FIDELITY ADVISOR FUNDS CLASS A
PROSPECTUS
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
JUNE 30 , 1994
The Fidelity Advisor Funds (Funds) offer investors a broad selection of
portfolios.
INTERNATIONAL FUNDS:
FIDELITY ADVISOR OVERSEAS FUND
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND
EQUITY FUNDS:
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND
FIDELITY ADVISOR GLOBAL RESOURCES FUND
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND
(formerly Fidelity Special Situations Fund: Advisor Class)
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
FIDELITY ADVISOR INCOME & GROWTH FUND
FIXED-INCOME FUNDS:
FIDELITY ADVISOR HIGH YIELD FUND
FIDELITY ADVISOR LIMITED TERM BOND FUND
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND
FIDELITY ADVISOR SHORT FIXED-INCOME FUND
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
FIDELITY ADVISOR SHORT-INTERMEDIATE TAX-EXEMPT FUND
Fidelity Advisor Equity Portfolio Growth is a portfolio of Fidelity Advisor
Series I. Fidelity Advisor Growth Opportunities Fund, Fidelity Advisor
Income & Growth Fund, Fidelity Advisor High Yield Fund, Fidelity
Advisor Government Investment Fund and Fidelity Advisor Short Fixed-Income
Fund are portfolios of Fidelity Advisor Series II. Fidelity Advisor Equity
Portfolio Income is a portfolio of Fidelity Advisor Series III. Fidelity
Advisor Limited Term Bond Fund is a portfolio of Fidelity Advisor Series
IV. Fidelity Advisor Global Resources Fund and Fidelity Advisor High Income
Municipal Fund are portfolios of Fidelity Advisor Series V. Fidelity
Advisor Limited Term Tax-Exempt Fund and Fidelity Advisor
Short-Intermediate Tax-Exempt Fund are portfolios of Fidelity Advisor
Series VI. Fidelity Advisor Overseas Fund is a portfolio of Fidelity
Advisor Series VII. Fidelity Advisor Strategic Opportunities Fund and
Fidelity Advisor Emerging Markets Income Fund are portfolios of Fidelity
Advisor Series VIII. Certain funds sell two classes of shares to retail
investors: Class A shares and Class B shares. Class A shares are offered
through this prospectus. Class B shares are offered through a separate
prospectus.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND, FIDELITY ADVISOR HIGH
YIELD FUND AND FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND MAY 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 POLICIES AND RISKS" ON PAGE FOR FURTHER INFORMATION.
Please read this Prospectus before investing. It is designed to provide you
with information and help you decide if a Fund's goals match your own.
RETAIN THIS DOCUMENT FOR FUTURE REFERENCE.
A Statement of Additional Information (SAI) dated June 30 , 1994 for
each Fund has been filed with the Securities and Exchange Commission (SEC)
and each is incorporated herein by reference. SAIs and each Fund's Annual
Report are available free upon request from Fidelity Distributors
Corporation (Distributors), 82 Devonshire Street, Boston, MA 02109, or from
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.
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.
(registered trademark)
TABLE OF CONTENTS Page
FINANCIAL HISTORY
Shareholder Transaction Expenses
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES
INVESTMENT POLICIES AND RISKS
INVESTMENT LIMITATIONS
HOW TO BUY SHARES
Sales Charges and Investment Professional Concessions
Minimum Account Balance
Sales Charge Waivers
INVESTOR SERVICES
Quantity Discounts
Combined Purchases
Rights of Accumulation
Letter of Intent
Fidelity Advisor Systematic Investment Program
SHAREHOLDER COMMUNICATIONS
HOW TO EXCHANGE
Fidelity Advisor Systematic Exchange Program
HOW TO SELL SHARES
Redemption Requests by Telephone
Redemption Requests in Writing
Reinstatement Privilege
Fidelity Advisor Systematic Withdrawal Program
Checkwriting Service
DISTRIBUTION OPTIONS
DISTRIBUTIONS AND TAXES
Distributions
Capital Gains
"Buying a Dividend"
Federal Taxes
Effect of Foreign Taxes 26
State and Local Taxes
Other Tax Information
FEES
Management and Other Services
Distribution and Service Plans
VALUATION
PERFORMANCE
PORTFOLIO TRANSACTIONS
THE TRUSTS AND THE FIDELITY ORGANIZATION
APPENDIX
FINANCIAL HISTORY
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in Class A shares of each
fund would bear directly or indirectly. This standard format was
developed for use by all mutual funds to help investors make
investment decisions. This expense information should be considered
along with other important information such as each Fund's investment
objective and past performance .
