by determining a 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
returns are a convenient means of comparing investment alternatives,
investors should realize that performance is not constant over time, but
changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance.
In addition to average annual total returns, unaveraged or cumulative total
returns reflecting the simple change in value of an investment over a
stated period may be quoted. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount, and may be calculated
for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking the
maximum front-end or contingent deferred sales charge into account.
Excluding the sales charge from a total return calculation produces a
higher total return figure. Total returns, yield, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using net asset values, adjusted net
asset values, and benchmark indices may be used to exhibit performance. An
adjusted NAV includes any distributions paid and reflects all elements of
its return. Unless otherwise indicated, adjusted NAVs are not adjusted for
sales charges, if any
MOVING AVERAGES. A growth or growth and income fund may illustrate
performance using moving averages. A long-term moving average is the
average of each week's adjusted closing NAV for a specified period. A
short-term moving average is the average of each day's adjusted closing NAV
for a specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving averages
for a specified period to produce indicators showing when an NAV has
crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown below:
As of 13-Week 39-Week
Equity Portfolio Growth:
Equity Portfolio Income:
HISTORICAL BOND FUND RESULTS. The following tables show yields,
tax-equivalent yields (for tax-free funds), and total returns for periods
ended _______, 199_ for each class of the following funds. The
tax-equivalent yield is based on a __% federal income tax rate. Note that
each fund may invest in securities whose income is subject to the federal
alternative minimum tax.
Average Annual Total Returns Cumulative Total Returns
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Equivalent One Five Ten Years/ One Five Ten Years/
Yield Yield Year Years Life of Fund* Year Years Life of Fund*
LIMITED
TERM
BOND-A
LIMITED
TERM
BOND-B
LIMITED
TERM
BOND-INST.
LTD TERM
TAX-EXEM
PT-A
LTD TERM
TAX-EXEM
PT-B
LTD TERM
TAX-EXEM
PT-INST.
</TABLE>
* From _________, 19__ (commencement of operations).
** Total return figures include the effect of the class's 4.75% front-end
sales charge.
*** Total return figures include the effect of the class's maximum 4.0%
CDSC.
Note: If FMR had not reimbursed certain fund expenses during these
periods, the yield and total returns for each class of ________________
would have been lower.
HISTORICAL EQUITY FUND RESULTS. The following table shows the total
returns for periods ended _______, 199_.
Average Annual Total Returns Cumulative Total Returns
One Five Ten Years/ One Five Ten Years/
Year Years Life of Fund* Year Years Life of Fund*
EPG-A
EPG-INST.
EPI-A
EPI-B
EPI-INST.
* From _________, 19__ (commencement of operations).
** Total return figures include the effect of the class's 4.75% front-end
sales charge.
*** Total return figures include the effect of the class's maximum 4.0%
CDSC.
Note: If FMR had not reimbursed certain fund expenses during these
periods, [the/each] fund's total returns would have 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 fund's return to the record of the Aggregate Bond Index
Portfolio (bond funds only), the S&P 500 (equity funds only), the Dow Jones
Industrial Average (DJIA) (equity funds only), and the cost of living
(measured by the Consumer Price Index (CPI) over the same period. The CPI
information is as of the month end closest to the initial investment date
for each fund. Returns for international bond funds may be compared to the
following indices: the J.P. Morgan Emerging Markets Bond Index, a broad
measure of bond performance in developing countries; the Salomon Brothers
World Government Bond Index, which measures the performance of bonds issued
by the U.S. and foreign governments; and the Lehman Brothers 1-3 Year
Government Bond Index, which measures the performance of short-term U.S.
government bonds. The comparisons to the Aggregate Bond Index Portfolio
show a class's total return compared to the record of a broad average of
debt securities. The Aggregate Bond Index is a total return index
measuring both the capital price changes and the income underlying the
universe of securities weighted by market value outstanding, and, unlike a
class's returns, its returns do not include the effect of paying brokerage
commissions and other costs of investing. The S&P 500 and DJIA comparisons
are provided to show how each class's total return compared to the record
of a broad average of common stock prices and a narrower set of stocks of
major industrial companies, respectively, over the same period. Of course,
since bond funds invest in fixed-income securities, common stocks represent
a different type of investment from the fund. Common stocks generally
offer greater growth potential than mutual funds, 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 funds. Each fund has the ability to invest in
securities not included in either index, and its investment portfolio may
or may not be similar in composition to the indices. Figures for the S&P
500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the classes' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
The following charts show the growth of a hypothetical $10,000 investment
in each class, assuming all distributions were reinvested. This was a
period of fluctuating interest rates, bond prices, and stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the class today. Tax consequences of different investments have not been
factored into the figures.
INSTITUTIONAL CLASS CHARTS. Institutional Class shares are sold to eligible
investors without a sales charge or a 12b-1 fee.
CLASS A CHARTS. Class A shares are sold to eligible investors with a
maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On 9/10/92, a .65% (for equity funds) or a .25%
(for fixed-income funds) 12b-1 fee for all Class A shares was imposed. The
Class A 12b-1 fee is not reflected in figures prior to that date. The
initial offering of Class A shares for Equity Portfolio Growth, Equity
Portfolio Income, Limited Term Tax-Exempt, and Limited Term Bond was
9/10/92. Prior to that date, the figures for these funds reflect
Institutional Class data, i.e., no sales charge or 12b-1 fee.
CLASS B CHARTS. Class B shares are sold to eligible investors with a 1.00%
12b-1 fee and may be subject to the contingent deferred sales charge upon
redemption (maximum 4.00%). The 1.00% 12b-1 fee is reflected in figures for
the period beginning on 6/30/94, the initial offering date of Class B
shares. Prior to that date, the figures for Class B shares reflect Class A
and Institutional class data, as applicable, for the particular fund, as
described above.
EQUITY PORTFOLIO GROWTH-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
[IF APPROPRIATE: * From ________, 19__ (commencement of operations).]
[IF APPROPRIATE: ** From month-end closest to initial investment date.]
EQUITY PORTFOLIO GROWTH-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
[IF APPROPRIATE: * From ________, 19__ (commencement of operations).]
[IF APPROPRIATE: ** From month-end closest to initial investment date.]
EQUITY PORTFOLIO INCOME-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From April 25, 1983 (commencement of operations).
[IF APPROPRIATE: ** From month-end closest to initial investment date.]
EQUITY PORTFOLIO INCOME-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From April 25, 1983 (commencement of operations).
[IF APPROPRIATE: ** From month-end closest to initial investment date.]
EQUITY PORTFOLIO INCOME-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From April 25, 1983 (commencement of operations).
[IF APPROPRIATE: ** From month-end closest to initial investment date.]
LIMITED TERM BOND-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From February 2, 1984 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM BOND-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From February 2, 1984 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM BOND-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From February 2, 1984 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM TAX-EXEMPT-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM TAX-EXEMPT-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
The yield for the S&P 500 for the year ended _______ was __%, 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 ______. The S&P 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.
The following table reflects the cost of the initial $10,000 investment in
each of the classes, plus the aggregate cost of reinvested dividends and
capital gain distributions, if any, from the fund's commencement of
operations to the end of its fiscal period in 1994. If no additional
shares of these funds had been acquired through the reinvestment of
distributions, the cash payments from these funds would have come to the
amounts shown in column (A) for capital gain distributions, and the amounts
shown in column (B) for income dividends. No adjustment has been made for
a shareholder's income tax liability on dividends and capital gain
distributions.
(A) (B)
CAPITAL GAIN INCOME
FUND COST DISTRIBUTIONS DIVIDENDS
Equity Portfolio Growth-A
Equity Portfolio Growth-Institutional
Equity Portfolio Income-A
Equity Portfolio Income-B
Equity Portfolio Income-Institutional
Limited Term Bond-A
Limited Term Bond-B
Limited Term Bond-Institutional
Limited Term Tax-Exempt-A
Limited Term Tax-Exempt-B
Limited Term Tax-Exempt-Institutional
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 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; Fidelity Asset Allocation Program materials,
including computerized investment planning software and a workbook
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to assess
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
AverageS(trademark)/All Taxable (Strategic Income, High Yield, Short-Fixed)
, The Bond fund Report AverageS(trademark)/Municipal (Limited Term
Tax-Exempt, High Income Municipal, Short-Intermediate Tax-Exempt) and which
is reported in the BOND FUND REPORT(registered trademark), covers over ___
taxable bond 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 tax-free bond fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales
charges of many tax-free 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.
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 the fund's
historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents the
class's percentage change in price movements over that period. Examples of
the effects of periodic investment plans, including the principle of dollar
cost averaging may be advertised. In such a program, an investor invests a
fixed dollar amount in a class at periodic intervals, thereby purchasing
fewer shares when prices are high and more shares when prices are low.
While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than
if fixed numbers of shares are purchased at the same intervals. In
evaluating such a plan, investors should consider their ability to continue
purchasing shares during periods of low price levels.
A class 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 _________, 199_, FMR advised over $__ billion in tax-free fund
assets, $__ billion in money market fund assets, $___ billion in equity
fund assets, and $__ billion in international fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad, with over __ employees in over __ foreign countries.
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.
Each fund may present its fund number, Quotron number and CUSIP number and
discuss or quote its current portfolio manager.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the Investment Company Act of 1940 (the 1940
Act), FDC exercises its right to waive Class A's maximum 4.75% (1.50% for
Short-Fixed Income and Short-Intermediate Tax-Exempt) sales charge in
connection with the fund's merger with or acquisition of any investment
company or trust. In addition, FDC has chosen to waive Class A's sales
charge in certain instances because of efficiencies involved in those sales
of shares. The sales charge will not apply:
1. to shares purchased in connection with an employee benefit plan
(including the Fidelity-sponsored 403(b) and corporate IRA programs but
otherwise as defined in the Employee Retirement Income Security Act
(ERISA)) maintained by a U.S. employer and having more than 200 eligible
employees, or a minimum of $1,000,000 in plan assets invested in the assets
of which are held in a bona fide trust for the exclusive benefit of
employees participating therein;
2. 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;
3. 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;
4. to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
5. 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);
6. 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;
7. 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;
8. to shares purchased by a trust institution or bank trust department
investing on their own behalf or on the behalf of their clients;
9. to shares purchased by accounts to which a bank or broker-dealer charges
an asset management fee, provided the bank or broker-dealer has an
Agreement with Distributors;
10. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency; or
11. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end sales charge only
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, you or your Investment Professional must notify the
Transfer Agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company" as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Internal
Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A shares after you have reached a new breakpoint in a
fund's sales charge schedule. The value of currently held Fidelity Advisor
Fund Class A and Class B shares, and Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio and shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund acquired
by exchange from any Fidelity Advisor fund, is determined at the current
day's NAV at the close of business, and is added to the amount of your new
purchase valued at the current offering price to determine your reduced
front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Advisor Short Fixed-Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund) had been invested at one time. To
ensure that the reduced front-end sales charge will be received on future
purchases, you or your Investment Professional must inform the Transfer
Agent that the Letter is in effect each time Class A shares are purchased.
Neither income nor capital gain distributions taken in additional Class A
or Class B shares will apply toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then current offering price applicable to total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
Each fund is open for business and the NAV for each class is calculated
each day the NYSE is open for trading. The NYSE has designated the
following holiday closings for 1995: New Year's Day (observed),
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. Each class's NAV is calculated as of the
close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV may be
calculated earlier if trading on the NYSE is restricted or as permitted by
the SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, a class's NAV may be affected on
days when investors do not have access to the fund to purchase or redeem
shares. In addition, trading in some of a fund's portfolio securities may
not occur on days when the fund is open for business. Certain Fidelity
funds may follow different holiday closing schedules.
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, the Transfer Agent may reinvest your distributions
at the then-current NAV. All subsequent distributions will then be
reinvested until you provide the Transfer Agent with alternate
instructions.
DIVIDENDS. A portion of a Fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that a Fund's income is derived from qualifying dividends. Because
a Fund may also earn other types of income, such as interest, income from
securities loans, non-qualifying dividends and short-term capital gains,
the percentage of dividends from the equity portfolios that qualify for the
deduction will generally be less than 100%. A Fund will notify corporate
shareholders annually of the percentage of Fund dividends which qualify for
the dividends received deduction. A portion of a Fund's dividends derived
from certain U.S. Government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore will increase (decrease)
dividend distributions. A Fund will send each shareholder a notice in
January describing the tax status of dividends and capital gain
distributions for the prior year.
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 purpos es of a fund's policies of investing so
that at least 80% of its income is free from federal income tax. Interest
from private activity securities is a tax preference item for the
purpose of determining whether a taxpayer is subject to the AMT and the
amount of AMT tax to be paid, if any. Private activity securities issued
after August 7, 1986 to benefit a private or industrial user or to finance
a private facility are affected by this rule.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by a Fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a Fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
A portion of the gain on bonds purchased at a discount after April 30, 1993
and short-term capital gains distributed by the Fund are federally taxable
to shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions resulting from a recharacterization of
gain from the sale of bonds purchased at a discount after April 30, 1993
are not considered income for the purposes of the Fund's policy of
investing so that at least 80% of its income is free from federal income
tax.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because none of the
funds currently anticipate that securities of foreign corporations will
constitute more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUNDS. Each Fund has qualified and intends to continue
to qualify as a "regulated investment company" for tax purposes, so that it
will not be liable for federal tax on income and capital gains distributed
to shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes, 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 must constitute
less than 30% of a 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, called
passive foreign investment companies (PFICs), 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.
Each Fund is treated as a separate entity from the other funds in its
Trust, if any, for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting a 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 distributions received from a Fund. Investors
should consult their tax advisors to determine whether a Fund is suitable
for their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, 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 require pre-clearance, and participation in initial public
offerings is prohibited. In addition, restrictions on the timing of
personal investing in relation to trades by Fidelity funds and on
short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Trusts are listed
below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. All persons
named as Trustees and officers also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of
each Trustee and officer is 82 Devonshire Street, Boston, MA 02109, which
is also the address of FMR. Those Trustees who are "interested persons"
(as defined in the 1940 Act) by virtue of their affiliation with either the
Fund or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, 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. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, a Trustee and member of
the Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) 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, 1989) 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, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), 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,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership
Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
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. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, 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).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.[equity funds only: WILLIAM J. HAYES, Vice President (1994),
is Vice President of Fidelity's equity funds; Senior Vice President of FMR;
and Managing Director of FMR Corp.]
ROBERT A. LAWRENCE, 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).
THOMAS J. STEFFANCI, Vice President (1994), is Vice President of Fidelity's
fixed-income funds and Senior Vice President of FMR (1993). Prior to
joining FMR, Mr. Steffanci was Senior Managing Director of CMB Investment
Counselors (1984-1990).
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's equity
funds, is Vice President of FMR
MICHAEL GRAY, is Vice President of Limited Term Bond (1989) and an employee
of FMR.
JOHN F. HALEY, JR., is Vice President of Limited Term Tax-Exempt, and an
employee of FMR.
ROBERT STANSKY, is Vice President of Equity Portfolio Growth (1991) and of
other funds advised by FMR, and an employee of FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham, and
David L. Yunich participate in the program.
On _______________________, the trustees and officers owned in the
aggregate less than 1% of each fund's outstanding shares.
MANAGEMENT AND OTHER SERVICES
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, as
applicable, to State Street Bank and Trust Company (State Street), transfer
agent for Class A shares of taxable funds; FIIOC, transfer agent for Class
B shares of taxable funds; FSC, pricing and bookeeping agent for taxable
funds; and United Missouri Bank, N.A. (UMB), transfer agent and pricing and
bookeeping agent for non-taxable funds; 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, the Trust, on behalf of each 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.
State Street is transfer and dividend-disbursing and shareholder servicing
agent for Class A shares of each taxable fund and maintains its shareholder
records. State Street has delegated certain transfer, dividend paying and
shareholder services to FIIOC, an affiliate of FMR. Under a revised fee
arrangement effective January 1, 1993, each class pays a per account fee
and a monetary transaction fee of $30 and $6, respectively. For accounts
that FIIOC maintains on behalf of State Street, FIIOC receives all such
fees. For accounts as to which FIIOC provides limited services, FIIOC may
receive a portion (currently up to $20 and $6, respectively) of related per
account fees and monetary transaction fees, less applicable charges and
expenses of State Street for account maintenance and transactions.
Service, an affiliate of FMR, performs the calculations necessary to
determine the NAV and dividends and maintain the accounting recordsfor each
class of each taxable fund. Prior to July 1, 1991, the annual fee for
these pricing and bookkeeping services was based on two schedules, one
pertaining to a fund's average net assets, and one pertaining to the type
and number of transactions made by a class of a fund. The fee rates in
effect as of July 1, 1991 are based on each fund's average net assets,
specifically, .06% for the first $500 million of average net assets and
.03% for average net assets in excess of $500 million. The fee is limited
to a minimum of $45,000 and a maximum of $750,000 per year. Service also
receives fees for administering a fund's securities lending program.
Securities lending fees are based on the number and duration of
individual securities loans.
FMR is each fund's manager pursuant to management contracts approved by
shareholders on the dates shown in the table below. The management fee paid
to FMR is reduced by an amount equal to the fees and expenses of the
non-interested Trustees.
Date of Management Contract Date of Shareholder Approval
Equity Portfolio Growth: 12/1/90
Equity Portfolio Income 8/1/86
Limited Term Bond Fund: 1/29/89 11/15/88
Limited Term Tax-Exempt 1/29/89 11/26/86
For the services of FMR under the contract, Equity Portfolio Income pays
FMR a monthly management fee at the annual rate of .50% of the average net
assets of Equity Portfolio Income throughout the month. For the fiscal
years ended November 30, 1994, 1993, and 1992, FMR received $_________,
$________ and $___________, respectively, after reduction of fees and
expenses of the non-interested Trustees.
For the services of FMR under the contract, Equity Portfolio Growth,
Limited Term Bond, and Limited Term Tax-Exempt pay FMR a monthly management
fee composed of a basic fee.
COMPUTING THE BASIC FEE. Equity Portfolio Growth, Limited Term Bond, and
Limited Term Tax-Exempt's basic fee rates are composed of two elements: a
group fee rate and an individual fund fee rate. The group fee rate is based
on the monthly average net assets of all of the registered investment
companies with which FMR has management contracts and is calculated on a
cumulative basis pursuant to the graduated fee rate schedule shown below on
the left. Also shown below on the right is the effective annual group fee
rate schedule which is the result of cumulatively applying the annualized
rates at varying asset levels. For example, the effective annual fee rate
at ___billion of group net assets - the approximate level for
____________________- was ___%, which is the weighted average of the
respective fee rates for each level of group net assets up to that level.
FIXED-INCOME FUNDS
The following fee schedule is the current fee schedule for all fixed-income
funds.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
This fee schedule was approved by shareholders of all fixed-income funds
except Limited Term Tax-Exempt Fund. (See chart indicating Date of
Management Contract and Shareholder Approval.)
Under Limited Term Tax-Exempt Fund's current management contract, the group
fee rate is based on a schedule with breakpoints ending at .1400% for
average group net assets in excess of $174 billion. The following Fee
schedule is the fee schedule which was in effect through August 1, 1994,
and was either approved by shareholders or voluntarily adopted by FMR.
Group fee rate breakpoints shown for average group net assets in excess of
$120 billion and under $228 billion were voluntarily adopted by FMR, and
went into effect on January 1, 1992. Additional breakpoints for average
group net assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
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
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity funds
(except Equity Portfolio Income, see above).
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE
RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
This fee schedule was approved by shareholders of all equity funds except
Equity Portfolio Growth and Equity Portfolio Income (see chart indicating
date of management contract and date of shareholder approval.)
Under Equity Portfolio Growth's current management contract, the group fee
rate is based on a schedule with breakpoints ending at .3000% for average
group net assets in excess of $174 billion.
The following fee schedule is the fee schedule which was in effect through
August 1, 1994, and was either approved by shareholders or voluntarily
adopted by FMR.
Group fee rate breakpoints shown for average group net assets in excess of
$138 billion and under $228 billion were voluntarily adopted by FMR, and
went into effect on January 1, 1992. Additional breakpoints for average
group net assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
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
Based on the average group net assets of the funds advised by FMR for
[fiscal year end,year], the annual basic fee rate would be calculated as
follows:
Group Fee Rate Individual Fund Fee Rate
Basic Fee Rate.
Equity Portfolio Growth
_______% + .__________%
= ._______%
Limited Term Bond
_______% + .30%
= ._______%
Limited Term Tax-Exempt
_______% + .25%
= ._______%
One-twelfth of this annual basic fee rate is applied to each fund's net
assets averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
During the fiscal years ended November 30, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Limited Term Tax-Exempt. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Limited Term Tax-Exempt for each of those years.
During the fiscal years ended November 30, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Equity Portfolio Growth. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Equity Portfolio Growth for each of those years.
During the fiscal years ended November 30, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Limited Term Bond. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Limited Term Bond for each of those years.
FUND OPERATION EXPENSE REIMBURSEMENTS. FMR may, from time to time,
voluntarily reimburse all or a portion of a fund's operation expenses
(exclusive of interest, taxes, brokerage commissions, and extraordinary
expenses) above a specified percentage of average net assets. FMR retains
the ability to be repaid for these expense reimbursements in the amount
that expenses fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase each fund's total returns
and/or yield and reimbursement by each fund will lower its total returns
and/or yield.
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Limited Term Bond if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of __% of average net assets of Limited Term Bond. If this
reimbursement had not been in effect, for the fiscal years ended November
30, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Equity Portfolio Growth if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of __% of average net assets of Equity Portfolio Growth.
If this reimbursement had not been in effect, for the fiscal years ended
November 30, 1994, 1993, and 1992, FMR would have received fees amounting
to $_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Equity Portfolio Income if and to the extent
that its aggregate operating expenses, including management fees, were in
excess of an annual rate of __% of average net assets of Equity Portfolio
Income. If this reimbursement had not been in effect, for the fiscal years
ended November 30, 1994, 1993, and 1992, FMR would have received fees
amounting to $_________, $___________, and $_________, respectively, which
would have been equivalent to __%, __%, and __% of average net assets of
the fund (after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Limited Term Tax-Exempt if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of ___% of average net assets of Limited Term Tax-Exempt.
If this reimbursement had not been in effect, for the fiscal years ended
November 30, 1994, 1993, and 1992, FMR would have received fees amounting
to $_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that each fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating each fund's expenses for purposes of this regulation,each
fund of 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 Portfolio Income, Limited Term Bond, and
Equity Portfolio Growth, FMR has entered into sub-advisory agreements with
FMR U.K. and FMR Far East. Pursuant to the sub-advisory agreements, FMR may
receive investment advice and research services outside the United States
from the sub-advisers.
On behalf of Limited Term Bond, 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. and FMR Far East each focus on issuers in countries
other than the United States such as those in Europe, Asia, and the Pacific
Basin. FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays the
fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far East
fees equal to 110% and 105%, respectively, of FMR U.K.'s and FMR Far East's
costs incurred in connection with providing investment advice and research
services.
(medium solid bullet) 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.
FEES PAID TO FOREIGN SUB-ADVISERS
FUND FEES PAID BY FMR TO FMR U.K. FEES PAID BY FMR TO FMR FAR EAST
FISCAL 1994 FISCAL 1993 FISCAL 1992 FISCAL 1994 FISCAL 1993 FISCAL 1992
Equity Portfolio Growth
Equity Portfolio Income
Limited Term Bond
THE DISTRIBUTOR
Each Fund has a Distribution Agreement with Distributors, a Massachusetts
corporation organized July 18, 1960. Distributors is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. The distribution
agreement calls for Distributors to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of a Fund, which
are continuously offered. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by Distributors.
DISTRIBUTION AND SERVICE PLANS
The Trustees have adopted a Distribution and Service Plan on behalf of
Class A and Class B shares of the funds (the Plans) pursuant to Rule 12b-1
under the Investment Company Act of 1940 (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 adopted by the fund under the
Rule. The Trustees have adopted the Plans to allow Class A and Class B
shares of the funds 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 Plans, FDC is paid a distribution fee at an annual rate of
up to 0.75% for Equity Portfolio Growth; up to 0.40% for Limited Term Bond
and Limited-Term Tax-Exempt; and up to 0.65% for Equity Portfolio Income's
average net assets and 0.75% of Class B's average net assets for all funds
with Class B shares determined as of the close of business on each day
throughout the month, but excluding assets attributable to Class A shares
of Equity Portfolio Growth, Equity Portfolio Income, and Limited Term
Tax-Exempt purchased more than 144 months prior to such day. Currently, the
Trustees have approved a distribution fee for Equity Portfolio Growth and
Equity Portfolio Income at an annual rate of 0.65% and for Limited Term
Bond and Limited Term Tax-Exempt at an annual rate of 0.25% of each fund's
average net assets. This fee may be increased only when, in the opinion of
the Trustees, it is in the best interests of the shareholders of Class A to
do so. Class B of each fund also pays Investment Professionals a service
fee at an annual rate of .25% of its average daily net assets determined as
of the close of business on each day throughout the month for personal
service and/or the maintenance of shareholder accounts.
CLASS A DISTRIBUTION FEES
1992
1993
1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paid to Paid to Paid to
Investm Investm Investm
ent Retaine ent Retaine ent Retaine
Professi d by Total Professi d by Total Professi d by Total
FUND onals FDC Fees onals FDC Fees onals FDC Fees
Equity Portfolio Growth
Equity Portfolio Income
Limited Term Bond
Limited Term Tax-Exempt
</TABLE>
CLASS B DISTRIBUTION FEES
1992
1993
1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareho Shareho Shareho
lder Retaine lder Retaine lder Retaine
Service d by Total Service d by Total Service d by Total
FUND Fees FDC Fees Fees FDC Fees Fees FDC Fees
Equity Portfolio Income
Limited Term Bond
Limited Term Tax-Exempt
</TABLE>
Each Plan also specifically recognizes that FMR, either directly or through
FDC, may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the applicable class of
each fund. Under each Plan, if the payment by the fund to FMR of management
fees should be deemed to be indirect financing of the distribution of
shares of the applicable class of each fund, such payment is authorized by
the Plan. In addition, each Plan provides that FMR may use its resources,
including its management fee revenues, to make payments to third parties
that assist in selling shares of the applicable class of each fund or to
third parties, including banks, that render shareholder support services.
Each Plan has been approved by the Trustees. As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implementation of each Plan prior to its approval, and have determined that
there is a reasonable likelihood that the Plan will benefit the class and
its shareholders. 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.
Additionally, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders have
other relationships.
None of the Plans provide for specific payments by the applicable class of
any of the expenses of FDC, or obligates 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 shareholders on the dates shown in the table
below:
Date of Shareholder Approval
Class A Class B
Equity Portfolio Growth 9/25/86 N/A
Equity Portfolio Income 7/23/86 6/26/94
Limited Term Bond 1/1/95 6/26/94
Limited Term Tax-Exempt 6/26/94
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 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 Plan. No
preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Equity Portfolio Growth is a series of Fidelity Advisor
Series I, an open-end management investment company organized as a
Massachusetts business trust on June 24, 1983, as amended and restated July
18,1991 and as supplemented April 15, 1993. On July 18, 1991, the name was
changed from Equity Portfolio Growth to Fidelity Broad Street Trust. On
April 15, 1993 its name was changed by an amendment to the Declaration of
Trust from Fidelity Broad Street Trust: Equity Portfolio: Growth to
Fidelity Advisor Series I: Equity Portfolio Growth.
Equity Portfolio Income is a series of Fidelity Advisor Series III, an
open-end management investment company organized as a Massachusetts
business trust on May 17, 1982. On January 29, 1986, the name was changed
from Equity Portfolio: Income to Fidelity Franklin Street Trust. On April
15, 1993 the Trust's name was again changed to Fidelity Advisor Series III.
Limited Term Bond Fund is a series of Fidelity Advisor Series IV, an
open-end management investment company organized as a Massachusetts
business trust on 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.
Short-Intermediate Tax-Exempt Fund and Limited-Term Tax-Exempt Fund are
series of Fidelity Advisor Series VI, an open-end management investment
company organized as a Massachusetts business trust on 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.
Each Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the Trust or a
fund, the right of the Trust or Fund to use the identifying name "Fidelity"
may be withdrawn.
The assets of the Trust received for the issue or sale of shares of each
series and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such series,
and constitute the underlying assets of such fund. The underlying assets
of each series are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of the Trust. Expenses with respect to the Trust are
to be allocated in proportion to the asset value of the respective series,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given series, or which are general or allocable to all of the series. In
the event of the dissolution or liquidation of the Trust, shareholders of
each series are entitled to receive as a class the underlying assets of
such series available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each Trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the Trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
Trust or the Trustees include a provision limiting the obligations created
thereby to the Trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholders held
personally liable for the obligations of the Fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
Fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for neglect or wrongdoing,
but nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties in the conduct of his office. Claims asserted against Class A
shares may subject holders of Class B shares to certain liabilities and
claims asserted against Class B shares may subject holders of Class A
shares to certain liabilities.
VOTING RIGHTS. A Fund's capital consists of shares of beneficial interest.
The shares have no preemptive or conversion rights; the voting and dividend
rights, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of a Trust or a fund or class
of a fund may, as set forth in the Declaration of Trust, call meetings of
the Trust , fund or class of a fund for any purpose, related to the Trust
or fund, as the case may be, including the case of meeting of the Trust,
the purpose of voting on removal of one or more Trustees. The Trust or any
fund may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of its
assets, if approved by vote of the holders of a majority of the outstanding
shares of the Trust or Fund . If not so terminated, the Trust and funds
will continue indefinitely
As of ____, 1995, the following owned of record or beneficially more than
5% of the outstanding shares of the following Fidelity Advisor classes:
Equity Portfolio Growth-Class A:
Equity Portfolio Growth-Institutional Class:
Equity Portfolio Income-Class A:
Equity Portfolio Income-Class B:
Equity Portfolio Income-Institutional Class:
Limited Term Bond-Class A:
Limited Term Bond-Class B:
Limited Term Tax-Exempt-Class A:
Limited Term Tax-Exempt-Class B:
Limited Term Tax-Exempt-Institutional Class:
CUSTODIAN. The Chase Manhattan Bank, 1211 Avenue of the Americas, New York,
New York, is custodian of the assets of Equity Portfolio Growth and Equity
Portfolio Income. The Bank of New York, 110 Washington Street, New York,
New York, is custodian of the assets of Limited Term Bond. United Missouri
Bank, 1010 Grand Avenue, Kansas City, Missouri, is custodian of the assets
of Limited Term Tax-Exempt. The custodian is responsible for the
safekeeping of the Fund's assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the
investment policies of the Fund or in deciding which securities are
purchased or sold by a Fund. A Fund may, however, invest in obligations of
the custodian and may purchase securities from or sell securities to the
custodian.
FMR, its officers and directors, its affiliated companies, and the Trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the Funds advised by
FMR. The Boston branch of the Fund's custodian bank leases its office
space from an affiliate of FMR at a lease payment which, when entered into,
was consistent with prevailing market rates. Transactions that have
occurred to date have included mortgages and personal and general business
loans. In the judgment of FMR, the terms and conditions of those
transactions were not influenced by existing or potential custodial or
other fund relationships
AUDITOR. ______________________ serves as the independent accountant for
Equity Portfolio Growth, Equity Portfolio Income, Limited Term Bond, and
Limited Term Tax-Exempt. The auditor examines financial statements for the
Fund and provides other audit, tax, and related services.
FINANCIAL STATEMENTS
Each class' financial statements and financial highlights for the fiscal
period ended November 30, 1994 are included in the Annual Report, which is
a separate report supplied with this Statement of Additional Information.
Each class' financial statements and financial highlights are incorporated
herein by reference.
FIDELITY ADVISOR CLASS A & CLASS B PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 .............................. Expenses
3 a,b .............................. **
c .............................. Performance
d .............................. Cover Page
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. FMR and Its Affiliates
d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates; Breakdown of Expenses
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. FMR and Its Affiliates
c .............................. Charter
d .............................. Cover Page; Charter
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Transaction Details; Breakdown of Expenses
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
** To Be Filed By Amendment
FIDELITY ADVISOR FUNDS
CLASS A AND CLASS B
Equity Portfolio Income, Limited Term Bond and Limited Term Tax-Exempt are
comprised of three classes of shares: Class A, Class B and Institutional
Class. Strategic Opportunities is comprised of three classes of shares:
Class A, Class B and Initial Shares. Equity Portfolio Growth is comprised
of two classes of shares: Class A and Institutional Class. Emerging Markets
Income, Strategic Income, High Yield, Government Investment, and High
Income Municipal are comprised of two classes of shares: Class A and Class
B. Overseas, Growth Opportunities, Global Resources, Income & Growth, Short
Fixed-Income and Short-Intermediate Tax-Exempt are comprised of Class A
only. Each class has a common investment objective and investment
portfolio.
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 February 24,
1995. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, contact Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA 02109, or
your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND, FIDELITY ADVISOR HIGH YIELD
FUND, FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND AND FIDELITY ADVISOR
STRATEGIC INCOME FUND 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 13 FOR FURTHER INFORMATION.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
GROWTH FUNDS:
Fidelity Advisor Overseas Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Global Resources Fund
GROWTH AND INCOME FUNDS:
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
FIXED-INCOME FUNDS:
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
Fidelity Advisor Government Investment Fund
TAX-EXEMPT/MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
PROSPECTUS
FEBRUARY 24, 1995
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 DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
APPENDIX
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Shares are offered through this prospectus to investors who engage an
Investment Professional for investment advice.
Overseas, Growth Opportunities, Strategic Opportunities, Equity Portfolio
Growth, Equity Portfolio Income, Global Resources, Income & Growth, High
Yield, Government Investment, Limited Term Bond, Short Fixed-Income, High
Income Municipal and Limited Term Tax-Exempt are diversified funds.
Emerging Markets Income, Strategic Income, and Short-Intermediate
Tax-Exempt are non-diversified funds. Non-diversified funds may invest a
greater portion of their assets in securities of a single issuer than
diversified funds. As a result, changes in the financial condition or
market assessment of a single issuer could cause greater fluctuations in
share value than a diversified fund.
Overseas, Growth Opportunities, Strategic Opportunities, Equity Portfolio
Growth, Global Resources, Equity Portfolio 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. Investors
must be willing to accept each fund's price movements. Overseas, Growth
Opportunities, Strategic Opportunities, Equity Portfolio Growth, and Global
Resources 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 Portfolio Income and Income & Growth are
designed for those investors who seek a combination of growth and income
from equity and some bond investments.
High Income Municipal, Limited Term Tax-Exempt and Short Intermediate
Tax-Exempt are designed for investors in higher tax brackets who seek high
current income that is free from federal income tax. Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt also invest consistent with
consideration of capital preservation. High Income Municipal focuses on
lower-quality debt securities. This fund 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.
Investors must be willing to accept the fund's greater price movements and
credit risks.
Limited Term Bond, Government Investment and Short Fixed-Income are
designed for investors who seek high current income from a portfolio of
investment-grade debt securities. These funds also invest consistent with
consideration of capital preservation.
Emerging Markets Income, Strategic Income, and High Yield are designed for
investors who want high current income with some potential for capital
growth from a portfolio of debt instruments with a focus on lower-quality
debt securities and income-producing equity securities. These funds may be
appropriate for long-term, aggressive investors who understand the
potential risks and rewards of investing in lower-quality debt securities,
including defaulted securities. Investors must be willing to accept each
fund's price movements and credit risks.
A fund's level of risk and potential reward depend on the quality and
maturity of its investments.The value of each fund's investments and, as
applicable, the income they generate, varies from day to day, generally
reflecting changes in market conditions, interest rates and other company,
political, and economic news. Over time, stocks, although more volatile,
have shown greater growth potential than other types of securities. In the
shorter term, however, stock prices can fluctuate dramatically in response
to these factors.
The prices of bonds typically move in the opposite direction from interest
rates. Strategic Income's, Government Investment's, Limited Term Bond's,
and Short Fixed-Income's investments are also subject to prepayments, which
can lower the fund's yield, particularly in periods of declining interest
rates.
In addition, Overseas, Emerging Markets, Global Resources and Strategic
Income may also be appropriate for investors who want to pursue their
investment goals in markets outside of the United States. By including
international investments in your portfolio, you can achieve an extra level
of diversification and also participate in opportunities around the world.
However, there are additional risks involved with international investing.
The performance of international funds depends upon currency values, the
political and regulatory environment, and overall economic factors in the
countries in which a fund invests. These risks may be more significant for
those funds that focus on emerging markets.
Each fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell or
exchange shares of a fund. Lower front-end sales charges may be available
with purchases of $50,000 or more in conjunction with various programs. See
"Transaction Details," page 32 for an explanation of how and when these
charges apply.
A contingent deferred sales charge (CDSC) is imposed only if you redeem
Class B shares within 5 years of purchase. See "Transaction Details," page
32, for information about the CDSC.
Clas Clas
s A s B
Maximum sales charge on purchases 4.75 None
for all other Advisor funds
(as a % of offering price)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Maximum sales charge on purchases 1.50 None
of Short-Intermediate Tax-Exempt or Short Fixed-Income
(as a % of offering price)
Maximum CDSC on purchases None 4.00[
(as a % of the lesser of original purchase price A]
or redemption proceeds)
</TABLE>
Maximum sales charge on None None
reinvested distributions
Redemption fee None None
Exchange fee None None
[A] DECLINES FROM 4.00% OVER 5 YEARS TO 0% FOR CLASS B SHARES.
ANNUAL OPERATING EXPENSES are paid out of each class's assets. Each fund
also pays a management fee to Fidelity Management & Research (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 and Class B include a distribution fee and, for
Class B, a shareholder service fee. Distribution fees are paid by each
class to FDC for services and expenses in connection with the distribution
of the applicable class's shares. Shareholder service fees are paid by
Class B shares 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 front-end sales charges permitted by
the National Association of Securities Dealers, Inc., (NASD) due to 12b-1
fees.
Each class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page 23).
A portion of the brokerage commissions that Equity Portfolio Growth, Growth
Opportunities, Global Resources, High Yield and Income & Growth paid was
used to reduce each class's expenses. Without this reduction, the total
Class A operating expenses would have been _ % for Equity Portfolio Growth,
__% for Growth Opportunities, __% for Global Resources, __% for High Yield
and __% for Income & Growth. The total Class B operating expenses would
have been _ % for Equity Portfolio Growth, __% for Growth Opportunities,
__% for Global Resources, __% for High Yield and __% for Income & Growth.
The following are projections based on historical (and for Strategic Income
estimated) expenses of each class of each fund, and are calculated as a
percentage of average net assets.
EQUITY FUNDS
Operating Expenses
Class A Class B
OVERSEAS Management fee % n/a
12b-1 fee 0.65 n/a
%
Other expenses % n/a
Total operating expenses % n/a
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROWTH OPPORTUNITIES Management fee % n/a
12b-1 fee 0.65 n/a
%
Other expenses % n/a
Total operating expenses % n/a
EQUITY PORTFOLIO GROWTH Management fee % n/a
12b-1 fee 0.65 n/a
%
Other expenses % n/a
Total operating expenses % %
EQUITY PORTFOLIO INCOME Management fee
12b-1 fee (including 0.25% Shareholder 0.65 1.00
Service Fee for Class B shares) % %
Other expenses % %
Total operating expenses % %
STRATEGIC OPPORTUNITIES Management fee % %
12b-1 fee (including 0.25% Shareholder 0.65 1.00
Service Fee for Class B shares) % %
Other expenses % %
Total operating expenses % %
GLOBAL RESOURCES Management fee % n/a
12b-1 fee 0.65 n/a
%
Other expenses % n/a
Total operating expenses % n/a
INCOME & GROWTH Management fee % n/a
12b-1 fee 0.65 n/a
%
Other expenses % n/a
Total fund operating expenses % n/a
</TABLE>
FIXED-INCOME
Operating Expenses
Class A Class B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EMERGING MARKETS INCOME Management fee (after reimbursement) % %
12b-1 fee (including 0.25% Shareholder 1.00
Service Fee for Class B shares) 0.25 %
%
Other expenses (after reimbursement) % %
Total operating expenses % %
</TABLE>
STRATEGIC INCOME Management fee (after reimbursement) % %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) % %
Total operating expenses % %
HIGH YIELD Management fee % %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses % %
Total operating expenses % %
LIMITED TERM BOND Management fee (after reimbursement) % %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) % %
Total operating expenses % %
SHORT FIXED-INCOME Management fee % n/a
12b-1 fee 0.15 n/a
%
Other expenses % n/a
Total operating expenses % n/a
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GOVERNMENT INVESTMENT Management fee (after reimbursement) % %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) %
Other expenses (after reimbursement) % %
Total operating expenses % %
</TABLE>
TAX-EXEMPT/MUNICIPAL
Operating Expenses
Class A Class B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HIGH INCOME MUNICIPAL Management fee % %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) %
Other expenses % %
Total operating expenses % %
LIMITED TERM TAX-EXEMPT Management fee (after reimbursement) % %
12b-1 fee (including 0.25% Shareholder 0.25 1.00
Service Fee for Class B shares) % %
Other expenses (after reimbursement) % %
Total operating expenses % %
SHORT-INTERMEDIATE TAX-EXEMPT Management fee [(after reimbursement)] % n/a
12b-1 fee 0.15 n/a
%
Other expenses [(after reimbursement)] % n/a
Total fund operating expenses % n/a
</TABLE>
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge or CDSC, as applicable, on a $1,000
investment, assuming a 5% annual return and either (1) full redemption or
(2) no redemption, at the end of each time period:
EQUITY FUNDS
Examples
Class A Class A Class B Class B
(1) (2) (1) (2)
OVERSEAS After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
GROWTH OPPORTUNITIES After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
EQUITY PORTFOLIO GROWTH After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
EQUITY PORTFOLIO INCOME After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
STRATEGIC OPPORTUNITIES After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
GLOBAL RESOURCES After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
INCOME & GROWTH After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
FIXED-INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Class A Class A Class B Class B
(1) (2) (1) (2)
EMERGING MARKETS INCOME After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
</TABLE>
STRATEGIC INCOME After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
HIGH YIELD After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
LIMITED TERM BOND After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
SHORT FIXED-INCOME After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
GOVERNMENT INVESTMENT After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
TAX-EXEMPT/MUNICIPAL
Examples
Class A Class A Class B Class B
(1) (2) (1) (2)
HIGH INCOME MUNICIPAL After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
LIMITED TERM TAX-EXEMPT After 1 year $ $ $[A] $
After 3 $ $ $[A] $
years
After 5 $ $ $[A] $
years
After 10 $ $ $ $
years[B]
SHORT-INTERMEDIATE TAX-EXEMPT After 1 year $ $ n/a n/a
After 3 $ $ n/a n/a
years
After 5 $ $ n/a n/a
years
After 10 $ $ n/a n/a
years[B]
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to temporarily limit Strategic Income's,
Emerging Markets Income's, Limited Term Bond's, Limited Term Tax-Exempt's,
Short-Intermediate Tax-Exempt's and Government Investment's management fee,
other expenses, and total fund operating expenses of each of their
respective average net assets to the following:
Managemen Other Total
t Fee Expenses Expenses
Clas Clas Clas Clas Clas Clas
s A s B s A s B s A s B
Strategic Income 2.00% % % % % %
Emerging Markets % % % % % %
Income
Limited Term Bond % % % % % %
Limited Term % % % % % %
Tax-Exempt
Short-Intermediate % % % % % %
Tax-Exempt
Government % % % % % %
Investment
If these agreements were not in effect, the management fee, other expenses,
and total operating expenses would have been:
Managemen Other Total
t Fee Expenses Expenses
Clas Clas Clas Clas Clas Clas
s A s B s A s B s A s B
Strategic Income 2.00% % % % % %
Emerging Markets % % % % % %
Income
Limited Term Bond % % % % % %
Limited Term % % % % % %
Tax-Exempt
Short-Intermediate % % % % % %
Tax-Exempt
Government % % % % % %
Investment
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. The annual
information has been audited by each fund's independent accountants. Their
reports on the financial statements and financial highlights are included
in each Annual Report. The financial statements, the financial highlights,
and the reports are incorporated by reference into the funds' SAI, which
may be obtained free of charge from FDC.
[INSERT A TABLE FOR EACH FUND HERE TO BE FILED BY AMENDMENT]
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN.
Bond fund performance can be measured as TOTAL RETURN or YIELD.
Each class's performance is affected by the expenses of that class;
accordingly, performance may be different among the classes.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results. Average annual total returns covering
periods of less than one year assume that performance will remain constant
for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders. This difference may
be significant for a fund whose investments are denominated in foreign
currencies.
In calculating yield, Overseas, Equity Portfolio Growth, Equity Portfolio
Income, Global Resources, Growth Opportunities, High Income Municipal,
Strategic Opportunities, High Yield, Emerging Markets Income, Income &
Growth, Short Fixed-Income and Strategic Income 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 their yield.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
An equity fund may quote its adjusted NAV including all distributions paid.
This value may be averaged over specified periods and may be used to
calculate an equity fund'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 Portfolio Growth is a
diversified fund of Fidelity Advisor Series I, a Massachusetts business
trust organized on June 24, 1983. Growth Opportunities, Income & Growth,
High Yield, Government Investment and Short Fixed-Income are diversified
funds of Fidelity Advisor Series II, a Massachusetts business trust
organized on April 24, 1986. Equity Portfolio Income is a diversified fund
of Fidelity Advisor Series III, a Massachusetts business trust organized on
May 17, 1982. Limited Term Bond is a diversified fund of Fidelity Advisor
Series IV, a Massachusetts business trust organized on May 6, 1983. Global
Resources and High Income Municipal are diversified funds of Fidelity
Advisor Series V, a Massachusetts business trust organized on April 24,
1986. Limited Term Tax-Exempt is a diversified fund and Short-Intermediate
Tax-Exempt is a non-diversified fund of Fidelity Advisor Series VI, a
Massachusetts business trust organized on June 1, 1983. Overseas is a
diversified fund of Fidelity Advisor Series VII, a Massachusetts business
trust organized on March 21, 1980. Emerging Markets Income and Strategic
Income are non-diversified funds and Strategic Opportunities is a
diversified fund of Fidelity Advisor Series VIII, a Massachusetts business
trust organized on September 23, 1983. Each trust is an open-end management
investment company. There is a remote possibility that one fund might
become liable for a misstatement in the prospectus about another fund.
INSTITUTIONAL SHARES. Equity Portfolio Growth, Equity Portfolio Income,
Limited Term Bond and Limited Term Tax-Exempt each offer shares to
institutional and retail investors. Shares offered to institutional
investors (Institutional Class shares) are offered continuously at NAV to
(i) banks and trust institutions investing for their own accounts or for
accounts of their trust customers, (ii) plan sponsors meeting the ERISA
definition of fiduciary, (iii) government entities or authorities and (iv)
corporations with at least $100 million in annual revenues. The initial and
subsequent investment minimums for Institutional Class shares are $100,000
and $2,500, respectively. The minimum account balance is $40,000.
Institutional Class shares are offered through a separate prospectus.
Institutional Class shares of one fund may be exchanged for Institutional
Class shares of another Fidelity Advisor Fund. Transfer agent and
shareholder services for Institutional Class shares are performed by
Fidelity Investments Institutional Operations Company (FIIOC). For each
fund's respective fiscal year end, total operating expenses for
Institutional Class shares as a percent of average net assets were: __% for
Equity Portfolio Growth; __% for Equity Portfolio Income; __% after
reimbursement for Limited Term Bond; and __% after reimbursement for
Limited Term Tax-Exempt. Institutional Class shares of each fund have a
Distribution and Service Plan that does not provide for payment of a
separate distribution fee; rather the Plans recognize that FMR may use its
management fee and other resources to pay expenses for distribution-related
activities and may make payments to investment professionals that provide
shareholder support services or sell Institutional Class shares.
Institutional Class shares also do not bear a shareholder service fee.
Investment professionals currently do not receive compensation in
connection with distribution and/or shareholder servicing of Institutional
Class shares.
Strategic Opportunities offers three classes of shares; Class A shares,
Class B shares and Initial Shares. Class A and Class B shares are offered
through this prospectus. Initial Shares are described below and offered
through a separate prospectus. Investment performance will be measured
separately for Class A shares, Class B shares and Initial Shares, and the
least of the three results obtained will be used in calculating the
performance adjustment to the management fee paid by Strategic
Opportunities.
Strategic Opportunities Initial Shares has a maximum 4.75% front-end sales
charge. New investors may not purchase Initial Shares. Current
shareholders may make additional investments in Initial Shares of $250 or
more. The minimum account balance for Initial Shares is $1,000. Reduced
sales charges apply to purchases of $50,000 or more of Initial Shares.
Transfer agent and shareholders services for Initial Shares are performed
by Fidelity Service Company (FSC). For the fiscal year ended December 31,
1994, total operating expenses as a percentage of net asset value for
Initial Shares was __%.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The Transfer Agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. For shareholders
of Overseas, Equity Portfolio Growth, Strategic Opportunities, Emerging
Markets Income, Strategic Income, Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt, you are entitled to one vote for each share
you own. For shareholders of Growth Opportunities, Equity Portfolio Income,
Global Resources, Income & Growth, Limited Term Bond, Government
Investment, High Yield, Short Fixed-Income and High Income Municipal, 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, or each fund if a matter
affects just that class of shares or fund, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which chooses each fund's investments and
handles its business affairs. FMR chooses the investments for each fund
(except Government Investment, High Income Municipal, Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt) with the assistance of
foreign affiliates.
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.
As of January 31, 1995, FMR advised funds having approximately million
shareholder accounts with a total value of more than $ billion.
Robert K. Citrone is manager of Advisor Emerging Markets Income. He also
manages Fidelity New Markets Income Fund, which he has managed since May
1993 and serves as strategist for Fidelity's emerging market fixed-income
investments. Mr. Citrone joined Fidelity in 1990.
Bettina E. Doulton has been manager of Advisor Equity Portfolio Income
since August 1993, and VIP Equity-Income since July 1993. Previously, she
managed Select Automotive Portfolio and assisted on Equity-Income Portfolio
and Magellan(registered trademark). Ms. Doulton also served as an analyst
following the domestic and European automotive and tire manufacturing
industry as well as the gaming and lodging industry. She joined Fidelity in
1985.
Margaret L. Eagle is vice president and manager of Advisor High Yield which
she has managed since it began in January 1987. Ms. Eagle also manages
several pension fund accounts. Previously, she managed Spartan High Income
and High Income (now Capital & Income). She also managed the bond portion
of Puritan(registered trademark). Ms. Eagle joined Fidelity in 1980.
Daniel R. Frank is vice president and manager of Advisor Strategic
Opportunities which he has managed since December 1983. Previously he was
an assistant to Peter Lynch on Magellan. Mr. Frank joined Fidelity in 1979
Michael S. Gray is vice president and manager of Advisor Limited Term Bond
which he has managed since August 1987. Mr. Gray also manages Investment
Grade Bond, Spartan Investment Grade Bond, and Intermediate Bond. Mr. Gray
joined Fidelity in 1982.
Robert E. Haber is vice president and manager of Advisor Income & Growth
which he has managed since January 1987. Mr. Haber also manages Balanced
and co-manages Global Balanced. Previously, he managed Convertible
Securities. Mr. Haber joined Fidelity in 1985.
John (Jack) F. Haley Jr. is vice president and manager of Advisor Limited
Term Tax-Exempt which he has managed since 1985. Mr. Haley also manages
California Tax-Free Insured, California Tax-Free High Yield, and Spartan
California Municipal High Yield. Mr. Haley joined Fidelity in 1981.
John R. Hickling is manager of Advisor Overseas which he has managed since
February 1993. Mr. Hickling also manages Japan, Overseas, VIP: Overseas and
International Growth & Income. Previously he managed Emerging Markets,
Europe and Pacific Basin. Mr. Hickling joined Fidelity in 1982.
Curtis Hollingsworth is vice president and manager of Advisor Government
Investment which he has managed since January 1992. Mr. Hollingsworth also
manages Short-Intermediate Government, Government Securities, Institutional
Short-Intermediate Government, Spartan Limited Maturity Government Bond,
Spartan Long-Term Government Bond and Spartan Short-Intermediate
Government. He joined Fidelity in 1983.
Malcolm W. MacNaught is vice president and manager of Advisor Global
Resources which he has managed since November 1988. Mr. MacNaught also
manages Select Precious Metals and Minerals and Select American Gold. Mr.
MacNaught joined Fidelity in 1968.
David Murphy is manager of Advisor Short-Intermediate Tax-Exempt Fund. He
also manages Limited Term Municipal, New York Tax-Free Insured, Spartan
Intermediate Municipal and Spartan New Jersey Municipal High Yield. Before
joining Fidelity in 1989, he managed municipal bond funds at Scudder,
Stevens & Clark.
Robert E. Stansky is vice president and manager of Advisor Equity Portfolio
Growth which he has managed since April 1987. Mr. Stansky also manages
Growth Company. Previously, he managed Emerging Growth and Select Defense
and Aerospace. Mr. Stansky joined Fidelity in 1983.
Donald G. Taylor is vice president and manager of Advisor Short
Fixed-Income which he has managed since September 1989 and has been manager
of Advisor Strategic Income since it began in October 1994. Mr. Taylor also
manages Short-Term Bond, Spartan Short-Term Bond, and VIP II: Investment
Grade Bond. In addition, he manages Income Plus for Fidelity International
and serves as an assistant on Asset Manager: Income. Previously, he managed
Corporate Trust, Qualified Dividend, VIP: Zero Coupon Bond and Utilities
Income. Mr. Taylor joined Fidelity in 1986.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp., Leader of the Growth Group, and joined Fidelity in 1971.