1.SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (as a percentage of the offering price)
- -Short-Intermediate Tax-Exempt Fund 1.50 %
- -Short Fixed-Income Fund 1.50 %
- -Other Fidelity Advisor Funds 4.75 %
Sales Charge on Reinvested Distributions None
Deferred Sales Charge on Redemptions None
Redemption Fees None
Exchange Fees None
SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you purchase,
sell or exchange Class A shares of a Fund. If you exchange Class A shares
or direct dividends of Short Fixed-Income Fund or Short-Intermediate
Tax-Exempt into Class A shares of other Fidelity Advisor Funds, a
differential sales charge may apply. Lower sales charges may be available
with purchases of $50,000 or more or in conjunction with various programs.
See "How to Buy Shares," page .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
INTERNATIONAL FUNDS: MANAGEM 12B-1 OTHER TOTAL
ENT FEE EXPENSE OPERATING
FEE (DISTRIBUT S EXPENSES
ION
FEE)
Overseas .77% .65% .96% 2.38%
Emerging Markets Income1 .71% .25% .54%* 1.50%
EQUITY FUNDS:
Equity Portfolio Growth .66% .65% .53%* 1.84%
Growth Opportunities .68% .65% .31%* 1.64%
Global Resources .77% .65% 1.20%* 2.62%
Strategic Opportunities .54% .65% .38% 1.57%
Equity Portfolio Income .50% .65% .62% 1.77%
Income & Growth .53% .65% .33%* 1.51%
FIXED-INCOME FUNDS:
High Yield .51% .25% .35% 1.11%
Limited Term Bond .42% .25% .23%* .90%
Government Investment . 46 % .25% . 24 %* . 95 %
Short Fixed-Income .47% .15% .33% .95%
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal .42% .25% .25% .92%
Limited Term Tax-Exempt .42% .25% .23%* .90%
Short-Intermediate Tax-Exempt1 .41% .15% .19%* .75%
</TABLE>
* AFTER EXPENSE REDUCTIONS
1 PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
ANNUAL OPERATING EXPENSES are based on historical expenses for the most
recent fiscal year ended o r in the case of Emerging Markets Income
and Short-Intermediate T a x-Exempt are based on estimated expenses
for the first year of operation. M anagement fees are paid by each
Fund to Fidelity Management & Research Company (FMR) for managing its
investments and business affairs. Management fees for Overseas, Growth
Opportunities and Strategic Opportunities will vary based on
performance . Distribution fees are paid by Class A shares of the
Funds to Distributors for services and expenses in connection with the
distribution of Class A shares. Long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealer s, Inc. (NASD )
due to 12b-1 fees. The Funds incur other expenses for maintaining
shareholder records, furnishing shareholder statements and reports,
c ustodial, legal and accounting services, registering a Trust or
F und with federal and state regulatory authorities and other
miscella n eous services. A portion of the brokerage commissions that
Equity Portfolio Growth, Growth Opportunities, Global Resources and Income
& Growth paid were used to reduce Fund expenses. Without this
reduction, other expenses and the total operating expenses for their
Class A shares would have been .54% and 1.85%, respectively (Equity
Portfolio Growth); .32% and 1.65%, respectively (Growth Opportunities);
1.21% and 2.63%, respectively (Global Resources); and .34% and 1.52%,
respectively (Income and Growth). FMR has voluntarily agreed to
reimburse Emerging Markets Income, Government Investment, Limited Term
Tax-Exempt, Short-Intermediate Tax-Exempt and (effective July 1, 1994)
Limited Term Bond, to the extent that total operating expenses for Class A
shares (exclusive of taxes, interest, brokerage commissions, and
extraordinary expenses) are in excess of an annual rate of 1.50%,
0. 9 5%, 0.90%, .75%, and .90% respectively, of average net assets. If
reimbursements were not in effect, the management fees, other expenses
(including Distribution F ees) and total operating expenses
for Class A shares would have been: . 71%, 1.08%, and 1.79% (Emerging
Markets Income, estimated); .46%, .86%, and 1.32%, (Government
Investment); . 42%, .94%, and 1.36%, (Limited Term Tax-Exempt) ;
.41%, .66%, and 1.07% (Short-Intermediate Tax-Exempt, estimated); and 42%,
.81% and 1.23% (Limited Term Bond). Please refer to the section "Fees,"
page .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXPENSE TABLE EXAMPLE:
You would pay the following expenses, including the
maximum sales charge, on a $1,000 investment in Class
A shares of a Fund assuming (1) a 5% annual return
and (2) full redemption at the end of each time period:
INTERNATIONAL FUNDS:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Overseas $ 70 $ 118 $ 169 $ 306
Emerging Markets Income1 62 93 -- --
EQUITY FUNDS:
Equity Portfolio Growth 65 103 142 265
Growth Opportunities 63 97 132 233
Global Resources 73 125 180 329
Strategic Opportunities 63 95 129 225
Equity Portfolio Income 65 101 139 246
Income & Growth 62 93 126 219
FIXED-INCOME FUNDS:
High Yield 58 81 106 176
Limited Term Bond 56 75 95 153
Government Investment 53 66 79 119
Short Fixed-Income 25 45 67 130
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal 56 75 96 155
Limited Term Tax-Exempt 56 75 95 153
Short-Intermediate Tax-Exempt1 26 48 -- --
</TABLE>
The HYPOTHETICAL EXAMPLE illustrates the expenses, including the maximum
sales charge, associated with a $1,000 investment in Class A shares of each
Fund over periods of one, three, five and ten years, based on the expenses
(after reimbursements, if any) in the above table and an assumed annual
return of 5%. THE RETURN OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED CLASS A PERFORMANCE OR EXPENSES, BOTH OF
WHICH MAY VARY.
FINANCIAL HIGHLIGHTS
The tables that follow are included in each Fund's Annual Report (except
for Emerging Markets Income and Short-Intermediate Tax Exempt) and have
been audited by each Fund's independent accountants. Their reports on the
Financial Statements and Financial Highlights are included in each Fund's
Annual Report. The Financial Statements and Financial Highlights are
incorporated by reference into each Fund's Statement of Additional
Information. The Strategic Opportunities table provides semiannual
information and is unaudited.
FIDELITY ADVISOR OVERSEAS FUND
April 23, 1990
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 October 31, 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.07 $ 9.78 $ 9.55 $ 10.00
Income from Investment Operations
Net investment income .03 .05 .14 .05
Net realized and unrealized gain (loss) on investments 3.93 (.62) .17 (.50)
Total from investment operations 3.96 (.57) .31 (.45)
Less Distributions
From net investment income (.07) (.14) (.07) -
From net realized gain on investments (.03)(s diamond) - (.01)(s diamond)-
Total distributions (.10) (.14) (.08) -
Net asset value, end of period $ 12.93 $ 9.07 $ 9.78 $ 9.55
TOTAL RETURN (dagger)(double dagger) 44.13% (5.88)% 3.25% (4.50)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 221,370 $ 18,652 $ 19,091 $ 18,161
Ratio of expenses to average net assets 2.38% 2.64% 2.85% 3.07%*+
Ratio of net investment income to average net assets (.18)% .48% 1.48% 1.45%*
Portfolio turnover rate 42% 168% 226% 137%*
</TABLE>
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND
<TABLE>
<CAPTION>
<S> <C>
March 10, 1994
(commencement
of
operations) to
May 31, 1994
(Unaudited)
SELECTED PER-SHARE DATA
Net asset value beginning of period $ 10.000
Income from Investment Operations
Not Investment income .086
Net realized and unrealized gain (loss) on investments .247
Total from investment operations .333
Less Distributions
From net investment income (.083)
Net asset value end of period $ 10.250
TOTAL RETURN (dagger) (double dagger) 3.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 7,119
Ratio of expenses to average net assets 1.50%*
Ratio of expenses to average net assets before voluntary expense reductions 2.60%*+
Ratio of net investment income to average net assets 3.83%*
Portfolio turnover rate 107%
</TABLE>
* ANNUALIZED.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND,
FOR PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
(s diamond) INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON
FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN
ACCORDANCE WITH A STATE LIMITATION.