Guy E. Wickwire is a vice president and manager of Advisor High Income
Municipal which he has managed since July of 1994. Mr. Wickwire also
manages Massachusetts Tax-Free High Yield and Insure Tax-Free. He assumed
responsibility for Massachusetts Tax-Free High Yield in 1983 and Insure
Tax-Free in 1993.
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. State Street
Bank & Trust Company (State Street) performs transfer agent servicing
functions for Class A shares of each fund. FIIOC performs sub-transfer
agent servicing functions for Class A and transfer agent servicing
functions for Class B shares of each fund. State Street's address is P.O.
Box 8302, Boston, Massachusetts 02266-8302. FIIOC is located at 82
Devonshire Street, Boston, Massachusetts 02109.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Through ownership of voting common stock, members of the Edward C.
Johnson 3d family form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or disability,
which would result in changes in each individual family member's holding of
stock. Such changes could result in one or more family members becoming
holders of over 25% of the stock. FMR Corp. has received an opinion of
counsel that changes in the composition of the Johnson family group under
these circumstances would not result in the termination of the funds'
management or distribution contracts and, accordingly, would not require a
shareholder vote to continue operation under those contracts.
Fidelity International Limited (FIL), is the parent company of FIIA, FIJ,
and FIIAL U.K. The Johnson family group also owns, directly or indirectly,
more than 25% of the voting common stock of FIL.
United Missouri Bank, N.A. (UMB) is the transfer agent for High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt,
although it employs State Street to perform these functions for Class A of
each of the funds and employs FIIOC to perform these functions for Class B
of each of the applicable funds. UMB is located at 1010 Grand Avenue,
Kansas City, Missouri 64106.
A broker-dealer may use a portion of the commissions paid by Overseas,
Growth Opportunities, Equity Portfolio Growth, Equity Portfolio Income,
Strategic Opportunities, Global Resources and Income & Growth to reduce
each of their custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
a fund's transactions, provided that a fund receives brokerage services and
commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The value of each fund's investments varies based on 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 domestic or foreign
interest rates, the credit quality of the issuer, market conditions, and
other economic and political news. 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.
For funds that can invest in foreign securities, and because many of these
investments are denominated in foreign currencies, changes in the value of
foreign securities can significantly affect a fund's share price. General
economic and political factors in the various world markets can also impact
the value of your investment, especially for securities in emerging
markets. Many investments in emerging markets can be considered
speculative, and therefore may offer higher income and total return
potential, but significantly greater risk.
FMR may use various investment techniques to hedge a fund's risks, but
there is no guarantee that these strategies will work as intended. When you
sell your shares, they may be worth more or less than what you paid for
them.
If you are subject to the federal alternative minimum tax, you should note
that each of High Income Municipal and Short-Intermediate Tax-Exempt may
invest all 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.
FMR normally invests each fund's assets according to its investment
strategy. Overseas, Growth Opportunities, Equity Portfolio Growth, Equity
Portfolio Income, Strategic Opportunities, Global Resources, and Income &
Growth each reserves the right to invest without limitation in preferred
stocks and investment-grade debt instruments for temporary, defensive
purposes.
High Yield reserves the right to invest in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
Limited Term Bond, Emerging Markets Income, Strategic Income, Government
Investment 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, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt each do not expect to invest in federally taxable obligations.
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt each, however, reserves the right to invest without limitation
in short-term instruments, to hold a substantial amount of uninvested cash,
or to invest more than normally permitted in federally taxable obligations
for temporary, defensive purposes.
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.
Under normal conditions, the fund 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 and, to a lesser extent, Asia,
Africa, and emerging European nations. FMR determines where an issuer is
located by looking at such factors as its country of organization, the
primary trading market for its securities, and the location of its assets,
personnel, sales, and earnings. There is no limit on investments in any one
region, country, or currency, although the fund normally invests in at
least three different countries.
The fund may also invest a portion of its assets in common and preferred
stocks of emerging markets issuers, debt securities of non-emerging market
foreign issuers, and lower-quality debt securities of U.S. issuers. FMR
does not currently anticipate that these investments will exceed
approximately 20% of the fund's total assets. In addition, for cash
management purposes, the fund will ordinarily invest a portion of its
assets in high-quality, short-term debt securities and money market
instruments, including repurchase agreements and bank deposits denominated
in U.S. or foreign currencies.
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. The fund currently intends
to limit its investments in these securities to 35% of its assets. 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 whether an issuer's principal activities are in a particular
region by looking at such factors as 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.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
Under normal circumstances, at least 65% of the fund's total assets will be
invested 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.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics.
The fund, under normal conditions, will invest at least 65% of its total
assets in common and preferred stock. The fund looks for domestic and
foreign companies with above-average growth characteristics compared to the
average of the companies included in the S&P 500. Growth may be measured by
factors such as earnings or gross sales. Companies with strong growth
potential often have new products, technologies, distribution channels, or
other opportunities. As a general rule, these companies may include
smaller, less well-known companies, and companies whose stocks have higher
than average price/earnings (P/E) ratios. The market prices of these stocks
may be particularly sensitive to economic, market, or company news. FMR may
also pursue growth in larger or revitalized companies or companies that
hold a strong position in the market. These growth characteristics may be
found in mature or declining industries.
EQUITY PORTFOLIO INCOME seeks a yield from dividend and interest income
which exceeds the composite dividend yield on securities comprising the S&P
500. In addition, consistent with the primary objective of obtaining
dividend and interest income, the fund will consider the potential for
achieving capital appreciation.
The fund will invest at least 65% of its total assets in income-producing
equity securities. For purposes of this policy, equity securities are
defined as common and preferred stocks. The balance of the fund's assets
will tend to be invested in debt securities, a high percentage of which are
expected to be convertible into common stocks. The fund does not intend to
invest in securities of issuers without proven earnings and/or credit
histories. Because the fund invests for income, as well as capital
appreciation, investors should not expect capital appreciation comparable
with funds which seek only capital appreciation. The yield on the fund's
assets generally will increase or decrease from year to year in accordance
with market conditions and in relation to the changes in yields of the
stocks included in the S&P 500.
STRATEGIC OPPORTUNITIES FUND seeks to achieve capital appreciation by
investing in securities of companies believed by FMR to involve a "special
situation."
Under normal conditions, the fund will invest at least 65% of its 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.
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. The fund may invest in securities
in which other investors have not shown interest or confidence subject to
stock market fluctuations.
GLOBAL RESOURCES FUND seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in
securities of foreign and domestic companies that own or develop natural
resources, or supply goods and services to such companies, or in physical
commodities.
Under normal conditions, the fund will invest at least 65% of its total
assets in securities of foreign and domestic companies that own or develop
natural resources, or supply goods and services to such companies, or in
physical commodities. FMR will seek securities that are priced relative to
the intrinsic value of the relevant natural resource or that are issued by
companies positioned to benefit from particular periods in the economic
cycle. Accordingly, the fund may shift its emphasis from one natural
resource industry to another depending upon prevailing trends or
developments. The fund may also invest in securities of companies in other
industries, and in corporate and governmental debt securities of all types.
The fund expects to invest a majority of its assets in the securities of
companies that have their principal business activities in at least three
different countries (including the United States).
A company will be deemed to have substantial ownership of, or activities in
natural resources if, at the time those company's securities are acquired,
at least 50% of the company's assets are involved, either directly or
indirectly, in exploring, mining, refining, processing, transporting,
fabricating, dealing in, or owning natural resources. Natural resources
include precious metals (e.g., gold, platinum and silver), ferrous and
nonferrous metals (e.g., iron, aluminum and copper), strategic metals
(e.g., uranium and titanium), hydrocarbons (e.g., coal,oil and natural
gases), chemicals, forest products, real estate, food products and other
basic commodities.
Although the fund is authorized to invest up to 50% of its assets in
physical commodities, it currently intends to invest no more than 25% of
its total assets in them, and intends to limit its physical commodity
investments to readily marketable precious metals. As a practical matter,
investments in other types of 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. The fund 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.
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.
INCOME & GROWTH FUND seeks both income and growth of capital by investing
in a diversified portfolio of equity and fixed-income securities with
income, growth of income and capital appreciation potential.
The fund invests in equity securities, convertible securities, common and
preferred stocks, and other 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.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
The fund invests primarily in fixed-income securities, allocated among
three broad categories: (1) U.S. government securities, including mortgage
securities and securities issued by government agencies; (2) corporate
securities, including lower-quality, high-yield securities as well as
investment-grade corporate bonds; and (3) foreign corporate and
governmental securities, including emerging market instruments and
securities of issuers in more developed markets. Although FMR expects that
the fund will normally have investments in each of the three asset
categories, there is no limit on the amount that the fund may invest in any
one type of fixed-income securities from time to time. Diversification,
when successful, can mean higher returns with decreased volatility. By
allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant investment risks
of each category through diversification. However, each category may
decline at the same time.
FMR regularly reviews the fund's allocation and makes changes gradually
over time to favor investments that it believes provide the most favorable
outlook for achieving the fund's objective.
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 will normally invest at least 65% of its total assets in income
producing debt securities and preferred stocks, including convertible and
zero coupon bonds. 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.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
The fund invests in domestic and foreign investment-grade debt securities.
Under normal circumstances, the fund will invest in the following
fixed-income securities: (i) obligations issued or guaranteed as to
interest and principal by the U.S. Government or any agency or
instrumentality thereof, and (ii) obligations (including certificates of
deposits and bankers' acceptances) of U.S. banks which at the date of
investment have capital gains, surplus, and undivided profits (as of the
date of their most recently published financial statements) in excess of
$100 million. When consistent with its primary objective, the fund may also
seek capital appreciation. Under normal conditions the fund maintains a
dollar-weighted average maturity of 10 years or less. In determining a
security's maturity for purposes of calculating the fund's average
maturity, estimates of the expected time for its principal to be repaid may
be used. This can be substantially shorter than its stated final maturity.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation.
The fund normally will invest primarily in investment-grade fixed-income
securities of all types. Fixed-income securities in which the fund may
invest include, in any proportion, bonds, notes, mortgage-related and
asset-backed securities, U.S. government and U.S. government agency
obligations, zero coupon securities and convertible securities, and
short-term obligations such as certificates of deposit, repurchase
agreements, bankers' acceptances and commercial paper. Under normal
circumstances, at least 65% of the fund's total assets will be invested in
bonds. The fund may invest a portion of its assets in securities issued by
foreign companies and foreign governments. The fund will maintain a
dollar-weighted average maturity of three years or less. In determining a
security's maturity for purposes of calculating the fund's average
maturity, estimates of the expected time for its principal to be repaid may
be used. This can be substantially shorter than its stated final maturity.
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.
Under normal circumstances, at least 65% of the fund's total assets will be
invested in government securities. The fund considers "government
securities" to include those which are subject to repurchase agreements.
The fund invests primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities (U.S. government
securities), including U.S. Treasury bonds, notes and bills, Government
National Mortgage Association mortgage-backed pass-through certificates
(Ginnie Maes) and mortgage-backed securities issued by the Federal National
Mortgage Association (Fannie Maes) or the Federal Home Loan Mortgage
Corporation (Freddie Macs). These securities may or may not be fully
backed by the U.S. Government. In seeking current income, the fund also may
consider the potential for capital gain.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax.
The fund normally invests so that at least 80% of its net assets is
invested in municipal obligations whose interest is free from federal
income tax. The fund may purchase long-term municipals with maturities of
20 years or more, which generally produce higher yields than short-term
municipals. The fund also may purchase short-term municipal obligations in
order to provide for short-term capital needs. The average maturity of the
fund is currently expected to be greater than 20 years. The fund may invest
more than 25% of its assets in bonds 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 reserves the right to
invest up to 100% of its assets in municipal obligations subject to the
federal alternative minimum tax.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt from
federal income taxes that can be obtained consistent with the preservation
of capital, from a diversified portfolio of high quality or upper-medium
quality municipal obligations.
The fund invests in municipal obligations judged by FMR to be essentially
the same quality as those rated within the three highest rating categories
by Moody's and S&P. Under normal conditions, at least 80% of the fund's
annual income will be exempt from federal income taxes and at least 80% of
the fund's net assets will be invested in obligations having remaining
maturities of 15 years or less. The fund maintains a dollar-weighted
average maturity of 10 years or less. In determining a security's maturity
for purposes of calculating the fund's average maturity, estimates of the
expected time for its principal to be repaid may be used. This can be
substantially shorter than its stated final maturity. The fund may invest
up to 25% of its total assets in the securities of a single issuer. The
fund may also invest 25% or more of its total assets in securities whose
revenue sources are from similar types of projects (e.g., education,
electric utilities, health care, housing, transportation or water, sewer,
and gas utilities) or whose issuers share the same geographic location. The
fund currently does not intend to invest in taxable obligations or in AMT
bonds.
SHORT INTERMEDIATE TAX-EXEMPT FUND seeks as high a level of current income,
exempt from federal income tax, as is consistent with preservation of
capital.
The fund invests primarily in municipal securities. Under normal
conditions, the fund will invest so that 80% or more of its net assets will
be invested in securities whose interest is free from federal income tax.
The fund maintains a dollar-weighted average maturity of between two and
four years. In determining a security's maturity for purposes of
calculating the fund's average maturity, estimates of the expected time for
its principal to be repaid may be used. This can be substantially shorter
than its stated final maturity. The fund may, under normal circumstances,
invest up to 20% of its net assets in municipal securities issued to
finance private activities whose interest is a tax-preference item for
purposes of the federal alternative minimum tax. The fund may invest any
portion of its assets in industrial revenue bonds (IRBs) backed by private
issuers, and may invest up to 25% of its total assets in IRBs related to a
single industry. The fund may also invest 25% or more of its total assets
in municipal securities whose revenue sources are from similar types of
projects (e.g., education, electric utilities, health care, housing,
transportation, or water, sewer and gas utilities).
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about each fund's investments
is contained in the SAI. Policies and limitations are considered at the
time of purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help a fund
achieve its goal. Current holdings and recent investment strategies are
described in a fund's financial reports, which are sent to shareholders
twice a year. For a free SAI or financial report, call your Investment
Professional.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each of Equity
Portfolio Income, Global Resources, Growth Opportunities, High Income
Municipal, High Yield, Income & Growth, Overseas, Limited Term Bond,
Government Investment and Short Fixed-Income may not purchase more than 10%
of the outstanding voting securities of a single issuer.
With respect to 100% of its assets each of Equity Portfolio Growth, Limited
Term Tax-Exempt and Strategic Opportunities may not purchase more than 10%
of the outstanding voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities, loans, and other direct debt have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds") are,
and tax-exempt lower-quality debt securities may be, considered to be
speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general economic difficulty.
Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they
may already be in default. These risks are in addition to the general risks
associated with foreign securities.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the funds' portfolios. These
figures are dollar-weighted averages of month-end portfolio holdings during
fiscal 1994, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
STANDARD AND POOR'S CORPORATION
(AS A % OF ASSETS IN EACH RATING CATEGORY) (AS A % OF ASSETS IN EACH
RATING CATEGORY)
INVESTMENT GRADE LOWER QUALITY
AAA AA A BBB BB B CCC CC,C D --
GROWTH FUNDS:
Overseas
Growth Opportunities
Equity Portfolio Growth
Equity Portfolio Income
Strategic Opportunities
Global Resources
FIXED-INCOME
Emerging Markets Income
Strategic Income
High Yield
Short Fixed-Income
TAX-EXEMPT/MUNICIPAL FUNDS:
High Income Municipal
MOODY'S INVESTOR SERVICE, INC.
Aaa Aa A Baa Ba B Caa Ca C --
EQUITY FUNDS:
Overseas
Growth Opportunities
Equity Portfolio Growth
Equity Portfolio Income
Strategic Opportunities
Global Resources
FIXED-INCOME
Emerging Markets Income
Strategic Income
High Yield
Short Fixed-Income
TAX-EXEMPT/MUNICIPAL FUNDS:
High Income Municipal
[A] FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING
GOVERNMENT. THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED
DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P
AMOUNTED TO __% (EMERGING MARKETS), __% (EQUITY PORTFOLIO GROWTH), __%
(EQUITY PORTFOLIO INCOME), __% (GROWTH
OPPORTUNITIES), __% (OVERSEAS), __% (STRATEGIC OPPORTUNITIES), __% (INCOME
& GROWTH), __% (GLOBAL RESOURCES),
__% (STRATEGIC INCOME), __% (HIGH YIELD)AND __% FOR (SHORT FIXED-INCOME)
RAATED BY OTHER NATIONALLY RECOGNIZED
RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS DETERMINED THAT
UNRATED SECURITIES THAT ARE LOWER QUALITY
ACCOUNT FOR __% (EMERGING MARKETS), __% (EQUITY PORTFOLIO GROWTH), __%
(EQUITY PORTFOLIO INCOME), __% (GROWTH
OPPORTUNITIES), __% (OVERSEAS), __% (STRATEGIC OPPORTUNITIES), __% (INCOME
& GROWTH), __% (GLOBAL RESOURCES),
__% (STRATEGIC INCOME), __% (HIGH YIELD)AND __% FOR (SHORT FIXED-INCOME) OF
EACH FUND' TOTAL SECURITY INVESTMENTS.
REFER TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
[A] THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S AND
S&P AMOUNTED TO __% (HIGH INCOME
MUNICIPAL), __% (LIMITED TERM TAX-EXEMPT) AND __% (SHORT-INTERMEDIATE
TAX-EXEMPT). THIS MAY INCLUDE SECURITIES
RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED
SECURITIES. FMR HAS DETERMINED THAT UNRATED
SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR __% (HIGH INCOME MUNICIPAL),
__% (LIMITED TERM TAX-EXEMPT) AND __%
(SHORT-INTERMEDIATE TAX-EXEMPT OF EACH FUND'S SECURITY INVESTMENTS. REFER
TO THE FUND'S SAI FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
RESTRICTIONS: For all other funds other than Limited Term Tax-Exempt,
purchase of a debt security is consistent with a fund's debt quality policy
if is rated at or above the stated level by Moody's or rated in the
equivalent categories by any other nationally recognized rating service, or
is unrated but judged to be of equivalent quality by FMR.
High Income Municipal currently intends to limit its investments in lower
than Baa-quality debt securities to 35% of its assets and currently intends
to limit its investment in debt securities to Caa quality and above.
Limited Term Bond currently intends to limit its investments in debt
securities to those of Baa-quality and above, and currently intends to
limit its investments in debt securities rated Baa to 5% of its net assets.
Short Fixed-Income currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investment in debt securities to B-quality and above.
Short-Intermediate Tax-Exempt currently intends to limit its investments in
lower than A-quality debt securities to 40% of its assets and in lower than
Baa-quality debt securities to 5% of its assets. In addition, the fund
currently intends to limit its investments in debt securities to Ba-quality
and above.
Purchase of a debt security is consistent with Limited Term Tax-Exempt's
debt quality policy if it is rated at or above the stated level by Moody's
or S&P, or with respect to 20% of total assets, is unrated but judged to be
of equivalent quality by FMR. The fund currently intends to limit its
investment in debt securities to those of A-quality or above.
Global Resources currently intends to limit its investments in lower than
Baa-quality debt securities to 35% of its assets and currently intends to
limit its investments in debt securities to Caa-quality and above.
Each of Equity Portfolio Growth, Equity Portfolio Income, Growth
Opportunities, Overseas, Income & Growth, and Strategic Opportunities
currently intends to limit its investments in lower than Baa-quality debt
securities to 35% of its assets.
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. Government obligations, commercial paper
and other short-term corporate obligations, and certificates of deposit,
bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by the full
faith and credit of the United States. For example, securities issued by
the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS (ADRS AND
EDRS) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
ASSET-BACKED SECURITIES may include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or residential
mortgages, and may include complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities. Mortgage
securities may be issued by the U.S. government or by private entities. For
example, Ginnie Maes are interests in pools of mortgage loans insured or
guaranteed by a U.S. government agency. Because mortgage securities pay
both interest and principal as their underlying mortgages are paid off,
they are subject to prepayment risk. This is especially true for stripped
securities. Also, the value of a mortgage security may be significantly
affected by changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other factors
difficult to predict, making their value highly volatile.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile, and certain stripped
securities move in the same direction as interest rates.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. A security's credit may be enhanced by a bank,
insurance company, or other financial institution. A fund may own a
municipal security directly or through a participation interest.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations.
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.
VARIABLE- AND FLOATING-RATE SECURITIES may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
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.
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.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield.
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.
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 securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS. Each of Equity Portfolio Growth, Growth Opportunities, Global
Resources, Strategic Opportunities, Equity Portfolio Income, Income &
Growth, Limited Term Bond, Government Investment, Short Fixed-Income, High
Income Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
may not purchase a security if, as a result, more than 10% of its net
assets would be invested in illiquid securities.
RESTRICTIONS. Each of Overseas, Emerging Markets Income, High Yield, and
Strategic Income may not purchase a security if, as a result, more than 15%
of its net assets would be invested in illiquid securities.
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 75% of its total assets, each of Overseas,
Growth Opportunities, Equity Portfolio Income, Global Resources, Income &
Growth, High Yield, Limited Term Bond, Short Fixed-Income, Government
Investment, Limited Term Tax-Exempt and High Income Municipal may not
purchase a security if, as a result, more than 5% would be invested in
securities of a single issuer. With respect to 100% of its assets, each of
Equity Portfolio Growth and Strategic Opportunities may not purchase a
security if, as a result, more than 5% would be invested in securities of a
single issuer. These limitations do not apply to U.S. government
securities.
Emerging Markets Income, Strategic Income and Short-Intermediate Tax-Exempt
are considered non-diversified. Generally, to meet federal tax requirements
at the close of each quarter, each fund does not invest more than 25% of
its total assets in any one issuer and, with respect to 50% of total
assets, does not invest more than 5% of its total assets in any one issuer.
These limitations do not apply to U.S. government securities.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering a fund's securities. A fund
may also lend money to other funds advised by FMR and to issuers in
connection with certain direct debt transactions.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of each fund's
total assets; however Limited Term Tax-Exempt, High Income Municipal and
Short-Intermediate Tax-Exempt do not currently intend to make loans.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs of this section, can be changed without shareholder
approval.
OVERSEAS FUND seeks growth of capital primarily through investments in
foreign securities.
EQUITY PORTFOLIO GROWTH seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above average growth characteristics.
EQUITY PORTFOLIO INCOME seeks a yield from dividend and interest income
which exceeds the composite dividend yield on securities comprising the S&P
500. In addition, consistent with the primary objective of obtaining
dividend and interest income, the fund will consider the potential for
achieving capital appreciation.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
STRATEGIC OPPORTUNITIES FUND seeks to achieve capital appreciation by
investing in securities of companies believed by FMR to involve a "special
situation."
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.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax. The fund normally invests so that at least 80% of its
net assets are invested in municipal obligations whose interest is free
from federal income tax.
SHORT INTERMEDIATE TAX-EXEMPT FUND seeks as high a level of current income,
exempt from federal income tax, as is consistent with preservation of
capital.
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.
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.
GLOBAL RESOURCES FUND seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in
securities of foreign and domestic companies that own or develop natural
resources, or supply goods and services to such companies, or in physical
commodities. The fund is authorized to invest up to 50% of its assets in
physical commodities.
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.
LIMITED TERM TAX-EXEMPT FUND seeks the highest level of income exempt from
federal income taxes that can be obtained consistent with the preservation
of capital, from a diversified portfolio of high quality or upper-medium
quality municipal obligations. The fund may invest 25% or more of its total
assets in securities whose revenue sources are from similar types of
projects (e.g., education, electric utilities, health care, housing,
transportation or water, sewer, and gas utilities) or whose issuers share
the same geographic location. Under normal conditions, at least 80% of the
fund's annual income will be exempt from federal income tax and at least
80% of the fund's assets will be invested in obligations having remaining
maturities of 15 years or less. The fund maintains a dollar-weighted
average maturity of 10 years or less. The fund invests in municipal
obligations judged by FMR to be essentially the same quality as those rated
within the three highest rating categories by Moody's and S&P. The fund may
invest up to 20% of its total assets in municipal obligations which are
unrated by Moody's and S&P, if judged by FMR to meet the fund's quality
standard. The fund currently does not intend to invest in taxable
obligations or in AMT bonds. The fund may not purchase the securities of
any issuer if, as a result, more than 25% of its total assets would be
invested in industrial development bonds whose issuers are in any one
industry.
LIMITED TERM BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed income obligations.
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.
With respect to 75% of its total assets, each of Overseas, Growth
Opportunities, Equity Portfolio Income, Global Resources, Income & Growth,
High Income Municipal, Limited Term Tax-Exempt, High Yield, Limited Term
Bond, Short Fixed-Income and Government Investment may not invest more than
5% in any one issuer. With respect to 100% of its assets, each of Equity
Portfolio Growth and Strategic Opportunities may not invest more than 5% in
any one issuer.
With respect to 75% of its total assets, each of Overseas, Growth
Opportunities, Equity Portfolio Income, Global Resources, Income & Growth,
High Yield, Limited Term Bond, High Income Municipal, Short Fixed-Income
and Government Investment may not purchase more than 10% of the outstanding
voting securities of a single issuer. With respect to 100% of its assets,
each of Equity Portfolio Growth, Limited Term Tax-Exempt and Strategic
Opportunities may not purchase more than 10% of the outstanding voting
securities of a single issuer.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in the
applicable class's share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain of the funds. Each fund also
pays OTHER EXPENSES, which are explained on page __.
FMR may, from time to time, agree to reimburse Overseas, Strategic
Opportunities, Growth Opportunities, Equity Portfolio Growth, Equity
Portfolio Income, Global Resources, Income & Growth, High Yield, High
Income Municipal and Short Fixed-Income for management fees and other
expenses above a specified limit. FMR retains the ability to be repaid by
each fund if expenses fall below the specified limit prior to the end of
the fiscal year. Reimbursement arrangements, which may be terminated at any
time without notice, can decrease each fund's expenses and boost its
performance.
MANAGEMENT FEE
The MANAGEMENT FEE is calculated and paid to FMR every month. The fee for
Emerging Markets Income, Equity Portfolio Growth, Global Resources, Income
& Growth, Strategic Income, High Yield, Limited Term Bond, Short
Fixed-Income, Government Investment, High Income Municipal, Limited Term
Tax-Exempt, and Short-Intermediate Tax-Exempt is calculated by adding a
group fee rate to an individual fee rate, and multiplying the result by
each fund's average net assets. The fee for Overseas, Growth Opportunities
and Strategic Opportunities is determined by taking a BASIC FEE and then
applying a PERFORMANCE ADJUSTMENT. The performance adjustment either
increases or decreases the management fee, depending on how well each fund
has performed relative to the Morgan Stanley Capital International Europe
Australia, Far East Index for Overseas or the S&P 500 for each of Growth
Opportunities and Strategic Opportunities.