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH
Equity Portfolio
Growth - Class A Equity Portfolio Growth - Institutional
Class
Year Period
Ended Ended
Nov. 30, Nov. 30 Years Ended November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 1984
Net asset value, beginning of period $ 26.33 $ 23.78 $ 26.37 $ 24.28 $
15.55 $ 17.32 $ 12.02 $ 9.92 $ 13.18 $ 11.09 $ 8.03 $ 10.05
Income from Investment Operations
Net investment income (.07)(dagger)(dagger) .01(dagger)(dagger)
.19(dagger)(dagger) .17(dagger)(dagger) .04 .01 .06 .28#
.00(dagger)(dagger) .03 .01 .02
Net realized and unrealized gain
(loss) on investments 3.82 2.54 3.78 4.55 8.69 .34 5.50 2.59
(2.03) 2.41 3.05 (2.04)
Total from investment operations 3.75 2.55 3.97 4.72 8.73 .35
5.56 2.87 (2.03) 2.44 3.06 (2.02)
Less Distributions
From net investment income (.08) - (.10) (.03) - (.08) (.26)
(.01) (.01) (.02) - -
From net realized gain on investments (.50) - (.50) (2.60) -
(2.04) - (.76) (1.22) (.33) - -
Total distributions (.58) - (.60) (2.63) - (2.12) (.26) (.77)
(1.23) (.35) - -
Net asset value, end of period $ 29.50 $ 26.33 $ 29.74 $ 26.37 $ 24.28 $
15.55 $ 17.32 $ 12.02 $ 9.92 $ 13.18 $ 11.09 $ 8.03
TOTAL RETURN (dagger)(double dagger) 14.52% 10.72% 15.36% 21.14%
56.14% 2.75% 47.18% 29.77% (17.12)% 22.55% 38.11% (20.10)%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000 omitted) $ 377,984 $ 22,655 $ 296,466 $
179,325 $ 68,766 $ 27,473 $ 24,523 $ 20,182 $ 43,537 $ 63,607 $ 23,447 $
4,117
Ratio of expenses to average net assets 1.84%## 1.47%* .94%## .98%
1.13% 1.74% 1.60% 1.47% 1.11% 1.07% 1.50%+ 1.50%+
Ratio of expenses to average net assets
before expense reductions 1.85%## 1.47%* .95% ## .98% 1.13% 1.74%
1.60% 1.47% 1.11% 1.07% 1.50%+ 1.50%+
Ratio of net investment income to
average net assets (.24)% .25%* .66% .73% .25% .07% .38% 1.20%
.00% .29% .43% .33%
Portfolio turnover rate 160% 240% 160% 240% 254% 262% 269% 331%
226% 115% 108% 453%
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND
November 18, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 October 31, 1988
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 21.14 $ 20.58 $ 12.99 $ 16.53 $ 14.27 $ 10.00
Income from Investment Operations
Net investment income .08 .14 .06 .18(s diamond).02 .05
Net realized and unrealized gain (loss) on investments 5.56 2.04 7.70 (2.50) 3.03 4.22
Total from investment operations 5.64 2.18 7.76 (2.32) 3.05 4.27
Less Distributions
From net investment income (.13) (.09) (.17) (.05) (.03) -
From net realized gain on investments (1.26) (1.53) - (1.17) (.76) -
Total distributions (1.39) (1.62) (.17) (1.22) (.79) -
Net asset value, end of period $ 25.39 $ 21.14 $ 20.58 $ 12.99 $ 16.53 $ 14.27
TOTAL RETURN (dagger)(double dagger) 28.11% 12.09% 60.25% (15.05)% 22.69% 42.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,054,988 $ 580,595 $ 213,095 $ 51,122 $ 34,351 $ 8,097
Ratio of expenses to average net assets 1.64%# 1.60% 1.73% 2.00% 2.45% 2.52%*