Equity Portfolio Income pays FMR a flat monthly management fee at an annual
rate of 0.50% of its average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. For Overseas, Growth Opportunities, Equity Portfolio
Growth, Strategic Opportunities, Income & Growth and Global Resources (the
Equity Funds) this rate cannot rise above 0.52%, and it drops as total
assets under management increase. For Emerging Markets, Strategic Income,
High Yield, Limited Term Bond, Short Fixed-Income, Government Investment,
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt (the Bond Funds) this rate cannot rise above 0.37%, and it drops
as total assets under management increase. The basic fee rate (calculated
monthly) is calculated by adding a group fee rate to an individual fund fee
rate, and multiplying the result by each fund's average net assets.
For each fund's fiscal year end, the group fee rate was __% for the Equity
Funds and __% for the Bond Funds. The individual fund fee rate is 0.20% for
Income & Growth, 0.25% for High Income Municipal, Limited Term Tax-Exempt
and Short-Intermediate Tax-Exempt, 0.30% for each of Growth Opportunities,
Strategic Opportunities, Limited Term Bond, Government Investment and Short
Fixed-Income, 0.33% for Equity Portfolio Growth, 0.45% for each of
Overseas, High Yield, Global Resources and Strategic Income, 0.55% for
Emerging Markets Income. The basic fee rate for fiscal 1994 was 0.77% for
Overseas, 0.68% for Growth Opportunities and 0.54% for Strategic
Opportunities.
The performance adjustment rate is calculated monthly by comparing each of
Overseas', Growth Opportunities' and Strategic Opportunities' performance
to that of the respective indices over the most recent 36-month period. The
difference is translated into a dollar amount that is added to or
subtracted from the basic fee. The maximum annualized performance
adjustment rate is +/- 0.20%.
Investment performance will be measured separately for each class of shares
offered by Strategic Opportunities, and the least of the three results
obtained will be used in calculating the performance adjustment.
The total management fee rate for fiscal 1994 was 0.__% for Overseas;
0.__% for Equity Portfolio Growth; 0.__% for Growth Opportunities; 0.__%
for Global Resources; 0.__% for Strategic Opportunities; 0.__% for Global
Resources; 0.__% rate for High Yield; 0.__% for Short Fixed-Income; and
0.__% for High Income Municipal. For Overseas 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. Because of a
reimbursement the total management fee for fiscal 1994 was 0.__% for
Emerging Markets Income; 0.__% for Strategic Income; 0.__% for Limited Term
Bond; 0.__% for Government Investment; 0.__% for Limited Term Tax-Exempt;
and 0.__% for Short Intermediate Tax-Exempt.
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.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A of Overseas, Growth Opportunities, Equity
Portfolio Growth, Equity Portfolio Income, Strategic Opportunities, Income
& Growth, Global Resources, Emerging Markets Income, Strategic Income, High
Yield, Limited Term Bond, Government Investment and Short Fixed-Income (the
taxable funds). FIIOC also performs certain transfer agency, dividend
disbursing and shareholder services for Class B of the taxable funds. FSC
calculates the NAV and dividends for each class of the taxable funds, and
maintains the general accounting records for the taxable funds and
administers the securities lending program for each of the taxable funds
(except for Government Investment). In fiscal 1994, fees paid by Class B to
FIIOC amounted to,___% of Equity Portfolio Income, ___% of Strategic
Opportunities,___% of Emerging Markets Income, ___% of Strategic
Income,___% of High Yield, ___% of Limited Term Bond and ___% of Government
Investment, respectively, of Class B's average net assets, and fees paid by
Class A to FSC amounted to __% of Overseas, __% of Growth Opportunities,
__% of Equity Portfolio Growth, __% of Equity Portfolio Income, __% of
Strategic Opportunities, __% of Income & Growth, __% of Global Resources,
__% of Emerging Markets Income, __% of High Yield, __% of Limited Term
Bond, __% of Government Investment and __% of Short Fixed-Income of each
fund's average net assets.
UMB has entered into sub-arrangements with State Street pursuant to which
State Street performs certain transfer agency, dividend disbursing and
shareholder services for Class A shares of High Income Municipal, Limited
Term Tax-Exempt and Short-Intermediate Tax-Exempt ( the tax-free funds).
UMB has entered into sub-arrangements with FIIOC pursuant to which FIIOC
performs certain transfer agency, dividend disbursing and shareholder
services for Class B shares of the tax free funds. UMB has entered into
sub-arrangements with FSC pursuant to which FSC calculates the NAV and
dividends for both Class A and Class B of the tax free funds, and maintains
each fund's general accounting records. All of the fees are paid to State
Street, FIIOC, and FSC by UMB, which is reimbursed by the applicable class
or fund, as appropriate, for such payments. In fiscal year 1994, fees paid
by UMB to FIIOC on behalf of the Class B shares amounted to __% of High
Income Municipal, __% of Limited Term Tax-Exempt and __% of
Short-Intermediate Tax-Exempt, respectively, of average net assets, and
fees paid by UMB to FSC amounted to __% of High Income Municipal, __% of
Limited Term Tax-Exempt and __% of Short-Intermediate Tax-Exempt,
respectively, of each fund's average net assets.
State Street has also entered into sub-arrangements with FIIOC pursuant to
which FIIOC performs certain transfer agency, dividend disbursing and
shareholder services for Class A shares. State Street pays to FIIOC a
portion of its fee for Class A accounts for which FIIOC provides limited
services, or its full fee for Class A accounts that FIIOC maintains on its
behalf. For fiscal year 1994, State Street paid FIIOC the following fees as
a percentage of Class Average net assets: ___% of Overseas, ___% of Growth
Opportunities, ___% of Equity Portfolio Growth, ___% of Equity Portfolio
Income, ___% of Strategic Opportunities, ___% of Income & Growth, ___% of
Global Resources, ___% of Emerging Markets Income, ___% of Strategic
Income, ___% of High Yield, ___% Limited Term Bond, __% of Government
Investment, and ___% of Short Fixed-Income, respectively. State Street pays
to FIIOC a portion of its fee for Class A accounts for which FIIOC provides
limited services, or its full fee for Class A accounts that FIIOC maintains
on its behalf. For fiscal year 1994, State Street paid FIIOC the following
fees as a percentage of Class A average net assets: __% of High Income
Municipal, __% of Limited Term Tax-Exempt, and __% of Short-Intermediate
Tax-Exempt respectively.
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 the distributor
a monthly distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares and providing personal
service to and/or maintenance of Class A shareholder accounts. Class A of
Equity Portfolio Growth and Equity Portfolio Income may pay the distributor
a distribution fee at an annual rate up to 0.75% of its average net assets,
or such lesser amount as the Trustees may determine from time to time.
Class A of Emerging Markets Income, Strategic Income, High Yield , Limited
Term Bond, Government Investment, High Income Municipal, Limited Term
Tax-Exempt, Short Fixed-Income and Short-Intermediate Tax-Exempt may pay
the distributor a distribution fee at an annual rate up to 0.40% of its
average net assets, or such lesser amount as the Trustees may determine
from time to time. Class A of each of Overseas, Growth Opportunities,
Strategic Opportunities, Equity Portfolio Growth, Equity Portfolio Income,
Global Resources and Income & Growth currently pays the distributor monthly
at an annual rate of 0.65%; and Class A of each of Emerging Markets Income,
Strategic Income, High Yield , Limited Term Bond, Government Investment,
High Income Municipal, Limited Term Tax-Exempt currently pays the
distributor monthly at an annual rate of 0.25%; and Class A of Short
Fixed-Income and Short-Intermediate Tax-Exempt pays 0.15% of each of its
average net assets determined at the close of business on each day
throughout the month. The distribution fee may be increased only when the
Trustees believe that it is in the best interest of the applicable class's
shareholders to do so.
Up to the full amount of the Class A distribution fee may be reallowed to
Investment Professionals based upon the level of marketing and distribution
services provided.
Class B shares of Emerging Markets Income, Strategic Opportunities, Equity
Portfolio Income, High Yield, Limited Term Bond, Government Investment,
Strategic Income, High Income Municipal and Limited Term Tax-Exempt have
also adopted a DISTRIBUTION AND SERVICE PLAN. Under the Class B Plans,
Class B of these funds is authorized to pay the distributor a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class B shares. Class B currently pays
the distributor monthly at an annual rate of 0.75% of its average net
assets determined at the close of business on each day throughout the
month. In addition, pursuant to each Class B Plan, Investment Professionals
are compensated at an annual rate of 0.25% of average net assets of Class B
shares for providing personal service to and/or maintenance of Class B
shareholder accounts.
The Plans also specifically recognize that FMR may make payments from its
management fee, revenue, past profits or other resources to Investment
Professionals for their services to each Class's shareholders.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; and 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 commission paid by the fund to reduce the a fund's custodian
or transfer agent fees.
The portfolio turnover rate for fiscal 1994 was __% for Overseas, __% for
Growth Opportunities, __% for Strategic Opportunities, __% for Equity
Portfolio Growth, __% for Equity Portfolio Income, __% for Global
Resources, __% for Income & Growth, __% for Emerging Markets Income, __%
for High Yield, __% for Limited Term Bond, __% for Government Investment,
__% for High Income Municipal, __% for Limited Term Tax-Exempt, __% for
Short Fixed-Income and __% for Short-Intermediate Tax-Exempt, respectively.
These rates vary from year to year. High turnover rates for increase
transaction costs and may increase taxable capital gains. FMR considers
these effects when evaluating the anticipated benefits of short-term
investing.
The portfolio turnover rate for Strategic Income is not expected to exceed
200% for its first fiscal period ending December 31, 1994.
YOUR ACCOUNT
TYPES OF ACCOUNTS
The different ways to set up (register) your account with Fidelity are
listed below.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, tax-free funds are not available
for purchase in retirement accounts. If your employer offers a fund through
a retirement program, contact your employer for more information. Otherwise
call your Investment Professional directly.
WAYS TO SET UP YOUR ACCOUNT
THE RETIREMENT ACCOUNT OPTIONS BELOW ARE ONLY FOR THE TAXABLE FUNDS OFFERED
THROUGH THIS PROSPECTUS.
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
If you invest through an Investment Professional, read that Investment
Professional's program materials in conjunction with this prospectus for
additional service features or fees that may apply. Certain features of
the funds, such as minimum initial or subsequent investment amounts, may be
modified in these programs, and administrative charges may be imposed for
the services rendered.
Once each business day, two share prices are calculated for Class A shares
of each fund: the offering price and the NAV. The offering price for Class
A shares includes a front-end sales charge, which you pay when you buy
Class A shares, unless you qualify for a reduction or waiver as described
on page ___. When you buy Class A shares at the offering price, the
Transfer Agent deducts the applicable sales charge and invests the rest at
NAV. Each fund's Class B NAV, is also calculated every business day. Class
B shares of each fund are sold without a front-end sales charge and may be
subject to a CDSC upon redemption. For information on how the CDSC is
calculated, see "How to Sell Shares," page 28.
Shares are purchased at the next share price calculated after your
investment is received and accepted. The offering price and NAV are
normally calculated at 4 P.M. Eastern Standard Time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to
buy shares to the appropriate Transfer Agent before 4:00 p.m. Eastern time.
State Street must receive payment within five business days after an order
for Class A shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on the right. If there is no account
application accompanying this prospectus, call your Investment Professional
or 1-800- .
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 in an account application with a check,
(small solid bullet) Wire money into your account,,
(small solid bullet) Open your account by exchanging from the same class of
anoth er Fidelity Advisor fund, or
(small solid bullet) Contact your Investment Professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity Advisor retirement accounts $ 500
TO ADD TO AN ACCOUNT $250
For Fidelity Advisor retirement accounts $100
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity Advisor retirement accounts $none
These minimums may vary for a Fidelity Advisor Systematic Investment
Program account.
PURCHASE AMOUNTS OF MORE THAT $250,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
investment professional or refer to the account application.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE Exchange from another Fidelity Advisor Exchange from another Fidelity Advisor
[1-800-526-0084 OR YOUR fund account with the same registration, fund account with the same registration,
INVESTMENT PROFESSIONAL including name, address, and taxpayer ID including name, address, and taxpayer ID
number. number.
(phone_graphic)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) Complete and sign the account application. Make your check payable to the complete
Make your check payable to the complete name of the fund of your choice. Indicate
name of the fund of your choice. Mail to your fund account number on your check
the address indicated on the application. and mail to the address printed on your
account statement.
Exchange by mail: call your Investment
Professional for instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) Bring your account application and check to Bring your check to your Investment
your Investment Professional. Professional.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) Call 1-800-_____ to set up your account Not available for retirement accounts.
and to arrange a wire transaction. Not Wire to:
available for retirement accounts.
Wire within 24 hours to: Specify the complete name of the fund of
your choice and include your account
number and your name.
Specify the complete name of the fund of
your choice and include your new account
number and your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) Not available. Use Fidelity Advisor Systematic Investment
Program. Sign up for this service when
opening your account, or call your
Investment Professional/the Transfer
Agent to begin the program.
</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, less any
applicable CDSC.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to other eligible Fidelity funds,
which can be requested by phone or in writing. Call 1-800-________ or your
Investment Professional for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES,
leave at least $1,000 worth of shares in the account to keep it open ($0
for retirement account).
TO SELL SHARES BY BANK WIRE you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity Advisor account with a different registration, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesig nated 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,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Unless otherwise instructed, the Transfer Agent will send a check to the
record address. Deliver your letter to your Investment Professional, or
mail it to the following address:
CHECKWRITING
If you have a checkbook for your account in Short Fixed-Income and
Short-Intermediate Tax-Exempt, you may write an unlimited number of checks.
The minimum amount for a check is $500 for each of these funds. Do not,
however, try to close out your account by check.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE All account types except Maximum check request: $100,000.
1-800-______ OR YOUR INVESTMENT retirement
PROFESSIONAL
(phone_graphic) All account types You may exchange to the same class of other
Fidelity Advisor funds if both accounts are
registered with the same name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic)Individual, Joint Tenant, The letter of instruction must be signed by all
Sole Proprietorship, persons required to sign for transactions, exactly as
UGMA, UTMA their names appear on the account.
The account owner should complete a retirement
Retirement account distribution form. Call 1-800-_____or your
Investment Professional to request one.
Trust The trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not in the account
registration, provide a copy of the trust document
certified within the last 60 days.
Business or Organization At least one person authorized by corporate
resolution to act on the account must sign the
letter.
Executor, Administrator, Call 1-800-_____ or your Investment Professional
Conservator/Guardian for instructions.
Wire (wire_graphic) All account types except You must sign up for the wire feature before using it.
retirement To verify that it is in place, call 1-800-______.
Minimum wire: $____.
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.
Check (check_graphic) All account types except Minimum check: $___.
retirement All account owners must sign a signature card to
receive a checkbook.
</TABLE>
Telephone redemptions cannot be processed for Fidelity Advisor Fund
prototype retirement accounts where State Street Bank and Trust Company is
the Custodian.
INVESTOR SERVICES
Fidelity Advisor Funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the Transfer Agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
your Investment Professional if you need additional copies of financial
reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds by telephone or in writing. The Class
A shares you exchange will carry credit for any front-end sales charge you
previously paid in connection with their purchase.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page __.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Because of Class A's front-end sales charge,
you may not want to set up a systematic withdrawal plan during a period
when you are buying Class A shares on a regular basis.
REGULAR INVESTMENT PLANS. One easy way to pursue your financial goals is to
invest money regularly. Fidelity Advisor Funds offer convenient services
that let you transfer money into your fund account, or between fund
accounts, automatically. While regular investment plans do not guarantee a
profit and will not protect you against loss in a declining market, they
can be an excellent way to invest for retirement, a home, educational
expenses, and other long-term financial goals. Certain restrictions apply
for retirement accounts. Call your Investment Professional for more
information.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
<TABLE>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100[A] Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
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, call
1-800-_____ at least __ business days prior to your next
scheduled investment date.
</TABLE>
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND,
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100[A] Monthly, quarterly, (small solid bullet) To establish, call your Investment Professional after both
semi-annually, or accounts are opened.
annually (small solid bullet) To change the amount or frequency of your investment, call
1-800-______ or your Investment Professional.
</TABLE>
[A] BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital gains
to shareholders each year. Each fund pays capital gains, if any, in
December and may pay additional capital gains after the close of its fiscal
year. Normally, dividends for Equity Portfolio Income and Income & Growth
are distributed in March, June, September and December; dividends and
capital gains for Overseas, Growth Opportunities, Global Resources and
Strategic Opportunities are distributed in December; dividends and capital
gains for Equity Portfolio Growth are distributed in January and December;
income dividends for Emerging Markets Income, Strategic Income, High Yield,
Limited Term Bond, Government Investment, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt are
declared daily and paid monthly while capital gains are normally
distributed in January.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer 4 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 OPTION. Your dividend and capital gain distributions
will be automatically invested in the same class of shares of another
identically registered Fidelity Advisor fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 1/2 years old, you can receive distributions in cash.
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge. If you direct Class A
distributions to a fund with a 4.75% front-end sales charge, you will not
pay a sales charge on those purchases.
When each of Overseas, Growth Opportunities, Equity Portfolio Growth,
Equity Portfolio Income, Strategic Opportunities, Global Resources and
Income & Growth deducts a distribution from its NAV, the reinvestment price
is the applicable fund's NAV at the close of business that day.
Dividends from Emerging Markets Income, High Yield, Strategic Income,
Limited Term Bond, Short Fixed-Income, Government Investment, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt will
be reinvested at the applicable fund's NAV on the last day of the month.
Capital gain distributions from these funds will be reinvested at the NAV
as of the date the applicable fund deducts the distributions from its NAV.
Distribution checks will be mailed within seven days, or longer for a
December ex-dividend date.
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.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the funds' tax implications. If your
account is not a tax-deferred retirement account, be aware of these tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that High Income Municipal, Limited
Term Tax-Exempt and Short-Intermediate Tax-Exempt earn is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed. Distributions from Overseas,
Growth Opportunities, Equity Portfolio Growth, Equity Portfolio Income,
Strategic Opportunities, Global Resources, Income & Growth, Emerging
Markets Income, Strategic Income, High Yield, Limited Term Bond, Short
Fixed-Income, and Government Investment, however, are subject to federal
income tax and may also be subject to state or local taxes. If you live
outside the United States, your distributions from these funds could also
be taxed by the country in which you reside.
For federal tax purposes, Overseas, Growth Opportunities, Equity Portfolio
Growth, Equity Portfolio Income, Strategic Opportunities, Global Resources,
Income & Growth, Emerging Markets Income, Strategic Income, High Yield,
Limited Term Bond, Short Fixed-Income, and Government Investment's income
and short-term capital gain distributions are taxed as dividends; long-term
capital gain distributions are taxed as long-term capital gains.
Mutual fund dividends from U.S. government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not quality 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.
During fiscal 1994, __% of Government Investment's, and __% of Strategic
Income's, income distributions were from U.S. government securities.
However, for shareholders of High Income Municipal, Limited Term
Tax-Exempt and Short-Intermediate Tax-Exempt, gain on the sale of tax-free
bonds results in taxable distributions. Short-term capital gains and a
portion of the gain on bonds purchased at a discount are taxed as
dividends. Long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them. However, distributions declared in December and paid in
January are taxable as if they were paid on December 31.
Every January, the Transfer Agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. High Income Municipal may invest so that up to
100% of its income is derived from these securities. Individuals who are
subject to the tax must report this interest on their tax returns.
A portion of Limited Term Tax-Exempt, High Income Municipal and
Short-Intermediate Tax-Exempt's dividends may be free from state or local
taxes. Income from investments in your state are often tax-free to you.
Each year, the Transfer Agent will send you a breakdown of income from each
state to help you calculate your taxes.
During fiscal 1994, __% of High Income Municipal, __% of Limited Term
tax-Exempt and __% of Short-Intermediate Tax-Exempt's income dividends were
free from federal income tax. And during fiscal 1994, ___% of High Income
Municipal's income dividends was subject to the federal alternative minimum
tax.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of a fund, the Transfer Agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution or dividend distribution, as applicable, from its NAV,
you will pay the full price for the shares and then receive a portion of
the price back in the form of a taxable distribution.
CURRENCY CONSIDERATIONS. For funds that can invest in foreign securities,
if a fund's dividends exceed its taxable income in any year, which is
sometimes the result of currency-related losses, all or a portion of the
fund's dividends may be treated as a return of capital to shareholders for
tax purposes. To minimize the risk of a return of capital, each of these
funds may adjust its dividends to take currency fluctuations into account,
which may cause the dividends to vary. Any return of capital will reduce
the cost basis of your shares, which will result in a higher reported
capital gain or a lower reported capital loss when you sell your shares.
The statement you receive in January will specify if any distributions
included a return of capital.
Undistributed net gains from currency transactions, if any, will generally
be distributed as a separate dividend in December.
EFFECT OF FOREIGN TAXES. Funds that can invest in foreign securities
sometimes pay withholding or other taxes to foreign governments during the
year. These taxes reduce each of these funds' dividends, but are included
in the taxable income reported on your tax statement. You may be able to
claim an offsetting tax credit or itemized deduction for foreign taxes paid
by each of these funds. Your tax statement will generally show the amount
of foreign tax for which a credit or deduction may be available.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV and offering price is 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' pro rata share of the value the applicable
fund's investments, cash, and other assets, subtracting that class' pro
rata share of the value of the applicable fund's liabilities, subtracting
the liabilities allocated to that class, and dividing by the number of
shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable class's NAV,
plus a sales charge for Class A shares. Class A has a maximum sales charge
of 4.75% (1.50% for Short Fixed-Income and Short-Intermediate Tax-Exempt)
of the offering price. The REDEMPTION PRICE (price to sell one share) is
the applicable class' NAV, minus any applicable CDSC for Class B shares.
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS
Sales Charge as % of
Offering Net Investment
Price Amount Profession
Investe al
d Concession
as % of
Offering
Price
Less than $50,000 4.75 4.99% 4.00%
%
$50,000 to less than $100,000 4.50 4.71 4.00%
% %
$100,000 to less than $250,000 3.50 3.63 3.00%
% %
$250,000 to less than $500,000 2.50 2.56 2.00%
% %
$500,000 to less than $1,000,000 2.00 2.04 1.75%
% %
$1,000,000 or more None None See
Below[A]
SHORT FIXED-INCOME FUND AND
SHORT-INTERMEDIATE TAX-EXEMPT FUND:
Less than $1,000,000 1.50 1.52 1.20%
% %
$1,000,000 or more None None See
Below[A]
[A] INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF 0.25% FOR
PURCHASES OF $1 MILLION OR MORE IF THE ASSETS ON WHICH THE 0.25% IS PAID
REMAIN WITHIN THE FIDELITY ADVISOR FUNDS FOR ONE YEAR, EXCEPT FOR PURCHASES
THROUGH A BANK OR BANK-AFFILIATED BROKER-DEALER THAT QUALIFY FOR A SALES
CHARGE WAIVER DESCRIBED ON PAGE _. ALL ASSETS ON WHICH THE ,0.25% FEE IS
PAID MUST REMAIN IN CLASS A SHARES OF THE FIDELITY ADVISOR FUNDS, INITIAL
SHARES OF DAILY MONEY FUND: U.S. TREASURY PORTFOLIO, OR SHARES OF DAILY
MONEY FUND: MONEY MARKET PORTFOLIO OR DAILY TAX-EXEMPT MONEY FUND FOR A
PERIOD OF ONE UNINTERRUPTED YEAR, OR THE INVESTMENT PROFESSIONAL WILL BE
REQUIRED TO REFUND THIS FEE TO FDC.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 4%
1 year to less than 3 years 3%
3 years to less than 4 years 2%
4 years to less than 5 years 1%
5 years to less than 6 years [A] 0%
[A] AFTER A MAXIMUM HOLDING PERIOD OF 6 YEARS, CLASS B SHARES WILL CONVERT
AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND. SEE
"CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
Investment professionals with which FDC has agreements receive as
compensation from FDC a concession equal to 3% of your purchase.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of 6 years from the
initial date of purchase, Class B shares convert automatically to Class A
shares of the same Fidelity Advisor Fund. Conversion to Class A shares will
be made at NAV. At the time of conversion, a portion of the Class B shares
purchased through the reinvestment of dividends or capital gains (Dividend
Shares) will also convert to Class A shares. The portion of Dividend Shares
that will convert is determined by the ratio of your converting Class B
non-Dividend Shares to your total Class B non-Dividend Shares. (A portion
of Class B shares that had been acquired previously by exchange also may
convert, representing the appreciated value of, and/or reinvested dividends
or capital gains earned on, Class B shares prior to their exchange.)
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your Investment
Professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of a fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or of any
of the other Fidelity Advisor Funds, at the NAV next determined after
receipt of your investment order, provided that such reinvestment is made
within 30 days of redemption. Under these circumstances, the dollar amount
of the CDSC you paid on Class B shares will be reimbursed to you by
reinvesting that amount in Class B shares. You must reinstate your shares
into an account with the same registration. This privilege may be exercised
only once by a shareholder with respect to a fund and certain restrictions
may apply. For purposes of the CDSC schedule, the holding period of your
Class B shares will continue as if Class B shares had not been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the Transfer
Agent may only be liable for losses resulting from unauthorized
transactions if it does 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 order will be processed at the
next offering price calculated after your order is received and accepted.
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
cancelled and you could be liable for any losses or fees a fund or
the Transfer Agent has incurred.
(small solid bullet) Direct Purchases: You begin to earn dividends as of
the first business day following the day the fund receives
payment.
(small solid bullet) Automated Order Purchases: You begin to earn
dividends as of the business day your order is received and
accepted.
(small solid bullet) Automated Purchase Orders. Class A and Class B shares
of Emerging Markets Income, Strategic Income, Limited Term
Bond, Government Investment and Short Fixed-Income can be
purchased or sold through investment professionals utilizing an
automated order placement and settlement system that guaran tees
paym,ent for oders on a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
Federal Reserve check, or direct deposit instead.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your request is
received and accepted. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares of Emerging Markets Income, Strategic Income,
High Yield, Limited Term Bond, Government Investment, Short Fixed-Income,
High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt will earn dividends through the date of redemption; however,
shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(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.
IF YOUR ACCOUNT NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will
be given 30 days' notice to reestablish the minimum balance. If you do not
increase your balance, the Transfer Agent reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at the
NAV, minus any applicable CDSC, on the day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professional who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of Investment Professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to Investment Professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Class A or Class B
shares of a fund for the same class of shares of other Fidelity Advisor
funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincide
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A shares
according to the Sales Charge Schedule shown on page 33 if your purchase
qualifies for one of the following reduction plans. Please refer to the
funds' SAI for more details about each plan or call your investment
professional.