# +
Ratio of expenses to average net assets before
expense reductions 1.65%# 1.60% 1.73% 2.00% 2.45% 2.52%*
#
Ratio of net investment income to average net assets .43% .80% .47% 1.49% .31% .82%*
Portfolio turnover rate 69% 94% 142% 136% 163% 143%*
</TABLE>
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED
ON AVERAGE SHARES OUTSTANDING.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
# DURING THE PERIOD A SHAREHOLDER REDEEMED A SIGNIFICANT PORTION OF THE
ASSETS OF THE FUND. DUE TO THE TIMING OF THIS TRANSACTION, THE FUND
EXPERIENCED AN UNUSUALLY HIGH LEVEL OF INVESTMENT INCOME PER SHARE.
## FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
(s diamond) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND
WHICH AMOUNTED TO $.09 PER SHARE.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION.
FIDELITY ADVISOR GLOBAL RESOURCES FUND
December 29, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 October 31, 1988
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period
$ 13.88 $ 14.11 $ 12.30 $ 12.60 $ 11.47 $ 10.00
Income from Investment Operations
Net investment income
.22 (.10) (.15) (.10) .10(s diamond) (.05)
Net realized and unrealized gain (loss) on investments
4.91 .79 2.45 .93 1.96 1.52
Total from investment operations
5.13 .69 2.30 .83 2.06 1.47
Less Distributions
From net investment income
- - - - (.08) - -
From net realized gain on investments
(1.42) (.92) (.49) (1.05) (.93) -
Total distributions
(1.42) (.92) (.49) (1.13) (.93) -
Net asset value, end of period
$ 17.59 $ 13.88 $ 14.11 $ 12.30 $ 12.60 $ 11.47
TOTAL RETURN (dagger)(double dagger)
41.05% 5.97% 19.50% 6.37% 19.63% 14.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)
$ 40,309 $ 7,087 $ 5,940 $ 4,615 $ 2,049 $ 916
Ratio of expenses to average net assets
2.62%** 3.27%(dagger)(dagger) 3.35%(dagger)(dagger) 3.34%(dagger)(dagger) 3.23%(dagger)(dagger) 2.85%*(dagger)
(dagger)
Ratio of expenses to average net assets before expense
2.63%** 3.94% 3.35% 3.34% 3.23% 2.85%*
reductions
Ratio of net investment income to average net assets
(1.18)% (1.22)% (1.28)% (1.13)% .83% (.64)%*
Portfolio turnover rate
208% 248% 256% 229% 249% 220%*
</TABLE>
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND
August 20, 1986
Six Months (Commencement
Ended of Operations) to
March 31, 1994 Years Ended September 30, September 30,
(Unaudited) 1993 1992(dagger)(dagger) 1991 1990 1989 1988 1987 1986
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.52 $ 19.53 $ 21.38 $ 17.21
$ 19.55 $ 15.53 $ 19.06 $ 16.71 $ 17.81
Income from Investment Operations
Net investment income (.24) .33 .61 .66 .70 .50 .42 .46
.08 (s diamond)
Net realized and unrealized gain (loss) on investments (.69)
4.44 .58 4.26 (2.49) 4.08 (1.80) 2.95 (1.18)
Total from investment operations (.93) 4.77 1.19 4.92 (1.79)
4.58 (1.38) 3.41 (1.10)
Less Distributions
From net investment income (.43) (.57) (.62) (.75) (.55)
(.56) (.24) (.09) --
From net realized gain on investments (1.71) (1.21) (2.42) -
-- -- (1.91) (.97) --