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor funds, and to purchases of Initial shares
and Class B shares of Daily Money Fund: U.S. Treasury Portfolio and shares
of Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund
acquired by exchange from Fidelity Advisor funds. (Minimum investment is
$50,000, except that the minimum investment in each of Short-Fixed Income
or Short-Intermediate Tax-Exempt is $1 million.
To qualify for a quantity discount, investing in a fund's Class A shares
for several accounts at the same time will be considered a single
transaction (Combined Purchase), as long as shares are purchased through
one investment professional and the total is at least $50,000 (or at least
$1 million for each of Advisor Short-Fixed Income Fund or Advisor
Short-Intermediate Tax-Exempt Fund).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A shares by adding to your new purchase of Class A shares the value
of all of the Fidelity Advisor Fund Class A and Class B shares held by you,
your spouse, and your children under age 21. You can also add the value of
Initial Shares and Class B shares of Daily Money Fund: U.S. Treasury
Portfolio and shares of Daily Money Fund: Money Market Portfolio and Daily
Tax-Exempt Money Fund acquired by exchange from any Fidelity Advisor fund.
A LETTER OF INTENT lets you receive the same reduced front-end sales charge
on purchases of Class A shares made during a 13-month period as if the
total amount invested during the period had been invested in a single lump
sum. The Letter of Intent applies to purchases of Class A shares or to
combined purchases of Class A and Class B shares of one or more Fidelity
Advisor funds. (Minimum investment is $50,000, except that the minimum
investment in each of Short-Fixed Income or Short-Intermediate Tax-Exempt
is $1 million.)
A FRONT-END SALES CHARGE WILL NOT APPLY TO CLASS A SHARES:
1. Purchased as part of an employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor mutual funds.
2. Purchased for a Fidelity or Fidelity Advisor IRA account with the
proceeds of a distribution (i) from an employee benefit plan that qualified
for waiver (1) or had a minimum of $3 million in plan assets invested in
Fidelity mutual funds; or (ii) from an insurance company separate account
qualifying under 11 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 mutual funds;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
5. Purchased by a 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;
6. Purchased by a trust institution or bank trust department investing on
its own behalf or on behalf of its clients;
7. 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;
8. Purchased in an account for which a bank or broker-dealer charges an
asset management fee, provided the bank or broker-dealer has an Agreement
with FDC;
9. Purchased with redemption proceeds from other mutual fund complexes on
which you have paid a front-end sales charge only;
10. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency; or
11. 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 mutual funds;
Qualification for front-end sales charge waivers must be cleared through
FDC in advance, and employee benefit plan investors must meet additional
requirements specified in the funds' SAI.
THE CDSC ON CLASS B SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that Class B shares are
redeemed within one year following the death or the initial determination
of disability, or
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts.
Your investment professional should call Fidelity for more information.
APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issued so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
FIDELITY ADVISOR CLASS A AND CLASS B
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page; Table of Contents
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a ............................ *
b ............................ **
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management and Other Services
b,c,d ............................ Management and Other Services
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trust
i ............................ Management and Other Services
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 Distributions and Taxes
21 a, b ............................ The Distributor; Management Contracts and Other
Services
c ............................ *
22 ............................ Performance
23 ............................ **
</TABLE>
* Not Applicable
** To Be Filed By Amendment
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND, FIDELITY ADVISOR OVERSEAS
FUND, FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND, FIDELITY ADVISOR EQUITY
PORTFOLIO GROWTH, FIDELITY ADVISOR EQUITY PORTFOLIO INCOME, FIDELITY
ADVISOR INCOME & GROWTH FUND, FIDELITY ADVISOR STRATEGIC OPPORTUNITIES
FUND, FIDELITY ADVISOR GLOBAL RESOURCES FUND, FIDELITY ADVISOR STRATEGIC
INCOME FUND, FIDELITY ADVISOR HIGH YIELD FUND, FIDELITY ADVISOR LIMITED
TERM BOND FUND, FIDELITY ADVISOR SHORT FIXED-INCOME FUND, FIDELITY ADVISOR
GOVERNMENT INVESTMENT FUND, FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND,
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND, AND FIDELITY ADVISOR
SHORT-INTERMEDIATE TAX-EXEMPT FUND
FUNDS OF FIDELITY ADVISOR SERIES I-VIII
CLASS A AND CLASS B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 24, 1995
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus (dated
February 24, 1995) for Class A and Class B shares. Please retain this
document for future reference. Each class' financial statements and
financial highlights, included in their respective Annual Reports for the
most recent fiscal period, are separate reports, which are incorporated
herein by reference.
Additional copies of this SAI, any Prospectus, Annual or Semiannual Report
are available without charge upon request from Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts, 02109 or from
your Investment Professional.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND LIMITATIONS 2
SPECIAL CONSIDERATIONS AFFECTING CANADA 35
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA 36
SPECIAL CONSIDERATIONS AFFECTING JAPAN, THE PACIFIC BASIN, AND SOUTHEAST
ASIA 37
SPECIAL CONSIDERATIONS AFFECTING EUROPE 38
SPECIAL CONSIDERATIONS AFFECTING AFRICA 39
PORTFOLIO TRANSACTIONS 39
VALUATION OF PORTFOLIO SECURITIES 42
PERFORMANCE 43
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 60
DISTRIBUTIONS AND TAXES 62
FMR 63
TRUSTEES AND OFFICERS 64
MANAGEMENT AND OTHER SERVICES 66
THE DISTRIBUTOR 76
DISTRIBUTION AND SERVICE PLANS 76
DESCRIPTION OF THE TRUSTS 78
FINANCIAL STATEMENTS 80
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)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectuses. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other assets, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of a fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with a fund's investment
policies and limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 (the 1940 Act)) of the fund.
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);
(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;
or
(8) 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
objectives, 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 qualifications 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 securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
GLOBAL RESOURCES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or
instrumentalities) if, as a result thereof, (a) more than 5% of the fund's
total assets would be invested in the securities of such issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of such
issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(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;
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements; or
(8) 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.
Investment limitation (__) is construed in conformity with the 1940 Act,
and accordingly, "three days" means three business days, exclusive of
Sundays and holidays.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) With respect to 100% 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 own more than 10% of the
outstanding voting securities of such issuer.
(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 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 (5)). 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 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 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 lending money up to 5% of the fund's
net assets to a registered investment company or fund for which FMR or an
affiliate serves as investment adviser. (This limit 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 invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions" on page
___. For the fund's limitations on short sales, see the section entitled
"Short Sales Against the Box" on page ___.
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 lend assets other than securities
to other parties, except by (i) 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 (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 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.
(ix) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the Fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
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) it would hold more than 10% of the
outstanding voting securities of that issuer;
(2) may not issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) borrow money, except 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 securties 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 companieswhose 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
the 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).
(8) lend any securities 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.
Investment limitation (5) is construed in conformity with the 1940 Act;
and, accordingly, "three days" means three business days, exclusive of
Sundays and holidays.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) TheFund does not currently intend to sell securities short, unless it
owns or has the right to obtain secutities equivalent in kind and amount to
the secutirties 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 (5)). 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 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 invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) or
traded in the NASDAQ National Market System.
(v) 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.
(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.)
(vi) The fund does not currently intend to purchase 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 or retain securities
issued by other open-end investment companies. This limitation does not
apply to securities received as dividends, through offers of exchange, or
as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower cost of the market, in excess of 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of net assets, may 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
__.
EQUITY PORTFOLIO GROWTH
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the Government of the United States, its agencies or
instrumentalities) if, as a result (a) more than 5% of the 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.
(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 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 (NYSE) or
the American Stock Exchange (AMEX). 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 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 assets.
(vii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the fund and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(viii) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
EQUITY PORTFOLIO INCOME
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 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);
(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;
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 of (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation). 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 securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) 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 (a) by 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 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 NYSE or AMEX. Warrants acquired by
the fund in units or attached to securities are not subject to these
restrictions.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
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 aquired 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);
(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.
Investment limitation (5) is construed in conformity with the 1940 Act;
accordingly, "three days" means three business days, exclusive of Sundays
and holidays.
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 contitute 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 (5)). 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 (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. Limitaions (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.
(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 (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation or merger.
(vi) The fund does not currently intend to 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.
(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 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 (NYSE) or
American Stock Exchange (AMEX). 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, other
mineral exploration or development programs or leases.
(x) 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 the
limitation would exceed 10% of the fund's net assets.
(x) 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.
(xi) 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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page ___.
STRATEGIC OPPORTUNITIES
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 (SEC) 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 invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) or
traded on the NASDAQ National Market System.
(iv) The fund does not currently intend to lend assets other than
securities to other parties, except by (i) 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 (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.)
(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 NYSE or the AMEX. 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 fund 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.
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 1940 Act;
(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 to be 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);
(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 objectives, 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 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) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
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 to be an underwriter within the meaning of the
Securities Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
(i) 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 own more than 10% of the
outstanding voting securities of such issuer.
(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 (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.
(iii) 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.
(iv) 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.
(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 (i) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or for which FMR or
an affiliate serves as investment adviser or (ii) acquiring loans and loan
participations 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 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 (NYSE) or
the American Stock Exchange (AMEX). 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 as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
LIMITED TERM BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer.
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment), in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings.) Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation.
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities.
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry.
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements);
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
Investment limitation (___) is construed in conformity with the 1940 Act,
and, accordingly, "three days" means three days, exclusive of Sundays and
holidays.
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 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 (5)). 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.
(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 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.)
(iv) 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.
(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 invest in real estate
investment trusts that are not readily marketable or 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 would exceed 10% of the
fund's net assets.
(viii) 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.
(ix) 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.
(x) 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.
(xi) 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.
(xii) The fund does nor currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
FMR or an affiliate or successor with substantially the same fundamental
investment objective, policies, and limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page ___.
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 any single issuer.
(2) The fund may not 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 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 the
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
the 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);
(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 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 limitation (5)). 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 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 fund 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 limit does not apply to purchases of debt securities or to
repurchase agreements.
(v) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange or as a result of a reorganization, consolidation, or merger.
(vi) The fund does not currently intend to 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.
(vii) 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 (NYSE) or
the American Stock Exchange (AMEX). Warrants acquired by the fund in units
or attached to securities are not subject to these restrictions.
(viii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(ix) 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.
(x) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" 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) 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;
(3) the fund may not 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).
(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) issue senior securities, except as permitted under the Investment
Company Act of 1940;
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
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 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 invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) or
traded on the NASDAQ National Market System.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This limitation
does not apply to purchases of debt securities or to repurchase
agreements).
(vi) The fund does not currently intend to (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 3
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 NYSE or AMEX. 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 fund 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 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.
For the fund's limitations on futures and options contracts, see the
section entitled "Limitations on Futures and Options Transactions"
beginning 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 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 required 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);
(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
investment objective, policies, and limitations as the fund.
Investment limitation (3) is construed in conformity with the Investment
Company Act of 1940 (the 1940 Act); accordingly, "three days" means three
days, exclusive of Sundays and holidays. The sale of a security coupled
with an obligation to repurchase that security at a future date (i.e., a
reverse repurchase agreement) is considered borrowing and would therefore
be subject to the fund's fundamental borrowing limitations.
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) 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. 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 (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger
(vi) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans (but this limitation does not apply to purchases of debt
securities).
(viii) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(ix) The fund does not currently intend to purchase or retain securities
issued by other open-end investment companies. This limitation does not
apply to securities received as dividends, through offers of exchange, or
as a result of a reorganization, consolidation, or merger.
(x) 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.
(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 fund 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.
LIMITED TERM TAX-EXEMPT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS AND
POLICIES SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
(a) more than 5% of its total assets would be invested in the securities of
such issuer; provided, however, that up to 25% of its total assets may be
invested without regard to such 5% limitation (as used in this Prospectus,
the entity which has the ultimate responsibility for the payment of
interest and principal on a particular security will be treated as its
issuer); and (b) the fund would hold more than 10% of the voting securities
of such issuer;
(2) make short sales of securities; 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 (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 (within 3 days) reduced to the extent
necessary to comply with the 33 1/3% limitation (the fund will not purchase
securities for investment while borrowings equal to 5% or more of its total
assets are outstanding);
(5) underwrite any issue of securities, except to the extent that the
purchase of municipal bonds in accordance with the fund's investment
objective, policies and limitations, either directly from the issuer, or
from an underwriter for an issuer, may be deemed to be underwriting;
(6) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
more than 25% of the fund's total assets would be invested in industrial
development bonds whose issuers are in any one industry;
(7) purchase or sell real estate, but this shall not prevent the fund from
investing in bonds or other obligations secured by real estate or interests
therein;
(8) make loans, except (a) by the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies and
limitations, and (b) by engaging in repurchase agreements;
(9) purchase the securities of other investment companies or investment
trusts;
(10) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
more than 5% of its total assets would be invested in securities, such as
industrial development bonds, where payment of principal and interest are
the responsibility of a company with less than three years' operating
history;
(11) invest in oil, gas or other mineral exploration or development
programs;
(12) purchase the securities of any issuer (except the United States
government, its agencies or instrumentalities or securities which are
backed by the full faith and credit of the United States) if, as a result,
the fund would hold the securities of any issuer other than the securities
of the fund where the Trustees and officers of the Trust, or of the
Manager, together own beneficially more than 5% of such outstanding
securities; or
(13) invest in companies for the purpose of exercising control or
management.
Investment limitation (4) is construed in conformity with the Investment
Company Act of 1940 (1940 Act) accordingly, "three days" means three days
exclusive of Sundays and holidays.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell 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
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 engage in repurchase agreements
or make loans but this limitation does not apply to purchases of debt
securities.
For the fund's limitations on futures contracts and options, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
SHORT-INTERMEDIATE TAX-EXEMPT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate, unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business;
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements); or
(8) 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) 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.
For purposes of certain fundamental investment limitations, FMR identifies
the issuer of a security depending on its terms and conditions. In
identifying the issuer, FMR will consider the entity or entities
responsible for payment of interest and repayment of principal and the
source of such payments; the way in which assets and revenues of an issuing
political subdivision are separated from those of other political entities;
and whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
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 (the Trustees) has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUNDS' RIGHTS AS A SHAREHOLDER. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of a fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
company's direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing third party
takeover efforts. This area of corporate activity is increasingly prone to
litigation and it is possible that a fund could be involved in lawsuits
related to such activities. FMR will monitor such activities with a view
to mitigating, to the extent possible, the risk of litigation against the
fund and the risk of actual liability if a fund is involved in litigation.
No guarantee can be made, however, that litigation against the fund will
not be undertaken or liabilities incurred.
LOWER-QUALITY DEBT SECURITIES. A fund may purchase lower-quality debt
securities (those rated below Baa by Moody's Investors Service, Inc. or BBB
by Standard and Poor's Corporation, and unrated securities judged by FMR to
be of equivalent quality) that have poor protection with respect to the
payment of interest and repayment of principal, or may be in default.
These securities are often considered to be speculative and involve greater
risk of loss or price changes due to changes in the issuer's capacity to
pay. The market prices of lower-quality debt securities may fluctuate more
than those of higher-quality debt securities and may decline significantly
in periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past
experience may not provide an accurate indication of the future performance
of the high-yield bond market, especially during periods of economic
recession. In fact, from 1989 to 1991, the percentage of lower-quality
securities that defaulted rose significantly above prior levels, although
the default rate decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-quality debt
securities and a fund's ability to sell these securities.Since the risk of
default is higher for lower-quality debt securities, FMR's research and
credit analysis are an especially important part of managing securities of
this type held by a fund. In considering investments for the 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. The tax-free bond funds may invest a
portion of their assets in lower-quality municipal securities as described
in the investment policies and risks section in the Prospectus.While the
market for municipals is considered to be substantial
, adverse publicity and changing investor perceptions may affect the
ability of outside pricing services used by a fund to value its portfolio
securities, and a fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded. Each fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If a fund does not receive scheduled interest or
principal payments on such indebtedness, the fund's share price and yield
could be adversely affected. Loans that are fully secured offer a fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to a fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, each fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, each fund has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against
a borrower. If assets held by the agent for the benefit of a fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by each 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.
Each 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, each 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 each fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict a fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the reale price, as well as delays and costs to a fund in
connection with bankruptcy proceedings), it is each fund's (except Equity
Portfolio Growth) current policy to engage in repurchase agreement
transactions with parties whoise creditworthiness has been reviewed and
found satisfactory by FMR. Equity Portfolio Growth limits repurchase
agreement transactions to banks of the Federal Reserve System and primary
dealers in U.S. government securities.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may include
agreements to purchase and sell foreign securities in exchange for fixed
U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of the
security purchased by the fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of a
default by the counterparty, the fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the
fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve
higher credit risks than repurchase agreements in U.S. markets, as well as
risks associated with currency fluctuations. In addition, as with other
emerging market investments, repurchase agreements with counterparties
located in emerging markets or relating to emerging market securities may
involve issuers or counterparties with lower credit ratings than typical
U.S. repurchase agreements.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. A fund will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of a fund's assets and may be
viewed as a form of leverage.
DELAYED-DELIVERY TRANSACTIONS. A fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. A fund may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
a fund's other investments. If a fund remains substantially fully invested
at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, a fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, a fund does not participate in further gains or losses with respect
to the security. If the other party to a delayed-delivery transaction fails
to deliver or pay for the securities, a fund could miss a favorable price
or yield opportunity, or could suffer a loss.
A fund may renegotiate delayed-delivery transactions after they are entered
into, and may sell underlying securities before they are delivered, which
may result in capital gains or losses.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Trustees, FMR determines the
liquidity of a fund's investments and, through reports from FMR, the Board
monitors investments in illiquid instruments. In determining the liquidity
of a fund's investments, FMR may consider various factors including (1) the
frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make
a market, (4) the nature of the security (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, 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 a fund may have to close out the
option before expiration. In the absence of market quotations, illiquid
investments are priced at face 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
10% or 15% of its net assets (depending on the fund's investment
limitations) were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the NYSE and a subsidiary of
FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1) a
fund must receive 100% collateral in the form of cash or cash equivalents
(e.g., U.S. Treasury bills or notes) from the borrower; (2) the borrower
must increase the collateral whenever the market value of the securities
loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, a fund must be able to terminate the
loan at any time; (4) a fund must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) a fund may pay only reasonable custodian
fees in connection with the loan; and (6) the Board of Trustees must be
able to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long- or
short-term interest rates (in the United States or abroad), foreign
currency values, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. A fund is
not limited to any particular form of swap agreement if FMR determines it
is consistent with a fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains
the rights to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease a fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, a fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. A fund expects to be able to
reduce its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of a fund's accrued
obligations under the swap agreement over the accrued amount a fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of a fund's accrued obligations under the
agreement.
INDEXED SECURITIES. A fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects. The considerations noted above generally are
intensified for investments in developing countries. Developing countries
may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally
not as developed as those in the United States, and securities of some
foreign issuers (particularly those located in developing countries) may be
less liquid and more volatile than securities of comparable U.S. issuers.
Foreign security trading practices, including those involving securities
settlement where fund assets may be released prior to receipt of payment,
may expose a fund to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer, and may involve substantial delays.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than for
U.S. 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.
Each fund may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to such transfer restrictions may be marketable abroad, they may be
less liquid than foreign securities of the same class that are not subject
to such restrictions.
A fund may invest in American Depository Receipts and European Depository
Receipts (ADRs and EDRs), which are certificates evidencing ownership of
shares of a foreign-based issuer held in trust by a bank or similar
financial institution. Designed for use in the U.S. and European securities
markets, respectively, ADRs and EDRs are alternatives to the purchase of
the underlying securities in their national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. A fund will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a fund at one rate, while offering a lesser rate
of exchange should a fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
A fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by a fund. A fund may also use swap agreements, indexed securities,
and options and futures contracts relating to foreign currencies for the
same purposes.
When a fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, a fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." A fund may also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. A fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling - for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a fund held investments denominated in
Deutschemarks, a fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased much as if a fund had sold a security denominated in one currency
and purchased an equivalent security denominated in another. Cross-hedges
protect against losses resulting from a decline in the hedged currency, but
will cause a fund to assume the risk of fluctuations in the value of the
currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management
strategies may substantially change a fund's investment exposure to changes
in currency exchange rates, and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a currency's
value rose at a time when FMR had hedged a fund by selling that currency in
exchange for dollars, a fund would be unable to participate in the
currency's appreciation. If FMR hedges currency exposure through proxy
hedges, a fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in
tandem. Similarly, if FMR increases a fund's exposure to a foreign
currency, and that currency's value declines, a fund will realize a loss.
There is no assurance that FMR's use of currency management strategies will
be advantageous to the fund or that it will hedge at an appropriate time.
REFUNDING CONTRACTS. A fund may purchase securities on a when-issued basis
in connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts require the issuer to sell and a fund to buy refunded
municipal obligations at a stated price and yield on a settlement date that
may be several months or several years in the future. A fund generally will
not be obligated to pay the full purchase price if it fails to perform
under a refunding contract. Instead, refunding contracts generally provide
for payment of liquidated damages to the issuer (currently 15-20% of the
purchase price). A fund may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the
liquidated damages provisions of the refunding contract. When required by
SEC guidelines, a fund will place liquid assets in a segregated custodial
account equal in amount to its obligations under refunding contracts.
INVERSE FLOATERS. A fund may invest in inverse floaters, which are
instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value. A fund may invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held in trust or otherwise. These 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. A fund considers variable rate
instruments structured in this way (Participating VRDOs) to be essentially
equivalent to other VRDOs it purchases. The Internal Revenue Service (IRS)
has not ruled whether the interest on Participating VRDOs is tax-exempt
and, accordingly, a fund intends to purchase these instruments based on
opinions of bond counsel.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for a fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. A fund may acquire
standby commitments to enhance the liquidity of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, a fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
FEDERALLY TAXABLE OBLIGATIONS. A tax-exempt fund does not intend to invest
in securities whose interest is federally taxable; however, from time to
time, a tax-exempt fund may invest a portion of its assets on a temporary
basis in fixed-income obligations whose interest is subject to federal
income tax. For example, a tax-exempt fund may invest in obligations whose
interest is federally taxable pending the investment or reinvestment in
municipal securities of proceeds from the sale of its shares or sales of
portfolio securities.
Should a tax-exempt fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These would
include obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The tax-exempt fund's standards for high quality,
taxable obligations are essentially the same as those described by Moody's
Investors Service, Inc. (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. If such proposals were enacted, the availability of municipal
obligations and the value of the tax-exempt fund's holdings would be
affected and the Trustees would reevaluate the tax-exempt fund's investment
objectives and policies.
The tax-exempt fund anticipates being as fully invested as practicable in
municipal securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of fund shares, or in order to
meet redemption requests, the tax-exempt fund may hold cash that is not
earning income. In addition, there may be occasions when, in order to raise
cash to meet redemptions, the tax-exempt fund may be required to sell
securities at a loss.
MUNICIPAL LEASE OBLIGATIONS. A fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, a fund will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
the fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
INTERFUND BORROWING PROGRAM. Certain funds have received permission from
the SEC to lend money to and borrow money from other funds advised by FMR
or its affiliates, but will participate in the interfund borrowing program
only as a borrower. Interfund loans normally will extend overnight, but can
have a maximum duration of seven days. A fund will borrow through the
program only when the costs are equal to or lower than the costs of bank
loans. Loans may be called on one day's notice, and a fund may have to
borrow from a bank at a higher interest rate if an interfund loan is called
or not renewed.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities sponsored by government and non-government entities such as
banks, mortgage lenders, or other financial institutions. A
mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as collateralized
mortgage obligations (CMOs), make payments of both principal and interest
at a variety of intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties. Other
types of mortgage-backed securities will likely be developed in the future,
and the fund may invest in them if FMR determines they are consistent with
the fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
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 those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. A fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining, and closing short sales.
SHORT SALES "AGAINST THE BOX." If a fund enters into a short sale against
the box, it will be required to set aside securities equivalent in kind and
amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. A fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
WARRANTS. A fund may invest in warrants which entitle the holder to buy
equity securities at a specific price for a specific period of time.
Warrants may be considered more speculative then certain other types of
investments in that they do not entitle a holder to dividends or voting
rights with respect to the securities which may be purchased, nor do they
represent any rights in the assets of the issuing company. The value of a
warrant may be more volatile than the value of the securities underlying
the warrants. 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 the expiration date.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Equity Portfolio Growth,
Growth Opportunities, Strategic Opportunities, Global Resources, Overseas,
Equity Portfolio Income, Income & Growth, High Income Municipal,
Short-Intermediate Tax-Exempt, Short Fixed-Income, Strategic Income,
Limited Term Bond, and High Yield have filed and Emerging Markets Income,
Limited Term Tax-Exempt, and Government Investment intend to file notices
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, before engaging in any purchases or sales of futures contracts or
options on futures contracts. Each fund intends to comply with Rule 4.5
under the Commodity Exchange Act, which limits the extent to which the fund
can commit assets to initial margin deposits and option premiums.
In addition to the above limitations, a fund will not: (a) sell futures
contracts, purchase put options, or write call options if, as a result,
more than 25% of a fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or write
put options if, as a result, a fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by
a fund would exceed 5% of a fund's total assets. These limitations do not
apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate
features similar to options.
The above limitations on a fund's investments in futures contracts and
options, and a fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, are not fundamental policies and may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date.
When a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when a fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Index of 500
Stocks (S&P 500). Futures can be held until their delivery dates, or can
be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, a 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 a
fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, a 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,
a fund will lose the entire premium it paid. If a 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, a 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, a fund
must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult
to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows a fund
greater flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of a fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow. Many factors
may affect the financing of multi-family housing projects, including
acceptable completion of construction, proper management, occupancy and
rent levels, economic conditions, and changes to current laws and
regulations.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public colleges and universities, and
those representing pooled interests in student loans. Bonds issued to
supply public educational institutions with funds are subject to the risk
of unanticipated revenue decline, primarily the result of decreasing
student enrollment. Among the factors that may affect enrollment 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 (DOE) through
its guaranteed student loan program (GSLP). 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 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.
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. The companies may 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, as well as a major exporter of agricultural
products. Canada 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. 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 investment.
Canadian securities are not considered by FMR to have the same level of
risk as other nation's securities. 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. The political system is more stable than in some other
foreign countries, and the Canadian dollar is generally less volatile
relative to the U.S. dollar.
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. In Canada,
where recovery is not yet as firmly established as in the United States,
interest rates have been coming down after a sharp rise associated with
exchange market developments in the fall of 1992. In light of the cyclical
situation, there should be room for a further easing of interest rates
without jeopardizing the progress made toward price stability. Continued
perseverance in reducing the structural budget deficit also is required.
FMR is unable to predict what effect, if any, such factors would have on
instruments held in the fund's portfolio.
Beginning in January of 1989 the U.S. - Canada Free Trade Agreement will be
phased in over a period of 10 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 U.S. and Mexico will implement the North American Free Trade
Agreement, beginning in 1994. This cooperation is expected to lend to
increased trade and to reduce barriers.
The majority of new equity issues or initial public offerings in Canada are
through underwritten offerings. The fund may elect to participate in these
issues.
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
series of markets. Economic growth was strong in the 1960s and 1970s, but
slowed dramatically in the 1980s as a result of poor economic policies,
higher international interest rates and the denial of access to new foreign
capital. Capital flight has proven a persistent problem and external debt
has been forcibly rescheduled. Political turmoil, high inflation, capital
export or repatriation restrictions, and nationalization have further
exacerbated economic conditions.Changes in political leadership, the
implementation of market oriented economic policies, such as privatization,
trade reform, and fiscal and monetary reform are among the recent steps
taken to renew economic growth. External debt is being restructured and
flight capital (domestic capital that has left the home country) has begun
to return. Inflation control efforts have also been implemented. Free
trade zones are being discussed in various areas around the region, the
most notable being a free zone recently approved among Mexico, the United
States, and Canada. Latin American equity markets can be extremely
volatile and in the past have shown little correlation with the United
States market. Currencies are typically weak, but most are now relatively
free floating, and it is not unusual for the currencies to undergo wide
fluctuations in value over short periods of time due to changes in the
market.Mexico's economy is a mixture of state-owned industrial plants
(notably oil), private manufacturing and services, and both large-scale and
traditional agriculture. In the 1980s, Mexico experienced severe economic
difficulties: the nation accumulated large external debts as world
petroleum prices fell; rapid population growth outstripped the domestic
food supply; and inflation, unemployment, and pressures to emigrate became
more acute. Growth in national output however appears to be recovering,
rising from 1.4% in 1988 to 3.9% in 1990. The United States is Mexico's
major trading partner, accounting for two-thirds of its exports and
imports. In fact, the United States now exports more goods to Mexico than
Japan. After petroleum, border assembly plants and tourism are the largest
earners of foreign exchange. The government, in consultation with
international economic agencies, is implementing programs to stabilize the
economy and foster growth, and strongly supported the recent free trade
agreement with the United States and Canada as a means to foster growth.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy direction.
A major long-run strength is Brazil's natural resources. Iron ore,
bauxite, tin, gold, and forestry products make up some to Brazil's basic
natural resource base, which includes some of the largest mineral reserves
in the world. A vibrant private sector is marred by an inefficient public
sector. The government has embarked on an ambitious reform program that
seeks to modernize and reinvigorate the economy by stabilizing prices,
deregulating the economy, and opening the economy to increased foreign
competition. Privatization of certain industries has been proposed and is
proceeding slowly. In terms of population, Brazil is the sixth largest in
the world with about 155 million people and represents a huge domestic
market.
Chile, like Brazil, is endowed with considerable mining resources, in
particular copper. Economic reform has been ongoing in Chile for at least
15 years, but political democracy has only recently returned to Chile.
Privatization of the public sector beginning in the early 1980s has
bolstered the equity market. A well-organized pension system has created
a long-term domestic investor base.
Argentina is strong in wheat production and other foodstuffs and 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. Recent attempts by the
present political regime to slow inflation and rationalize government
spending appear to be meeting with some success. Privatization is ongoing
and should reduce the amount of external debt outstanding. External debt
has grown to $60 billion, creating severe debt servicing difficulties and
hurting the country's creditworthiness with international lenders.
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. Plans for privatization and exchange and interest
rate liberalization are examples of recently introduced reforms.
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.
Thailand has one of the fastest growing stock markets in the world. The
manufacturing sector is becoming increasingly sophisticated and is
benefiting from export-oriented investing. The manufacturing and service
sectors continue to account for the bulk of Thailand's economic growth.
The agricultural sector continues to become less important. The government
has followed fairly sound fiscal and monetary policies, aided by increased
tax receipts from a fast moving economy. The government also continues to
move ahead with new projects - especially telecommunications, roads and
port facilities - needed to refurbish the country's overtaxed
infrastructure. Nonetheless, political unrest coupled with the shooting of
anti-government demonstrators in May of 1992 has caused many international
businesses to question Thailand's political stability.
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
1980's. 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 action s of the
government of China. Business confidence in Hong Kong, therefore, can be
significantly affected by such 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 manufacture, steel and shipbuilding among others. The driving
force behind the economy's dynamic growth has been the planned development
of an export-oriented economy in a vigorously entrepreneurial society.
Real GDP grew about 4.3% in 1993. Labor unrest was noticeably calmer,
unemployment averaged a low of 2.3%, and investment was strong. Inflation
rates, however, are beginning to challenge South Korea's strong economic
performance. Both Koreas joined the United Nations separately in late
1991, creating another forum for negotiation and joint cooperation.
Reunification of North Korea 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. Indonesia's
dependence on commodity exports makes it vulnerable to a fall in world
commodity prices.
Malaysia has one of the fastest growing economies in the Asian-Pacific
region. Malaysia has become the world's third-largest producer of
semiconductor devices (after the United States and Japan) and the world's
largest exporter of semiconductor devices. More remarkable is the
country's ability to achieve rapid economic growth with relative price
stability (2% inflation over the past five years) as the government
followed prudent fiscal/monetary policies. Malaysia's high export
dependence level leaves it vulnerable to a recession in the Organization
for Economic Cooperation and Development countries or a fall in world
commodity prices.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its history. During the 1970s and the early 1980s, the economy
expanded rapidly, achieving an average annual growth rate of 9%. Per
capita GDP is among the highest in Asia. Singapore holds a position as a
major oil refining and services center.
Japan currently has the second largest GDP in the world. The Japanese
economy has grown substantially over the last three decades. Its growth
rate averaged over 5% in the 1970's and 1980. However, in 1992, the growth
rate in Japan slowed to 0.6% and their budget showed a deficit of 11/2%
percent 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 1980's supported high
rates of investment and consumer spending on durable goods, but both of
these components of demand have now retreated sharply following the the
decline in asset prices. Profits have fallen sharply, the previously tight
labor market conditions have eased considerably, and consumer confidence is
low. The banking sector has experienced a sharp rise in non-performing
loans, and strains in the financial system are likely to continue. The
decline in interest rates and the two large fiscal stimulus packages should
help to contain the 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.
Although Japan's economic growth has declined significantly since 1990,
many Japanese companies seem capable of rebounding due to increased
investments, smaller borrowings, increased product development and
continued government support. Growth is expected to recover in 1994.
Japan's economic growth in the early 1980's was due in part to government
borrowings. Japan is heavily dependent upon international trade and,
accordingly, has been and may continue to be adversely affected by trade
barriers, and other protectionist or retaliatory measures of, as well as
economic conditions in, the United States and other countries with which
they trade. 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 may
forest products. Only 19% of its land is suitable for cultivation.
Japan's agricultural economy is subsidized and protected. It is about 50%
self-sufficient in food production. Even though Japan produces a minute
rice surplus, it is dependent upon large imports of wheat, sorghum, and
soybeans from other countries. Japan's high volume of exports such as
automobiles, machine tools, and semiconductors have caused trade tensions
with other countries, particularly the United States. Attempts to approve
trading agreements between the countries may reduce the friction caused by
the current trade imbalance.
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 for mutton, and is 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 can
have a big impact on its economy.
SPECIAL CONSIDERATIONS AFFECTING EUROPE
Most Eastern European nations, including Hungary, Poland, the Czech
Republic, Slovakia, and Romania have had centrally planned, socialist
economies since shortly after World War II. A number of their governments,
including those of Hungary, the Czech Republic, and Poland are currently
implementing or considering reforms directed at political and economic
liberalization, including efforts to foster multi-party political systems,
decentralize economic planning, and move toward free market economies. At
present, no Eastern European country has a developed stock market, but
Poland, Hungary, and the Czech Republic have small securities markets in
operation. Ethnic and civil conflict currently rage throughout the former
Yugoslavia. The outcome is uncertain.Both the European Union (EU) and
Japan, among others, have made overtures to establish trading arrangements
and assist in the economic development of the Eastern European nations. A
great deal of interest also surrounds opportunities created by the
reunification of East and West Germany. Following reunification, Germany
remains a firm and reliable member of the EU and numerous other
international alliances and organizations. To reduce inflation caused by
the unification of East and West Germany, Germany has adopted a tight
monetary policy which has led to weakened exports and a reduced domestic
demand for goods and services. However, in the long-term, reunification
could prove to be an engine for domestic and international growth. The
conditions that have given rise to these developments are changeable, and
there is no assurance that reforms will continue or that their goals will
be achieved.
Portugal is a genuinely emerging market which has experienced rapid growth
since the mid-1980s, except for a brief period of stagnation over 1990-91.
Portugal's government remains committed to privatization of the financial
system away from one dependent upon the banking system to a more balanced
structure appropriate for the requirements of a modern economy. Inflation
continues to be about three times the EC average.
Economic reforms launched in the 1980s continue to benefit Turkey in the
1990s. Turkey's economy has grown steadily since the early 1980s, with real
growth in per capita Gross Domestic Product (GDP) increasing more than 6%
annually. Agriculture remains the most important economic sector,
employing approximately 55% of the labor force, and accounting for nearly
20% of GDP and 20% of exports. Inflation and interest rates remain high,
and a large budget deficit will continue to cause difficulties in Turkey's
substantial transformation from a centrally controlled to a free market
economy.
Like many other Western economies, Greece suffered severely from the global
oil price hikes of the 1970s, with annual GDP growth plunging from 8% to 2%
in the 1980s, and inflation, unemployment, and budget deficits rising
sharply. The fall of the socialist government in 1989 and the inability of
the conservative opposition to obtain a clear majority have led to business
uncertainty and the continued prospects for 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.
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, diamond,
cotton, coffee, cocoa, timber, tobacco, sugar, tourism, and cattle.Many of
the countries are fraught with political instability. However, there has
been a trend over the past five 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. Other countries have been
enmeshed in civil wars and border clashes.Economically, the Northern Rim
countries (including 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 may be
reduced by constitutional changes that are in progress, the long-term
future of South Africa is 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' Gross Domestic Product. However, general decline in oil
prices has had an adverse impact on many economies.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to the
sub-advisers (see the section entitled "Management and Other Services"),
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 foreign investments
traded will be higher than for United States investments and may not be
subject to negotiation.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). Generally, FMR selects such broker-dealers
for equity funds (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff, and for other funds, based upon the
quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts. Subject to applicable
limitations of the federal securities laws, broker-dealers may receive
commissions for agency transactions that are in excess of the amount of
commissions charged by other broker-dealers in recognition of their
research and execution services. In order to cause each fund to pay such
higher commissions, FMR must determine in good faith that such commissions
are reasonable in relation to the value of the brokerage and research
services provided by such executing broker-dealers, viewed in terms of a
particular transaction or FMR's overall responsibilities to the funds and
its other clients. In reaching this determination, FMR will not attempt to
place a specific dollar value on the brokerage and research services
provided, or to determine what portion of the compensation should be
related to those services.
FMR is authorized to use research services provided by, and to place
portfolio transactions with, brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with FBSI and Fidelity Brokerage
Services, Ltd. (FBSL), subsidiaries of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. Prior to September 4,
1992, FBSL operated under the name Fidelity Portfolio Services, Ltd. (FPSL)
as a wholly owned subsidiary of Fidelity International Limited (FIL).
Edward C. Johnson 3d is Chairman of FIL. Mr. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family own,
directly or indirectly, more than 25% of the voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by Overseas, Global Resources, Growth
Opportunities, Equity Portfolio Growth, Equity Portfolio Income, Strategic
Opportunities, and Income & Growth toward payment of each 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 1993 and 1994, respectively, each fund's
portfolio turnover rates are shown in the chart below. The annualized
turnover rate for Strategic Income its first fiscal period is not expected
to exceed ____%. Because a high turnover rate increases transaction costs
and may increase taxable gains, FMR carefully weighs the anticipated
benefits of short-term investing against these consequences. An increased
turnover rate is due to a greater volume of shareholder purchase orders,
short-term interest rate volatility and other special market conditions.
Fiscal Period Ended 1993 1994
Emerging Markets Income December 31
Overseas December 31
Growth Opportunities October 31
Global Resources October 31
Equity Portfolio Growth November 30
Equity Portfolio Income November 30
Strategic Opportunities December 31
Income & Growth October 31
High Yield October 31
Limited Term Bond November 30
Short Fixed Income October 31
Government Investment October 31
High Income Municipal October 31
Limited Term Tax-Exempt November 30
Short-Intermediate Tax-Exempt November 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% of % of
FISCAL PERIOD Transactions Transactions
ENDED AS % Paid to % of % of Effected Effected
INDICATED: Firms Commissions Commissions through through
Total Providing To FBSI To FBSL To FPSL Paid to FBSI Paid to FBSL To FBSI FBSL
10/31= * Research
11/30= **
12/31= ***
EMERGING
MARKETS
INCOME ***
1994
1993
1992
OVERSEAS ***
1994
1993
1992
GROWTH
OPPORTUNITI
ES *
1994
1993
1992
GLOBAL
RESOURCES *
1994
1993
1992
EQUITY
PORTFOLIO
GROWTH **
1994
1993
1992
EQUITY
PORTFOLIO
INCOME **
1994
1993
1992
STRATEGIC
OPPORTUNITI
ES ***
1994
1993
1992
STRATEGIC
INCOME ***
1994
1993
1992
INCOME &
GROWTH *
1994
1993
1992
HIGH YIELD *
1994
1993
1992
LIMITED
TERM BOND
**
1994
1993
1992
SHORT FIXED-
INCOME *
1994
1993
1992
GOVERNMENT
INVESTMENT *
1994
1993
1992
HIGH INCOME
MUNICIPAL *
1994
1993
1992
LIMITED
TERM
TAX-EXEMPT
**
1994
1993
1992
SHORT-INTER
MEDIATE
TAX-EXEMPT
**
1994
1993
1992
</TABLE>
From time to time, the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine in the exercise of their
business judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds 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 OF PORTFOLIO SECURITIES
High Yield, Limited Term Bond, Short Fixed Income, Government Investment,
High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt value securities and other assets for which market quotations
are readily available at market values determined by their most recent bid
prices (sales prices if the principal market is an exchange) in the
principal market in which such securities normally are traded as furnished
by recognized dealers in such securities or assets. Futures contracts and
options are valued on the basis of available market quotations if
available.
Securities of the above-mentioned funds may also be valued on the basis of
valuations furnished by a pricing service which utilizes both
dealer-supplied valuations and evaluations based on expert analysis of the
market data and other factors if such valuations are believed to reflect
more accurately the fair value of such securities. Use of a pricing service
has been approved by the Board of Trustees. There are a number of pricing
services available, and the Trustees, on the basis of an on-going
evaluation of these services, may use other pricing services or discontinue
the use of any pricing service in whole or in part. Securities and other
assets not valued by a pricing service or for which market quotations are
not readily available (including restricted securities, if any) are
appraised at their fair value in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
For High Income Municipal, Limited Term Tax-Exempt, and Short-Intermediate
Tax-Exempt, valuations of portfolio securities furnished by the pricing
service employed by a fund are based upon a computerized matrix system
and/or appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
Trust and Fidelity Service Company under the general supervision of the
Trustees or officers acting on behalf of the Board of Trustees.
U.S. Treasury securities are valued on the basis of valuations furnished by
a pricing service which utilizes both dealer-supplied valuations and
electronic data processing techniques. Such techniques take into account
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations
are believed to reflect more accurately the fair value of such securities.
The portfolio securities of Emerging Markets Income and Strategic Income,
including ADRs, EDRs, and other forms of depository receipts, are valued
(i) by appraising the portfolio securities that are traded on the NYSE at
the closing bid price, or, if no closing bid price is available, at the
last traded bid price; or (ii) by appraising foreign securities as nearly
as possible in the manner described in clause (i) if such securities are
traded on any other U.S., Canadian, or foreign exchange, or, if not so
traded, on the basis of closing over-the-counter bid prices, if available.
The procedures set forth in (i) and (ii) above need not be used to
determine the value of securities owned by a fund if, in the opinion of the
Board of Trustees, some other method (e.g., based on closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities. Use of a pricing service has been approved by the Board of
Trustees. There are a number of pricing services available, and the
Trustees, on the basis of an on-going evaluation of these services, may use
other pricing services, or discontinue the use of any pricing service in
whole or in part.
If closing prices are unavailable, foreign securities will be valued at the
last traded bid price available prior to the time a fund's NAV is
determined. Foreign security prices are furnished by independent brokers
or quotation services which express the value of the securities in their
local currency. FSC gathers all exchange rates daily at the close of the
NYSE using the last quoted price, as applicable, on the local currency and
then translates the values of foreign securities from their local currency
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. Foreign security prices that cannot be obtained by the
independent brokers or quotation services are priced individually by FSC
using dealer-supplied quotations. If an extraordinary event that is
expected to affect materially the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then the
security will be valued at fair value as determined in good faith under the
direction of the Board of Trustees. Short-term obligations that mature in
60 days or less (from the date of purchase) are valued at amortized cost,
which constitutes fair value. All other securities and other assets are
appraised at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Portfolio securities of Overseas, Growth Opportunities, Equity Portfolio
Growth, Equity Portfolio Income, Strategic Opportunities, and Income &
Growth 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.
Short-term securities (securities having a maturity of one year or less)
are valued either at amortized cost or at original cost plus accrued
interest, both of which approximate current value. Convertible securities
and fixed-income securities are valued primarily by a pricing service that
uses a vendor security valuation matrix which incorporates both
dealer-supplied valuations and electronic data processing techniques. This
two-fold approach is believed to more accurately reflect fair value because
it takes into account appropriate factors such as institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type
of issue, trading characteristics, and other market data, without exclusive
reliance upon quoted, exchange, or over-the counter prices. Use of pricing
services has been approved by the Board of Trustees. All other securities
and other assets are appraised at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
Generally, the valuation of portfolio securities and other assets held by a
fund is substantially completed each day at the close of the NYSE. The
values of any such securities or other assets held by a fund are determined
as of such time for the purpose of computing the fund's net asset value.
PERFORMANCE
Class A and Class B 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 NAV or offering
price at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate.
Yields do not reflect any contingent deferredsales charge.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 after taxes to equal the class's tax-free yield.
Tax-equivalent yields are calculated by dividing a class's yield by the
result of one minus a stated federal or combined federal and state tax
rate. If any portion of a class's yield is tax-exempt, only that portion
is adjusted in the calculation.
1995 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Federal State Single Return Joint Return
Taxable Income* Income Tax Marginal Combined Income Combined Income
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket Rate Tax Bracket** Tax Bracket**
</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.
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1995. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from _% to _%. Of course, no assurance can
be given that a class will achieve any specific tax-exempt yield. While
the funds invests principally in obligations whose interest is exempt from
federal income tax, other income received by the funds may be taxable.
1995 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
Income Tax 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
8.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Single Return Joint Return* Bracket Then taxable-equivalent yield is:
</TABLE>
* Net amount subject to federal income tax after deductions and
exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A tax-free fund may invest a portion of its assets in obligations that are
subject to federal income tax. When the fund invests in these obligations,
its tax-equivalent yields will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the NAV over a stated
period. Average annual total returns are calculated by determining the
growth or decline in value of a hypothetical historical investment over a
stated period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
total return of 100% over ten years would produce an average annual return
of 7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. For class's less than one year
old, average annual returns covering periods of less than one year are
calculated by determining a 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
returns are a convenient means of comparing investment alternatives,
investors should realize that performance is not constant over time, but
changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance.
In addition to average annual total returns, unaveraged or cumulative total
returns reflecting the simple change in value of an investment over a
stated period may be quoted. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount, and may be calculated
for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking the
maximum front-end or contingent deferred sales charge into account.
Excluding the sales charge from a total return calculation produces a
higher total return figure. Ttoal returns, yield, and other performance
information may be quoted numerically or in a table, graph, or simialr
illustration.
NET ASSET VALUE. Charts and graphs using net asset values, adjusted net
asset values, and benchmark indices may be used to exhibit performance. An
adjusted NAV includes any distributions paid and reflects all elements of
its return. Unless otherwise indicated, adjusted NAVs are not adjusted for
sales charges, if any
MOVING AVERAGES. A growth or growth and income fund may illustrate
performance using moving averages. A long-term moving average is the
average of each week's adjusted closing NAV for a specified period. A
short-term moving average is the average of each day's adjusted closing NAV
for a specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving averages
for a specified period to produce indicators showing when an NAV has
crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown below:
As of 13-Week 39-Week
Overseas
Global Resources
Growth Opportunities
Equity Portfolio Growth
Equity Portfolio Income
Strategic Opportunities
Income & Growth
HISTORICAL BOND FUND RESULTS. The following tables show yields,
tax-equivalent yields (for tax-free funds), and total returns for periods
ended _______, 199_ for each class of the following funds. The
tax-equivalent yield is based on a __% federal income tax rate. Note that
each fund may invest in securities whose income is subject to the federal
alternative minimum tax.
Average Annual Total Returns Cumulative Total Returns
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Equivalent One Five Ten Years/ One Five Ten Years/
Yield Yield Year Years Life of fund* Year Years Life of fund*
</TABLE>
EMERGING
MARKETS
INCOME-A
EMERGING
MARKETS
INCOME-B
STRATEGIC
INCOME-A
STRATEGIC
INCOME-B
HIGH
YIELD-A
HIGH
YIELD-B
LIMITED
TERM
BOND-A
LIMITED
TERM
BOND-B
LIMITED
TERM
BOND-INST.
SHORT-FXD
INCOME-A
GOV'T
INVESTMENT
- -A
GOV'T
INVESTMENT
- -B
HIGH
INCOME
MUNI-A
HIGH
INCOME
MUNI-B
LTD TERM
TAX-EXEM
PT-A
LTD TERM
TAX-EXEM
PT-B
LTD TERM
TAX-EXEM
PT-INST.
S-I
TAX-EXEM
PT-A
* From commencement of operations to ____________________..
** Total return figures include the effect of the class's 4.75% front-end
sales charge.
*** Total return figures include the effect of the class's 1.50% front-end
sales charge.
**** Total return figures include the effect of the class's maximum 4.0%
CDSC.
Note: If FMR had not reimbursed certain fund expenses during these
periods, the yield and total returns for each class of ________________
would have been lower.
HISTORICAL EQUITY FUND RESULTS. The following table shows the total
returns for periods ended _______, 199_.
Average Annual Total Returns Cumulative Total Returns
One Five Ten Years/ One Five Ten Years/
Year Years Life of fund* Year Years Life of fund*
OVERSEAS-
A
GLOBAL
RESOURCES-
A
GROWTH
OPPORTUNIT
IES-A
EPG-A
EPG-INST.
EPI-A
EPI-B
EPI-INST.
STRATEGIC
OPPORTUNIT
IES-A
STRATEGIC
OPPORTUNIT
IES-B
INCOME &
GROWTH-A
* From commencement of operations to ___________________.
** Total return figures include the effect of the class's 4.75% front-end
sales charge.
*** Total return figures include the effect of the class's maximum 4.0%
CDSC.
Note: If FMR had not reimbursed certain fund expenses during these
periods, the total returns for each class of _________________ would have
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 fund's return to the record of the Aggregate Bond Index
Portfolio (bond funds only), the S&P 500 (equity funds only), the Dow Jones
Industrial Average (DJIA) (equity funds only), and the cost of living
(measured by the Consumer Price Index (CPI) over the same period. The CPI
information is as of the month end closest to the initial investment date
for each fund. Returns for international bond funds may be compared to the
following indices: the J.P. Morgan Emerging Markets Bond Index, a broad
measure of bond performance in developing countries; the Salomon Brothers
World Government Bond Index, which measures the performance of bonds issued
by the U.S. and foreign governments; and the Lehman Brothers 1-3 Year
Government Bond Index, which measures the performance of short-term U.S.
government bonds. The comparisons to the Aggregate Bond Index Portfolio
show a class's total return compared to the record of a broad average of
debt securities. The Aggregate Bond Index is a total return index
measuring both the capital price changes and the income underlying the
universe of securities weighted by market value outstanding, and, unlike a
class's returns, its returns do not include the effect of paying brokerage
commissions and other costs of investing. The S&P 500 and DJIA comparisons
are provided to show how each class's total return compared to the record
of a broad average of common stock prices and a narrower set of stocks of
major industrial companies, respectively, over the same period. Of course,
since bond funds invest in fixed-income securities, common stocks represent
a different type of investment from the fund. Common stocks generally
offer greater growth potential than mutual funds, 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 funds. Each fund has the ability to invest in
securities not included in either index, and its investment portfolio may
or may not be similar in composition to the indices. Figures for the S&P
500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the classes' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
The following charts show the growth of a hypothetical $10,000 investment
in each class, assuming all distributions were reinvested. This was a
period of fluctuating interest rates, bond prices, and stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the class today. Tax consequences of different investments have not been
factored into the figures.
INSTITUTIONAL CLASS CHARTS. Institutional Class shares are sold to eligible
investors without a sales charge or a 12b-1 fee.
CLASS A CHARTS. Class A shares are sold to eligible investors with a
maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On 9/10/92, a .65% (for equity funds) or a .25%
(for fixed-income funds) 12b-1 fee for all Class A shares was imposed. The
Class A 12b-1 fee is not reflected in figures prior to that date. The
initial offering of Class A shares for Equity Portfolio Growth, Equity
Portfolio Income, Limited Term Tax-Exempt, and Limited Term Bond was
9/10/92. Prior to that date, the figures for these funds reflect
Institutional Class data, i.e., no sales charge or 12b-1 fee.
CLASS B CHARTS. Class B shares are sold to eligible investors with a 1.00%
12b-1 fee and may be subject to the contingent deferred sales charge upon
redemption (maximum 4.00%). The 1.00% 12b-1 fee is reflected in figures for
the period beginning on 6/30/94, the initial offering date of Class B
shares. Prior to that date, the figures for Class B shares reflect Class A
and Institutional class data, as applicable, for the particular fund, as
described above.
GROWTH OPPORTUNITIES-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
GLOBAL RESOURCES-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From December 29, 1987 (commencement of operations).
** From month-end closest to initial investment date.
EQUITY PORTFOLIO GROWTH-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From ________, 19__ (commencement of operations).
** From month-end closest to initial investment date.
EQUITY PORTFOLIO GROWTH-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From ________, 19__ (commencement of operations).
** From month-end closest to initial investment date.
EQUITY PORTFOLIO INCOME-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From April 25, 1983 (commencement of operations).
** From month-end closest to initial investment date.
EQUITY PORTFOLIO INCOME-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From April 25, 1983 (commencement of operations).
** From month-end closest to initial investment date.
EQUITY PORTFOLIO INCOME-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From April 25, 1983 (commencement of operations).
** From month-end closest to initial investment date.
INCOME & GROWTH-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From January 6, 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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Dec. 31 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From December 31, 1983________, 19__ (commencement of operations).
** From month-end closest to initial investment date.
STRATEGIC OPPORTUNITIES-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Dec. 31 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From December 31, 1983 (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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Dec. 31 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From October 17, 1994 (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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM BOND-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From February 2, 1984 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM BOND-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* FromFebruary 2, 1984 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM BOND-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From February 2, 1984 (commencement of operations).
** From month-end closest to initial investment date.
SHORT FIXED-INCOME-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From ________, 19__September 16, 1987 (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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended ____ Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From January 7, 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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Oct. Investment Distributions Distributions Value 500 DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM TAX-EXEMPT-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM TAX-EXEMPT-CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
LIMITED TERM TAX-EXEMPT-INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From September 19, 1985 (commencement of operations).
** From month-end closest to initial investment date.
SHORT-INTERMEDIATE TAX-EXEMPT-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total S&P of
Ended Nov. 30 Investment Distributions Distributions Value 500 DJIA Living[**]
19__*
19__
19__
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
The yield for the S&P 500 for the year ended _______ was __%, 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 ______. The S&P 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 FUNDS. The following tables show the income and capital
elements of the total return for each class of the following funds from the
date it commenced operations through __________, 199_. 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
Diversified International, Morgan Stanley Capital International An unmanaged index of 900 foreign common
Overseas, and Emerging Europe, Australia, Far East Index stocks
Markets (EAFE)
Europe Morgan Stanley Capital International An unmanaged index of more than 500
Europe Index (Europe Index) companies throughout Europe
Pacific Basin Morgan Stanley Capital International An unmanaged index of more than 350
Pacific Index (Pacific Index) companies from Australia, Hong Kong, Japan,
Singapore, and Malaysia
Canada Toronto Stock Exchange 300 An unmanaged index of 300 companies in
Composite Index (TSE 300 Index) Canada published by the Toronto Stock
Exchange
Japan Tokyo Price Index (TOPIX) Includes over 1,200 companies representing
over 90% of the total market capitalization in
Japan
Southeast Asia Morgan Stanley Capital International Includes performance of over __ companies in
Combined Far East Ex-Japan Index over __ countries
Latin America Morgan Stanley Latin America Free Includes performance of over __ companies in
Index over __ countries
</TABLE>
Each table compares the returns for each class of the following funds to
the record of the S&P 500, the DJIA, a foreign stock market index as
described above, and the cost of living (measured by the Consumer Price
Index, or CPI) over the same period. The CPI information is as of the
month end closest to the initial investment date for each fund. The S&P
500 and DJIA comparisons are provided to show how each class's total return
compared to the record of a broad range of U.S. common stocks and a
narrower set of stocks of major U.S. industrial companies, respectively,
over the same period. The funds have the ability to invest in securities
not included in the indices, and their investment portfolios may or may not
be similar in composition to the indices. The EAFE Index, Europe Index,
Pacific Index, Combined Far East Free Ex-Japan Index, TSE 300 Index, TOPIX
Index, S&P 500, and DJIA are based on the prices of unmanaged groups of
stocks and, unlike each class's returns, their returns do not include the
effect of paying brokerage commissions and other costs of investing.
The following charts show the growth of a hypothetical $10,000 investment
in each class, assuming all distributions were reinvested. This was a
period of fluctuating interest rates, bond prices, and stock prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the class today. Tax consequences of different investments have not been
factored into the figures.
CLASS A CHARTS. Class A shares are sold to eligible investors with a
maximum 4.75% (1.50% for Short Fixed-Income and Short-Intermediate
Tax-Exempt) front-end sales charge, which is reflected in the figures set
forth in the charts below. On 9/10/92, a .65% (for equity funds) or a .25%
(for fixed-income funds) 12b-1 fee for all Class A shares was imposed. The
Class A 12b-1 fee is not reflected in figures prior to that date. The
initial offering of Class A shares for Equity Portfolio Growth, Equity
Portfolio Income, Limited Term Tax-Exempt, and Limited Term Bond was
9/10/92. Prior to that date, the figures for these funds reflect
Institutional Class data, i.e., no sales charge or 12b-1 fee.
CLASS B CHARTS. Class B shares are sold to eligible investors with a 1.00%
12b-1 fee and may be subject to the contingent deferred sales charge
(maximum 4.00%) applicable upon redemption. The 1.00% 12b-1 fee is
reflected in figures for the period beginning on 6/30/94, the initial
offering date of Class B shares. Prior to that date, the figures for Class
B shares reflect Class A and Institutional class data, as applicable, for
the particular fund, as described above.
EMERGING MARKETS INCOME-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total of
Ended Dec. 31 Investment Distributions Distributions Value DJIA Living[**]
19__*
19__
19__
</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>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total of
Ended Dec. 31 Investment Distributions Distributions Value DJIA Living[**]
19__*
19__
19__
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
OVERSEAS-CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of
Initial Reinvested Reinvested Cost
[Year/Period] $10,000 Dividend Capital Gain Total of
Ended Oct. Investment Distributions Distributions Value DJIA Living[**]
31
19__*
19__
19__
</TABLE>
* From April 23, 1990 (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, plus the aggregate cost of reinvested dividends and
capital gain distributions, if any, from the fund's commencement of
operations to the end of its fiscal period in 1994. If no additional
shares of these funds had been acquired through the reinvestment of
distributions, the cash payments from these funds would have come to the
amounts shown in column (A) for capital gain distributions, and the amounts
shown in column (B) for income dividends. No adjustment has been made for
a shareholder's income tax liability on dividends and capital gain
distributions.
(A) (B)
CAPITAL GAIN INCOME
FUND COST DISTRIBUTIONS DIVIDENDS
Growth Opportunities-A
Global Resources-A
Equity Portfolio Growth-A
Equity Portfolio Growth-Institutional
Equity Portfolio Income-A
Equity Portfolio Income-B
Equity Portfolio Income-Institutional
Income & Growth-A
Strategic Opportunities-A
Strategic Opportunities-B
Strategic Income-A
High Yield-A
High Yield-B
Limited Term Bond-A
Limited Term Bond-B
Limited Term Bond-Institutional
Short Fixed-Income-A
Government Investment-A
Government Investment-B
High Income Municipal-A
High Income Municipal-B
Limited Term Tax-Exempt-A
Limited Term Tax-Exempt-B
Limited Term Tax-Exempt-Institutional
Short-Intermediate Tax-Exempt-A
Emerging Markets Income-A
Emerging Markets Income-B
Overseas-A
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
Indices database, the total market capitalization of Latin American
countries according to the International Finance Corporation Emerging
Markets database, and the performance of national stock markets as measured
in U.S. dollars by the Morgan Stanley Capital International stock market
indices for the twelve months ended October 31, 1993. Of course, these
results are not indicative of future stock market performance or the
classes' performance. Market conditions during the periods measured
fluctuated widely. Brokerage commissions and other fees are not factored
into the values of the indices.
MARKET CAPITALIZATION. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization. According to
Morgan Stanley Capital International, the size of the markets as measured
in U.S. dollars grew from $____ billion in 19__ to $____ billion in
199_.The following table measures the total market capitalization of
certain countries according to the Morgan Stanley Capital International
Indices database. The value of the markets are measured in billions of
U.S. dollars as of __________, 199_.
TOTAL MARKET CAPITALIZATION
Australia $ Japan $
Austria Netherlands
Belgium Norway
Canada Singapore/Malaysia
Denmark Spain
France Sweden
Germany Switzerland
Hong Kong United Kingdom
Italy United States
The following table measures the total market capitalization of 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 _______________, 199_.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $
Brazil
Chile
Colombia
Mexico
Venezuela
Total Latin America $______
NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents the
performance of national stock markets as measured in U.S. dollars by the
Morgan Stanley Capital International stock market indices for the twelve
months ended ___________. 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
Australia $ Japan $
Austria Netherlands
Belgium Norway
Canada Singapore/Malaysia
Denmark Spain
France Sweden
Germany Switzerland
Hong Kong United Kingdom
Italy United States
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN LOCAL CURRENCY
Australia $ Japan $
Austria Netherlands
Belgium Norway
Canada Singapore/Malaysia
Denmark Spain
France Sweden
Germany Switzerland
Hong Kong United Kingdom
Italy United States
The following table shows the average annualized stock market returns
measured in U.S. dollars as of October 31, 199_.
STOCK MARKET PERFORMANCE
Five Years Ended_ Ten Years Ended
Germany
Hong Kong
Japan
Spain
United Kingdom
United States
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 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; Fidelity Asset Allocation Program materials,
including computerized investment planning software and a workbook
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to assess
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
AverageS(trademark)/All Taxable (Strategic Income, High Yield, Short-Fixed)
, The Bond fund Report AverageS(trademark)/Municipal (Limited Term
Tax-Exempt, High Income Municipal, Short-Intermediate Tax-Exempt) and which
is reported in the BOND FUND REPORT(registered trademark), covers over ___
taxable bond 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 tax-free bond fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales
charges of many tax-free 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.
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 the fund's
historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents the
class's percentage change in price movements over that period. Examples of
the effects of periodic investment plans, including the principle of dollar
cost averaging may be advertised. In such a program, an investor invests a
fixed dollar amount in a class at periodic intervals, thereby purchasing
fewer shares when prices are high and more shares when prices are low.
While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than
if fixed numbers of shares are purchased at the same intervals. In
evaluating such a plan, investors should consider their ability to continue
purchasing shares during periods of low price levels.
A class 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 _________, 199_, FMR advised over $__ billion in tax-free fund
assets, $__ billion in money market fund assets, $___ billion in equity
fund assets, and $__ billion in international fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The "equity funds
under management" figure represents the largest amount of equity fund
assets under management by a mutual fund investment adviser in the United
States, making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad, with over __ employees in over __ foreign countries.
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.
Each fund may present its fund number, Quotron number and CUSIP number and
discuss or quote its current portfolio manager.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class A's maximum 4.75% (1.50% for Short-Fixed Income and
Short-Intermediate Tax-Exempt) sales charge in connection with the fund's
merger with or acquisition of any investment company or trust. In addition,
FDC has chosen to waive Class A's sales charge in certain instances because
of efficiencies involved in those sales of shares. The sales charge will
not apply:
1. to shares purchased in connection with an employee benefit plan
(including the Fidelity-sponsored 403(b) and corporate IRA programs but
otherwise as defined in the Employee Retirement Income Security Act
(ERISA)) maintained by a U.S. employer and having more than 200 eligible
employees, or a minimum of $1,000,000 in plan assets invested in the assets
of which are held in a bona fide trust for the exclusive benefit of
employees participating therein;
2. 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;
3. 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;
4. to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
5. 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);
6. 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;
7. 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;
8. to shares purchased by a trust institution or bank trust department
investing on their own behalf or on the behalf of their clients;
9. to shares purchased by accounts to which a bank or broker-dealer charges
an asset management fee, provided the bank or broker-dealer has an
Agreement with Distributors;
10. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency; or
11. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end sales charge only
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, you or your Investment Professional must notify the
transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company" as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Internal
Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A shares after you have reached a new breakpoint in a
fund's sales charge schedule. The value of currently held Fidelity Advisor
Fund Class A and Class B shares, and Initial Class shares and Class B
shares of Daily Money Fund: U.S. Treasury Portfolio and shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund acquired
by exchange from any Fidelity Advisor fund, is determined at the current
day's NAV at the close of business, and is added to the amount of your new
purchase valued at the current offering price to determine your reduced
front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($1,000,000 for Advisor Short Fixed-Income fund or Advisor
Short-Intermediate Tax-Exempt fund) had been invested at one time. To
ensure that the reduced front-end sales charge will be received on future
purchases, you or your Investment Professional must inform the transfer
agent that the Letter is in effect each time Class A shares are purchased.
Neither income nor capital gain distributions taken in additional Class A
or Class B shares will apply toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then current offering price applicable to total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
Each fund is open for business and the NAV for each class is calculated
each day the NYSE is open for trading. The NYSE has designated the
following holiday closings for 1995: New Year's Day (observed),
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. Each class's NAV is calculated as of the
close of the NYSE (normally 4:00 p.m. Eastern time). However, NAV may be
calculated earlier if trading on the NYSE is restricted or as permitted by
the SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, a class's NAV may be affected on
days when investors do not have access to the fund to purchase or redeem
shares. In addition, trading in some of a fund's portfolio securities may
not occur on days when the fund is open for business. Certain Fidelity
funds may follow different holiday closing schedules.
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, the Transfer Agent may reinvest your distributions
at the then-current NAV. All subsequent distributions will then be
reinvested until you provide the Transfer Agent with alternate
instructions.
DIVIDENDS. A portion of a fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that a fund's income is derived from qualifying dividends. Because
a fund may also earn other types of income, such as interest, income from
securities loans, non-qualifying dividends and short-term capital gains,
the percentage of dividends from the equity portfolios that qualify for the
deduction will generally be less than 100%. A fund will notify corporate
shareholders annually of the percentage of fund dividends which qualify for
the dividends received deduction. A portion of a fund's dividends derived
from certain U.S. Government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore will increase (decrease)
dividend distributions. A fund will send each shareholder a notice in
January describing the tax status of dividends and capital gain
distributions for the prior year.
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 purpos es of a fund's policies of investing so
that at least 80% of its income is free from federal income tax. Interest
from private activity securities is a tax preference item for the
purpose of determining whether a taxpayer is subject to the AMT and the
amount of AMT tax to be paid, if any. Private activity securities issued
after August 7, 1986 to benefit a private or industrial user or to finance
a private facility are affected by this rule.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by a fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
A portion of the gain on bonds purchased at a discount after April 30, 1993
and short-term capital gains distributed by the Fund are federally taxable
to shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions resulting from a recharacterization of
gain from the sale of bonds purchased at a discount after April 30, 1993
are not considered income for the purposes of the Fund's policy of
investing so that at least 80% of its income is free from federal income
tax.
As of October 31, 1993, Overseas had a capital loss carryover, available to
offset future capital gains, of approximately $949,000 of which will
expire on October 31, 1999.
As of October 31, 1993, Short Fixed-Income had capital loss carryovers
aggregating approximately $864,000 available to offset future capital gains
of which $1,000, $19,000, $128,000, $63,000, $286,000, $38,000, and
$329,000 will expire on October 31, 1995, 1996, 1997, 1998, 1999, 2000 and
2001, respectively.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because none of the
funds currently anticipate that securities of foreign corporations will
constitute more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
STATE AND LOCAL TAXES. For mutual funds organized as business trusts, most
states' laws provide for a pass-through of the state and local income tax
exemption afforded to direct owners of U.S. government securities.
Therefore, for residents of most states, the tax treatment of your dividend
distributions from the Fund will be the same as if you directly owned your
proportionate share of the Fund's portfolio securities. Thus, because the
income earned on most U.S. government securities in which the fund invests
is exempt from state and local income taxes in most states, the portion of
your dividends from the Fund attributable to these securities will also be
free from income taxes in those states. The exemption from state and local
income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities.
TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue
to qualify as a "regulated investment company" for tax purposes, so that it
will not be liable for federal tax on income and capital gains distributed
to shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes, 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 must constitute
less than 30% of a 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, called
passive foreign investment companies (PFICs), 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.
Each fund is treated as a separate entity from the other funds in its
Trust, if any, for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting a 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 distributions received from a fund. Investors
should consult their tax advisors to determine whether a fund is suitable
for their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company (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 require pre-clearance, and participation in initial public
offerings is prohibited. In addition, restrictions on the timing of
personal investing in relation to trades by Fidelity funds and on
short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Trusts are listed
below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. All persons
named as Trustees and officers also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of
each Trustee and officer is 82 Devonshire Street, Boston, MA 02109, which
is also the address of FMR. Those Trustees who are "interested persons"
(as defined in the 1940 Act) by virtue of their affiliation with either the
Fund or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, 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. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous
waste, 1993) and CH2M Hill Companies (engineering). In addition, he served
on the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, a Trustee and member of
the Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) 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, 1989) 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, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), 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,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation funds and Warburg, Pincus Partnership
funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
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. (1989), and AppleSouth, Inc. (restaurants,
1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, 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).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
ROBERT A. LAWRENCE, 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).
THOMAS J. STEFFANCI, Vice President (1994), is Vice President of Fidelity's
fixed-income funds and Senior Vice President of FMR (1993). Prior to
joining FMR, Mr. Steffanci was Senior Managing Director of CMB Investment
Counselors (1984-1990).
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's equity
funds, is Vice President of FMR
MARGARET L. EAGLE, is Vice President of High Yield and an employee of FMR.
MICHAEL GRAY, is Vice President of Limited Term Bond (1989) and an employee
of FMR.
ROBERT HABER, is Vice President of Income & Growth (1989) and an employee
of FMR.
JOHN F. HALEY, JR., is Vice President of Limited Term Tax-Exempt, and an
employee of FMR.
MALCOLM W. MCNAUGHT, is Vice President of Global Resources (1991), and an
employee of FMR.
ROBERT STANSKY, is Vice President of Equity Portfolio Growth (1991) and of
other funds advised by FMR, and an employee of FMR.
DONALD TAYLOR, is Vice President of Short Fixed Income and an employee of
FMR.
GEORGE A. VANDERHEIDEN, is Vice President of Growth Opportunities (1990),
is an employee of FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. William R. Spaulding, Bertram H. Witham, and
David L. Yunich participate in the program.
On _______________________, the trustees and officers owned in the
aggregate less than 1% of each fund's outstanding shares.
MANAGEMENT AND OTHER SERVICES
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, as
applicable, to State Street Bank and Trust Company (State Street), transfer
agent for Class A shares of taxable funds; FIIOC, transfer agent for Class
B shares of taxable funds; FSC, pricing and bookeeping agent for taxable
funds; and United Missouri Bank, N.A. (UMB), transfer agent and pricing and
bookeeping agent for non-taxable funds; 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, the Trust, on behalf of each 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.
State Street is transfer and dividend-disbursing and shareholder servicing
agent for Class A shares of each taxable fund and maintains its shareholder
records. State Street has delegated certain transfer, dividend paying and
shareholder services to FIIOC, an affiliate of FMR. Under a revised fee
arrangement effective January 1, 1993, each class pays a per account fee
and a monetary transaction fee of $30 and $6, respectively. For accounts
that FIIOC maintains on behalf of State Street, FIIOC receives all such
fees. For accounts as to which FIIOC provides limited services, FIIOC may
receive a portion (currently up to $20 and $6, respectively) of related per
account fees and monetary transaction fees, less applicable charges and
expenses of State Street for account maintenance and transactions.
Service, an affiliate of FMR, performs the calculations necessary to
determine the NAV and dividends and maintain the accounting recordsfor each
class of each taxable fund. Prior to July 1, 1991, the annual fee for
these pricing and bookkeeping services was based on two schedules, one
pertaining to a fund's average net assets, and one pertaining to the type
and number of transactions made by a class of a fund. The fee rates in
effect as of July 1, 1991 are based on each fund's average net assets,
specifically, .06% for the first $500 million of average net assets and
.03% for average net assets in excess of $500 million. The fee is limited
to a minimum of $45,000 and a maximum of $750,000 per year. Service also
receives fees for administering a fund's securities lending program.
Securities lending fees are based on the number and duration of
individual securities loans.
FMR is each fund's manager pursuant to management contracts approved by
shareholders on the dates shown in the table below. The management fee paid
to FMR is reduced by an amount equal to the fees and expenses of the
non-interested Trustees.
Date of Management Contract Date of Shareholder Approval
Emerging Markets Income 1/20/94 2/10/94
Overseas 1/1/93 12/1/92
Growth Opportunities 12/1/88 11/16/88
Global Resources 12/30/88 11/16/94
Equity Portfolio Growth 12/1/90 11/14/90
Equity Portfolio Income 8/1/86
Strategic Opportunities 11/29/90 12/19/90
Income & Growth 1/1/95 12/14/94
Strategic Income 9/16/94
High Yield 1/1/95 12/15/94
Limited Term Bond 1/195 12/14/94
Short Fixed Income
Government Investment 12/30/88 10/18/88
High Income Municipal 12/30/88 10/18/88
Limited Term Tax-Exempt 1/29/89 11/26/86
Short-Intermediate Tax-Exempt 1/21/94 2/10/94
For the services of FMR under the contract, Equity Portfolio Income pays
FMR a monthly management fee at the annual rate of .50% of its average net
assets throughout the month. For the fiscal years ended November 30, 1994,
1993, and 1992, FMR received $_________, $_____________ and $____________,
respectively, after reduction of fees and expenses of the non-interested
Trustees.
For the services of FMR under the contract, Emerging Markets Income, Equity
Portfolio Growth, Global Resources, Income & Growth, Government Investment,
Strategic Income, Limited Term Bond, High Yield, Short Fixed Income,
Limited Term Tax-Exempt, Short-Intermediate Tax-Exempt and High Income
Municipal each pay FMR a monthly management fee composed of a basic fee.
For the services of FMR under the contract, Strategic Opportunities,
Overseas, and Growth Opportunities pay FMR a monthly management fee
composed of the sum of two elements: a basic fee and a performance
adjustment based on a comparison of Strategic Opportunities, Overseas, and
Growth Opportunities' performance to that of the S&P 500, EAFE, and the S&P
500, respectively.
COMPUTING THE BASIC FEE. Emerging Markets Income, Equity Portfolio Growth,
Global Resources, Overseas, Strategic Opportunities, Growth Opportunities,
Income & Growth, Government Investment, Strategic Income, High Yield, Short
Fixed Income, Limited Term Bond, Limited Term Tax-Exempt,
Short-Intermediate Tax-Exempt, and High Income Municipal's basic fee rates
are composed of two elements: a group fee rate and an individual fund fee
rate. The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the graduated
fee rate schedule shown below on the left. Also shown below on the right
is the effective annual group fee rate schedule which is the result of
cumulatively applying the annualized rates at varying asset levels. For
example, the effective annual fee rate at ___billion of group net assets -
the approximate level for ____________________- was ___%, which is the
weighted average of the respective fee rates for each level of group net
assets up to that level.
FIXED-INCOME FUNDS
The following fee schedule is the current fee schedule for all fixed-income
funds.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
This fee schedule was approved by shareholders of all fixed-income funds
except Limited Term Tax-Exempt Fund. (See chart indicating Date of
Management Contract and Shareholder Approval.)
Under Limited Term Tax-Exempt Fund's current management contract, the group
fee rate is based on a schedule with breakpoints ending at .1400% for
average group net assets in excess of $174 billion. The following Fee
schedule is the fee schedule which was in effect through August 1, 1994,
and was either approved by shareholders or voluntarily adopted by FMR.
Group fee rate breakpoints shown for average group net assets in excess of
$120 billion and under $228 billion were voluntarily adopted by FMR, and
went into effect on January 1, 1992. Additional breakpoints for average
group net assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
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
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity funds
(except Equity Portfolio Income, see above).
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE
RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
This fee schedule was approved by shareholders of all equity funds except
EPI, EPG, Strategic Opportunities, and Overseas (see chart indicating date
of management contract and date of shareholder approval.)
Under Equity Portfolio Growth, Strategic Opportunities, and Overseas'
current management contract, the group fee rate is based on a schedule with
breakpoints ending at .3000% for average group net assets in excess of $174
billion.
The following fee schedule is the fee schedule which was in effect through
August 1, 1994, and was either approved by shareholders or voluntarily
adopted by FMR.
Group fee rate breakpoints shown for average group net assets in excess of
$138 billion and under $228 billion were voluntarily adopted by FMR, and
went into effect on January 1, 1992. Additional breakpoints for average
group net assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints.
Each revised group fee rate schedule provides for lower management fee
rates as FMR's assets under management increase.
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
Based on the average group net assets of the funds advised by FMR for
1994, the annual basic fee rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate
Basic Fee Rate.
Emerging Markets Income
_______% + .55 %
= ._______%
Equity Portfolio Growth
_______% + .33%
= ._______%
Overseas
_______% + .45%
= ._______%
Global Resources
_______% + .45%
= ._______%
Strategic Opportunities
_______% + .30%
= ._______%
Growth Opportunities
_______% + .30%
= ._______%
Income & Growth
_______% + .20%
= ._______%
Strategic Income
_______% + .45%
= ._______%
Government Investment
_______% + .30%
= ._______%
High Yield
_______% + .45%
= ._______%
Short Fixed
_______% + .30%
= ._______%
Limited Term Bond
_______% + .30%
= ._______%
Limited Term Tax-Exempt
_______% + .25%
= ._______%
High Income Municipal
_______% + .25%
= ._______%
Short-Intermediate Tax-Exempt
_______% + .25%
= ._______%
One-twelfth of this annual basic fee rate is applied to each fund's net
assets averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to upward or
downward adjustment, depending upon whether, and to what extent, Strategic
Opportunities, Overseas, and Growth Opportunities' investment performance
for the performance period exceeds, or is exceeded by, the record of the
S&P 500, EAFE, and S&P 500, respectively (the Indices) over the same
period. Each fund's performance period commenced on December 30, 1983,
April 1, 1990, and November 18, 1987, respectively. Starting with the
twelfth month, the performance adjustment takes effect. Each month
subsequent to the twelfth month, a new month is added to the performance
period until the performance period equals 36 months. Thereafter, the
performance period consists of the most recent month plus the previous 35
months. Each percentage point of difference, calculated to the nearest 1.0%
(up to a maximum difference of +/- 10.00 ) is multiplied by a performance
adjustment rate of .02%. Thus, the maximum annualized adjustment rate is
+/- .20%. Strategic Opportunities is comprised of three classes of shares:
Initial Class shares, Class A shares and Class B shares. Investment
performance will be measured separately for each class, and the least of
the three results obtained will be used in calculating the performance
adjustment to the management fee paid by the fund. This performance
comparison is made at the end of each month. One twelfth (1/12) of this
rate is then applied to each fund's average net assets for the entire
performance period, giving a dollar amount which will be added to (or
subtracted from) the basic fee.
Each class's performance is calculated based on change in net asset value.
For purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by each class are treated as if reinvested
in that class's shares at the net asset value as of the record date for
payment. The record of the Index is based on change in value and is
adjusted for any cash distributions from the companies whose securities
compose the Index.
Because the adjustment to the basic fee is based on each class's
performance compared to the investment record of the Index, the controlling
factor is not whether each class's performance is up or down per se, but
whether it is up or down more or less than the record of the Index.
Moreover, the comparative performance of each class is based solely on the
relevant performance period without regard to the cumulative performance
over a longer or shorter period of time.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Income & Growth. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Income & Growth for each of those years.
During the fiscal years ended November 30, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Limited Term Bond. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Limited Term Bond for each of those years.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to High Income Municipal. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
High Income Municipal for each of those years.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Global Resources. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Global Resources for each of those years.
During the fiscal years ended November 30, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Limited Term Tax-Exempt. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Limited Term Tax-Exempt for each of those years.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Government Investment. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Government Investment for each of those years.
During the fiscal years ended November 30, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Equity Portfolio Growth. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Equity Portfolio Growth for each of those years.
During the fiscal years ended December 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Emerging Markets Income. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Emerging Markets Income for each of those years.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to High Yield. These fees were equivalent to
__%, __%, and __%, respectively, of the average net assets of HIgh Yield
for each of those years.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $____________ and $______________, respectively, for its
services as investment adviser to Short Fixed-Income. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Short Fixed for each of those years.
During the fiscal years ended December 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Strategic Opportunities. These fees were
equivalent to __%, __%, and __%, respectively, of the average net assets of
Strategic Opportunities for each of those years. For fiscal 1994, 1993, and
1992, the [downward/upward] performance adjustments amounted to $____,
$____, and $_____, respectively.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $___________ and $___________, respectively, for its
services as investment adviser to Overseas. These fees were equivalent to
__%, __%, and __%, respectively, of the average net assets of Overseas for
each of those years. For fiscal 1994, 1993, and 1992, the [downward/upward]
performance adjustments amounted to $____, $____, and $_____, respectively.
During the fiscal years ended October 31, 1994, 1993, and 1992, FMR
received $_______, $__________ and $_________, respectively, for its
services as investment adviser to Growth Opportunities. These fees were
equivalent to __%, .52%, and .53%, respectively, of the average net assets
of Growth Opportunities for each of those years. For fiscal 1994, 1993, and
1992, the [downward/upward] performance adjustments amounted to $____,
$____, and $_____, respectively.
FUND OPERATION EXPENSE REIMBURSEMENTS. FMR may, from time to time,
voluntarily reimburse all or a portion of a fund's operation expenses
(exclusive of interest, taxes, brokerage commissions, and extraordinary
expenses) above a specified percentage of average net assets. FMR retains
the ability to be repaid for these expense reimbursements in the amount
that expenses fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase each fund's total returns
and/or yield and reimbursement by each fund will lower its total returns
and/or yield.
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Strategic Income if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of __% of average net assets of Strategic Income. If this
reimbursement had not been in effect, for the fiscal years ended December
31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Short Fixed-Income if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of .___% of average net assets of Short Fixed-Income. If
this reimbursement had not been in effect, for the fiscal years ended
October 31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse High Yield if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of ___% of average net assets of High Yield. If this
reimbursement had not been in effect, for the fiscal years ended October
31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Limited Term Bond if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of __% of average net assets of Limited Term Bond. If this
reimbursement had not been in effect, for the fiscal years ended November
30, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Emerging Markets Income if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of __% of average net assets of Strategic Income. If this
reimbursement had not been in effect, for the fiscal years ended December
31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Overseas if and to the extent that its aggregate
operating expenses, including management fees, were in excess of an annual
rate of .___% of average net assets of Overseas. If this reimbursement had
not been in effect, for the fiscal years ended December 31, 1994, 1993, and
1992, FMR would have received fees amounting to $_________, $___________,
and $_________, respectively, which would have been equivalent to __%, __%,
and __% of average net assets of the fund (after reduction for compensation
to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Growth Opportunities if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of ___% of average net assets of Growth Opportunities. If
this reimbursement had not been in effect, for the fiscal years ended
October 31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Equity Portfolio Growth if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of __% of average net assets of Equity Portfolio Growth.
If this reimbursement had not been in effect, for the fiscal years ended
November 30, 1994, 1993, and 1992, FMR would have received fees amounting
to $_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Equity Portfolio Income if and to the extent
that its aggregate operating expenses, including management fees, were in
excess of an annual rate of __% of average net assets of Equity Portfolio
Income. If this reimbursement had not been in effect, for the fiscal years
ended November 30, 1994, 1993, and 1992, FMR would have received fees
amounting to $_________, $___________, and $_________, respectively, which
would have been equivalent to __%, __%, and __% of average net assets of
the fund (after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Income & Growth if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of .___% of average net assets of Income & Growth. If this
reimbursement had not been in effect, for the fiscal years ended October
31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Strategic Opportunities if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of ___% of average net assets of Strategic Opportunities.
If this reimbursement had not been in effect, for the fiscal years ended
December 31, 1994, 1993, and 1992, FMR would have received fees amounting
to $_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Global Resources if and to the extent that its
aggregate operating expenses, including management fees, were in excess of
an annual rate of __% of average net assets of Global Resources. If this
reimbursement had not been in effect, for the fiscal years ended October
31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Government Investment if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of __% of average net assets of Government Investment. If
this reimbursement had not been in effect, for the fiscal years ended
October 31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse High Income Municipal if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of .___% of average net assets of High Income Municipal.
If this reimbursement had not been in effect, for the fiscal years ended
October 31, 1994, 1993, and 1992, FMR would have received fees amounting to
$_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Limited Term Tax-Exempt if and to the extent that
its aggregate operating expenses, including management fees, were in excess
of an annual rate of ___% of average net assets of Limited Term Tax-Exempt.
If this reimbursement had not been in effect, for the fiscal years ended
November 30, 1994, 1993, and 1992, FMR would have received fees amounting
to $_________, $___________, and $_________, respectively, which would have
been equivalent to __%, __%, and __% of average net assets of the fund
(after reduction for compensation to the non-interested Trustees).
Effective _______________, FMR voluntarily agreed, subject to revision or
termination, to reimburse Short-Intermediate Tax-Exempt if and to the
extent that its aggregate operating expenses, including management fees,
were in excess of an annual rate of __% of average net assets of
Short-Intermediate Tax-Exempt. If this reimbursement had not been in
effect, for the fiscal years ended November 30, 1994, 1993, and 1992, FMR
would have received fees amounting to $_________, $___________, and
$_________, respectively, which would have been equivalent to __%, __%, and
__% of average net assets of the fund (after reduction for compensation to
the non-interested Trustees).
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that each fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating each fund's expenses for purposes of this regulation,each
fund of fund may exclude interest, taxes, brokerage commissions, and
extraordinary expenses, as well as a portion of its distribution plan
expenses and custodian fees attributable to investments in foreign
securities.
SUB-ADVISERS.On behalf of Strategic Opportunities, Global Resources, Income
& Growth, High Yield, Equity Portfolio Income, Limited Term Bond, Equity
Portfolio Growth, and Short Fixed-Income. FMR has entered into sub-advisory
agreements with FMR U.K. and FMR Far East. On behalf of Overseas, FMR has
entered into sub-advisory agreements with 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 , FMR has entered into sub-advisory
agreements with FMR U.K., FMR Far East, FIJ, and FIIA. FIIA, in turn, has
entered into a sub-advisory agreement with FIIAL U.K. Pursuant to the
sub-advisory agreements, FMR may receive investment advice and research
services outside the United States from the sub-advisers.
On behalf of Global Resources, Growth Opportunities, Income & Growth, High
Yield, Limited Term Bond, Emerging Markets Income, and Short Fixed-Income,
FMR may also grant FMR U.K. and FMR Far East investment management
authority as well as the authority to buy and sell securities if FMR
believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIAL U.K. each focus on
issuers in countries other than the United States such as those in Europe,
Asia, and the Pacific Basin. FMR U.K. and FMR Far East, which were
organized in 1986, are wholly owned subsidiaries of FMR. FIJ and FIIA are
wholly owned subsidiaries of Fidelity International Limited (FIL), a
Bermuda company formed in 1968 which primarily provides investment advisory
services to non-U.S. investment companies and institutional investors
investing in securities throughout the world. Edward C. Johnson 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family owns, 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:
(medium solid bullet) 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.
(medium solid bullet) 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.
(medium solid bullet) 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 Emerging Markets Income, Growth Opportunities, Global
Resources, Income & Growth, High Yield, Short Fixed-Income, and Limited
Term Bond, for providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as follows:
(medium solid bullet) 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.
(medium solid bullet) 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 for
providing investment advice and research services by FMR to FMR U.K.,
FMR Far East, FIIA, and FIJ, and by FIIA to FIIAL with respect to certain
of the funds for the fiscal period ended October 31, November 30, and
December 31, 1994.
FEES PAID TO FOREIGN SUB-ADVISERS
FUND FEES PAID BY FMR TO FMR U.K. FEES PAID BY FMR TO FMR FAR EAST
FISCAL 1994 FISCAL 1993 FISCAL 1992 FISCAL 1994 FISCAL 1993 FISCAL 1992
Emerging Markets Income
Overseas
Global Resources
Equity Portfolio Growth
Equity Portfolio Income
Growth Opportunities
Strategic Opportunities
Income & Growth
High Yield
Limited Term Bond
Short Fixed-Income
TOTAL
FEES PAID BY FMR TO FIIA FEES PAID BY FIIA TO FIIAL
FISCAL 1994 FISCAL 1993 FISCAL 1992 FISCAL 1994 FISCAL 1993 FISCAL 1992
Emerging Markets Income
Overseas
TOTAL
FEES PAID BY FMR TO FIJ
FISCAL 1994 FISCAL 1993 FISCAL 1992
Emerging Markets Income
THE DISTRIBUTOR
Each fund has a Distribution Agreement with FDC, a Massachusetts
corporation organized July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of a fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC.
DISTRIBUTION AND SERVICE PLANS
The Trustees have adopted a Distribution and Service Plan on behalf of
Class A and Class B shares of the funds (the Plans) pursuant to Rule 12b-1
under the 1940 Act. 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 adopted by the fund under the Rule. The Trustees have
adopted the Plans to allow Class A and Class B shares of the funds 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 Plans, FDC is paid a distribution fee at an annual rate of
up to 0.75% for Equity Portfolio Growth and Strategic Opportunities; up to
0.40% for Emerging Markets Income, High Yield, Limited Term Bond, High
Income Municipal, and Limited-Term Tax-Exempt; up to 0.65% for Overseas,
Growth Opportunities, Global Resources, Equity Portfolio Income, and Income
& Growth; and up to 0.15% for Short Fixed-Income and Short-Intermediate
Tax-Exempt Class A average net assets and 0.75% of Class B's average net
assets for all funds with Class B shares determined as of the close of
business on each day throughout the month, but excluding assets
attributable to Class A shares of Equity Portfolio Growth, Equity Portfolio
Income, Short-Intermediate Tax-Exempt, Limited Term Tax-Exempt, Overseas,
Strategic Opportunities, Strategic Income, and Emerging Markets Income
purchased more than 144 months prior to such day. Currently, the Trustees
have approved a distribution fee for Overseas, Equity Portfolio Growth,
Equity Portfolio Income, Growth Opportunities, Global Resources, Stratetgic
Opportunities, and Income & Growth at an annual rate of 0.65% and for
Emerging Markets Income, High Yield, limited Term Bond, Government
Investment, High Income Municipal, and Limited Term Tax-Exempt at an annual
rate of 0.25% and for Short Fixed-income and Short-Intermediate Tax-Exempt
at an annual rate of 0.15% of each fund's average net assets. This fee may
be increased only when, in the opinion of the Trustees, it is in the best
interests of the shareholders of Class A to do so. Class B of each fund
also pays Investment Professionals a service fee at an annual rate of .25%
of its average daily net assets determined as of the close of business on
each day throughout the month for personal service and/or the maintenance
of shareholder accounts.
CLASS A DISTRIBUTION FEES
1992
1993
1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paid to Paid to Paid to
Investm Investm Investm
ent Retaine ent Retaine ent Retaine
Professi d by Total Professi d by Total Professi d by Total
FUND onals FDC Fees onals FDC Fees onals FDC Fees
Emerging Markets Income
Overseas
Global Resources
Equity Portfolio Growth
Equity Portfolio Income
Growth Opportunities
Strategic Opportunities
Income & Growth
High Yield
Limited Term Bond
Short Fixed-Income
Government I nvestment
High Income Municipal
Limited Term Tax-Exempt
Short-Intermediate
Tax-Exempt
</TABLE>
CLASS B DISTRIBUTION FEES
1992
1993
1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareho Shareho Shareho
lder Retaine lder Retaine lder Retaine
Service d by Total Service d by Total Service d by Total
FUND Fees FDC Fees Fees FDC Fees Fees FDC Fees
Emerging Markets Income
Equity Portfolio Income
Strategic Opportunities
High Yield
Limited Term Bond
Government I nvestment
High Income Municipal
Limited Term Tax-Exempt
</TABLE>
Each Plan also specifically recognizes that FMR, either directly or through
FDC, may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the applicable class of
each fund. Under each Plan, if the payment by the fund to FMR of management
fees should be deemed to be indirect financing of the distribution of
shares of the applicable class of each fund, such payment is authorized by
the Plan. In addition, each Plan provides that FMR may use its resources,
including its management fee revenues, to make payments to third parties
that assist in selling shares of the applicable class of each fund or to
third parties, including banks, that render shareholder support services.
Each Plan has been approved by the Trustees. As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implementation of each Plan prior to its approval, and have determined that
there is a reasonable likelihood that the Plan will benefit the class and
its shareholders. 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.
Additionally, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders have
other relationships.
None of the Plans provide for specific payments by the applicable class of
any of the expenses of FDC, or obligates 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 shareholders on the dates shown in the table
below:
Date of Shareholder Approval
Class A Class B
Emerging Markets Income 2/10/94 6/26/94
Overseas 10/90 N/A
Growth Opportunities 11/17/94 N/A
Global Resources 11/16/94 N/A
Equity Portfolio Growth 9/25/86 N/A
Equity Portfolio Income 7/23/86 6/26/94
Strategic Opportunities 8/25/87 6/26/94
Income & Growth 1/1/95 N/A
Strategic Income
High Yield 12/15/94 6/26/94
Limited Term Bond 1/1/95 6/26/94
Short Fixed Income 1/1/95
Government Investment 10/26/94 10/26/94
High Income Municipal 11/16/94 11/16/94
Limited Term Tax-Exempt 6/26/94
Short-Intermediate Tax-Exempt 11/26/86 11/26/86
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 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 Plan. No
preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Equity Portfolio Growth is a series of Fidelity Advisor
Series I, an open-end management investment company organized as a
Massachusetts business trust on June 24, 1983, as amended and restated July
18,1991 and as supplemented April 15, 1993. On July 18, 1991, the name was
changed from Equity Portfolio Growth to Fidelity Broad Street Trust. On
April 15, 1993 its name was changed by an amendment to the Declaration of
Trust from Fidelity Broad Street Trust: Equity Portfolio: Growth to
Fidelity Advisor Series I: Equity Portfolio Growth.
Short-Fixed Income Fund, Government Investment. Fund, High Yield Fund,
Growth Opportunities Fund, and Income & Growth Fund are series of Fidelity
Advisor Series II, an open-end management investment company organized as a
Massachusetts business trust on 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 Portfolio Income is a series of Fidelity Advisor Series III, an
open-end management investment company organized as a Massachusetts
business trust on May 17, 1982. On January 29, 1986, the name was changed
from Equity Portfolio: Income to Fidelity Franklin Street Trust. On April
15, 1993 the Trust's name was again changed to Fidelity Advisor Series III.
Limited Term Bond Fund is a series of Fidelity Advisor Series IV, an
open-end management investment company organized as a Massachusetts
business trust on 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.
Global Resources Fund and High Income Municipal Fund are series of Fidelity
Advisor Series V, an open-end management investment company organized as a
Massachusetts business trust on April 24, 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 to Fidelity
Investment Series, and on April 15, 1993, the Board voted to change the
Trust's name to Fidelity Advisor Series V.
Short-Intermediate Tax-Exempt Fund and Limited-Term Tax-Exempt Fund are
series of Fidelity Advisor Series VI, an open-end management investment
company organized as a Massachusetts business trust on June 1, 1983, as
amended and restated May 5, 1993. On January 29, 1992 the name of the Trust
was changed from Tax-Exempt Funds to Fidelity Oliver Street Trust and on
April 15, 1993 the Board of Trustees voted to change the name of the Trust
to Fidelity Advisor Series VI.
Overseas Fund is a series of Fidelity Advisor Series VII, an open-end
management investment company organized as a Massachusetts business trust
on 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 series of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business trust
on September 23, 1983, as amended and restated October 1, 1986 and as
supplemented November 29, 1990. On April 15, 1993 the name of the Trust was
changed from Fidelity Special Situations Fund to Fidelity Advisor Series
VIII.
Each Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to a fund, the
right of the Trust or fund to use the identifying name "Fidelity" may be
withdrawn.
The assets of the Trust received for the issue or sale of shares of each
series and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such series,
and constitute the underlying assets of such fund. The underlying assets
of each series are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of the Trust. Expenses with respect to the Trust are
to be allocated in proportion to the asset value of the respective series,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given series, or which are general or allocable to all of the series. In
the event of the dissolution or liquidation of the Trust, shareholders of
each series are entitled to receive as a class the underlying assets of
such series available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each Trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the Trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
Trust or the Trustees include a provision limiting the obligations created
thereby to the Trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholders held
personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for neglect or wrongdoing,
but nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties in the conduct of his office. Claims asserted against Class A
shares may subject holders of Class B shares to certain liabilities and
claims asserted against Class B shares may subject holders of Class A
shares to certain liabilities.
VOTING RIGHTS. A fund's capital consists of shares of beneficial interest.
The shares have no preemptive or conversion rights; the voting and dividend
rights, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of a Trust or a fund or class
of a fund may, as set forth in the Declaration of Trust, call meetings of
the Trust , fund or class of a fund for any purpose, related to the Trust
or fund, as the case may be, including the case of meeting of the Trust,
the purpose of voting on removal of one or more Trustees. The Trust or any
fund may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of its
assets, if approved by vote of the holders of a majority of the outstanding
shares of the Trust or fund, except for Limited Term Bond, as determined by
the current value of each shareholder's investment in the fund. If not so
terminated, the Trust and funds will continue indefinitely. Limited Term
Bond may invest all of its assets in another investment company
As of ____, 1995, the following owned of record or beneficially more than
5% of the outstanding shares of the following Fidelity Advisor funds:
Emerging Markets Income-Class A:
Emerging Markets Income-Class B:
Overseas-Class A:
Growth Opportunities-Class A:
Global Resources-Class A:
Equity Portfolio Growth-Class A:
Equity Portfolio Income-Class A:
Equity Portfolio Income-Class B:
Strategic Opportunities-Class A:
Strategic Opportunities-Class B:
Income & Growth-Class A:
Strategic Income-Class A:
High Yield-Class A:
High Yield-Class B:
Limited Term Bond-Class A:
Limited Term Bond-Class B:
Short Fixed Income-Class A:
Government Investment-Class A:
Government Investment-Class B:
High Income Municipal-Class A:
High Income Municipal-Class B:
Limited Term Tax-Exempt-Class A:
Limited Term Tax-Exempt-Class B:
Short-Intermediate Tax-Exempt-Class A:
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of Global Resources, Growth
Opportunities, and Strategic Opportunities. The Chase Manhattan Bank, 1211
Avenue of the Americas, New York, New York, is custodian of the assets of
Emerging Markets Income, Overseas, Equity Portfolio Growth, Equity
Portfolio Income, and Income & Growth. The Bank of New York, 110 Washington
Street, New York, New York, is custodian of the assets of Government
Investment, Limited Term Bond, Short Fixed Income, Strategic Income, and
High Yield. United Missouri Bank, 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of High Income Municipal,
Short-Intermediate Tax-Exempt, and Limited Term Tax-Exempt. The custodian
is responsible for the safekeeping of the fund's assets and the appointment
of subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of the fund or in deciding which
securities are purchased or sold by a fund. A fund may, however, invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the Trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. The Boston branch of the fund's custodian bank leases its office
space from an affiliate of FMR at a lease payment which, when entered into,
was consistent with prevailing market rates. Transactions that have
occurred to date have included mortgages and personal and general business
loans. In the judgment of FMR, the terms and conditions of those
transactions were not influenced by existing or potential custodial or
other fund relationships
AUDITOR. _________________________________________ serves as the
independent accountant for Emerging Markets Income, Strategic
Opportunities, Equity Portfolio Growth, Equity Portfolio Income, Government
Investment, Income & Growth, Limited Term Bond, Short Fixed Income,
Strategic Income, High Yield, Limited Term Tax-Exempt, Global Resources,
Short-Intermediate Tax-Exempt, Growth Opportunities, and High Income
Municipal. __________________________________________ serves as the
independent accountant for Overseas. The auditor examines financial
statements for the fund and provides other audit, tax, and related
services.
FINANCIAL STATEMENTS
Except for Strategic Income (which commenced operations on , each class's
financial statements and financial highlights for the fiscal period ended
October 31, November 30, or December 31, 1994, as appropriate, are included
in the Annual Reports, which are separate reports supplied with this SAI.
Each class's financial statements and financial highlights are incorporated
herein by reference.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The audited financial statements for the fiscal year ended November 30,
1994 will be filed by subsequent amendment.
(b) Exhibits:
(1) (a) Amended and Restated Declaration of Trust dated December 1, 1990,
is incorporated herein by reference to Exhibit 1(c) to Post-Effective
Amendment No. 13.
(b) Supplement to Declaration of Trust dated December 20, 1991 is
incorporated herein by reference to Exhibit 1(d) to Post-Effective
Amendment No. 15.
(c) Amendment to the Declaration of Trust is incorporated herein by
reference to Exhibit 1(e) to Post-Effective Amendment No. 20.
(2) By-Laws of the Trust are incorporated herein by reference to Exhibit 2
to Registration Statement No. 2-84776.
(3) Not applicable
(4) Not applicable.
(5) (a) Management Contract between the Registrant and Fidelity Management
& Research Company dated December 1, 1990, is incorporated herein by
reference to Exhibit 5(c) to Post-Effective Amendment No. 13.
(b) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (U.K.) Inc. dated December 1, 1990, is
incorporated herein by reference to Exhibit 5(d) to Post-Effective
Amendment No. 13.
(c) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (Far East) Inc. dated December 1, 1990,
is incorporated herein by reference to Exhibit 5(e) to Post-Effective
Amendment No. 13.
(6) General Distribution Agreement between the Registrant and Fidelity
Distributors Corporation, dated April 1, 1987 is incorporated herein by
reference to Exhibit 6 to Post-Effective Amendment No. 7.
(7) Retirement Plan for Non Interested Person Trustees, Directors or
General Partners, effective November 1, 1989 is incorporated herein by
reference to Exhibit 7 to Post-Effective Amendment No. 15.
(8) Custodian Contract between Registrant and State Street Bank & Trust
Company, dated September 28, 1989, is incorporated herein by reference to
Exhibit 8 to Post-Effective Amendment No. 11.
(9) (a) Amended Service Agreement (including Schedule and C) between the
Registrant, FMR Corp. and Fidelity Service Co. dated June 1, 1989 is
incorporated herein by reference to Exhibit 9(a) to Post-Effective
Amendment No. 11.
(b) Schedule B to the Amended Service Agreement between the Registrant,
FMR Corp. and Fidelity Service Co. dated July 1, 1991 was filed
electronically and is incorporated herein by reference to Exhibit 9(d) to
Post-Effective Amendment No. 22.
(c) Form of Amended Transfer Agent Agreement between the Registrant, FMR
Corp. and Fidelity Investments Institutional Operations Company dated June
1, 1989 is incorporated herein by reference to Exhibit 9(b) to
Post-Effective Amendment No. 11.
(d) Schedule A to Amended Transfer Agreement between the Registrant, FMR
Corp. and Fidelity Investments Institutional Operations Company dated
January 1, 1993 was filed electronically and is incorporated herein by
reference to Exhibit 9(c) to Post-Effective Amendment No. 22.
(10) Not applicable.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) (a) Form for Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement Disclosure Statement in effect as of January 1, 1994
was filed electronically and is incorporated herein by reference to
Exhibit 14(a) to Post-Effective Amendment No. 22.
(b) Form for Fidelity Institutional Individual Retirement Account
Custodial Agreement in effect as of January 1, 1994 was filed
electronically and is incorporated herein by reference to Exhibit 14 (b) to
Post-Effective Amendment No. 22.
(15) Distribution and Service Plan pursuant to Rule 12b-1 for Equity
Portfolio: Growth is incorporated herein by reference to Exhibit 15 to
Post-Effective Amendment No. 22.
(16) (a) Schedule for computation of performance quotations is
incorporated herein by reference to Exhibit 16 to Post-Effective Amendment
No. 9.
(b) Schedule for computation of moving average calculation was filed
electronically and is incorporated herein by reference to Exhibit 16(b) to
Post-Effective Amendment No. 22.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of Registrant is the same as the boards of other
funds advised by FMR, each of which has Fidelity Management & Research
Company as its investment adviser. In addition, the officers of these
funds are substantially identical. Nonetheless, 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
November 30, 1994
Title of Class: Shares of Beneficial Interest Number of Recordholders
Equity Portfolio Growth: Class A 56,237
Equity Portfolio Growth: Institutional Class 2,897
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR (1992).
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen 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); and High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. McNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Leader.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management & Research
(Far East) Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
Treasurer and Vice President of FMR (1993).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the fund's custodian: The
Chase Manhattan Bank, 1211 Avenue of the Americas, New York, N.Y.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of Fidelity Advisor Equity Portfolio Growth -
Class A and Fidelity Advisor Equity Portfolio Growth - Institutional Class
undertakes, provided the information required by Item 5A is contained in
the annual report, to furnish each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 26 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 19th day of December,
1994.
Fidelity Advisor Series I
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 December 19, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer December 19, 1994
Gary L. French
/s/J. Gary Burkhead Trustee December 19, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee December 19, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee December 19, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee December 19, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee December 19, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee December 19, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee December 19, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee December 19, 1994
Edward H. Malone
/s/Marvin L. Mann * Trustee December 19, 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee December 19, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee December 19, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor 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 Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios 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
Fidelity Income Fund
</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.
Xupolos, 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 twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead 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
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series IV Fidelity School Street Trust
Fidelity Advisor Series VI Fidelity Select Portfolios
Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P.
Fidelity Beacon Street Trust Fidelity Trend Fund
Fidelity Capital Trust Fidelity Union Street Trust
Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust 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
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (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. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate 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 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 my hand on the date set forth below.
/s/Phyllis Burke Davis October 20, 1993
Phyllis Burke Davis
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Special Situations Fund
Fidelity Advisor Series IV Fidelity Sterling Performance Portfolio, L.P.
Fidelity Advisor Series VI Fidelity Trend Fund
Fidelity Advisor Series VII Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Advisor Series VIII Fidelity U.S. Investments-Government Securities
Fidelity Contrafund Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P.
Portfolio, L.P. Spartan U.S. Treasury Money Market
Fidelity Fixed-Income Trust Fund
Fidelity Government Securities Fund Variable Insurance Products Fund
Fidelity Hastings Street Trust Variable Insurance Products Fund II
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (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. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate 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 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 my hand on the date set forth below.
/s/Marvin L. Mann October 20, 1993
Marvin L. Mann
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
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 Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as a Board Member (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. Xupolos, each
of them singly, my true and lawful attorneys-in-fact, with full power of
substitution, and with full power to each of them, to sign for me and in my
name in the appropriate 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 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 my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
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 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 Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios 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
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 October 20, 1993
Edward C. Johnson 3d