Total distributions (2.14) (1.78) (3.04) (.75) (.55) (.56)
(2.15) (1.06) -
Net asset value, end of period $ 19.45 $ 22.52 $ 19.53 $ 21.38 $
17.21 $ 19.55 $ 15.53 $ 19.06 $ 16.71
TOTAL RETURN (dagger)(double dagger) (4.73%) 26.33% 7.26%
29.51% (9.49)% 30.45% (4.98)% 21.28% (6.23)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 331,650 $ 269,833 $ 194,694 $
199,604 $ 172,083 $ 198,198 $ 191,454 $ 283,117 $ 22,141
Ratio of expenses to average net assets 1.88%* 1.57%++ 1.46% 1.56%
1.59% 1.51% 1.71% 1.67%+ 1.50%* +
Ratio of net investment income to average net assets 1.49%* 2.06% 3.22%
3.61% 3.70% 3.23% 3.10% 2.36% 2.77%*
Portfolio turnover rate 241%* 183% 211% 223% 114% 89% 160% 225% --
* ANNUALIZED.
** FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF
EQUALIZATION ACCOUNTING.
# EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION REGULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD FMR NOT REIMBURSED
CERTAIN EXPENSES DURING THE PERIODS SHOWN.
(s diamond) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND
WHICH AMOUNTED TO $.17 PER SHARE.
(h diamond) NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE AT THE END OF THE PERIOD LESS
THE AMOUNT OF UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE OF THE FUND AT
AUGUST 20, 1986.
+ EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. IN
ADDITION, DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987 FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
++ INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES. IF THIS REIMBURSEMENT HAD NOT EXISTED THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.73%.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
Equity Portfolio
Income - Class A Equity Portfolio Income -
Institutional Class
Year Period
Ended Ended
Nov. 30 Nov. 30 Years Ended November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 1984
Net asset value, beginning of period $ 12.86 $ 12.37 $ 12.88 $ 11.08 $
9.52 $ 12.27 $ 11.10 $ 10.93 $ 13.54 $ 11.95 $ 10.24 $ 10.49
Income from Investment Operations
Net investment income .33 .13 .39 .49 .63 # .69 .75 .75 .76
.78 .79 .72
Net realized and unrealized gain
(loss) on investments 1.97 .47 2.02 1.79 1.52 (2.42) 1.17
1.81 (1.53) 1.92 1.69 (.14)
Total from investment operations 2.30 .60 2.41 2.28 2.15 (1.73)
1.92 2.56 (.77) 2.70 2.48 .58
Less Distributions
From net investment income (.30) (.11) (.36) (.48) (.59) (.72)
(.75) (.74) (.70) (.77) (.77) (.74)
From net realized gain on investments - - - - - (.30) -
(1.65) (1.14) (.34) - (.09)
Total distributions (.30) (.11) (.36) (.48) (.59) (1.02) (.75)
(2.39) (1.84) (1.11) (.77) (.83)
Net asset value, end of period $ 14.86 $ 12.86 $ 14.93 $ 12.88 $ 11.08 $
9.52 $ 12.27 $ 11.10 $ 10.93 $ 13.54 $ 11.95 $ 10.24
TOTAL RETURN (dagger)(double dagger) 18.03% 4.88% 18.90% 20.91%
22.97% (14.90)% 17.58% 26.99% (7.28)% 23.48% 24.86% 6.20%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000 omitted) $ 42,326 $ 1,462 $ 191,138 $
139,391 $ 168,590 $ 253,049 $ 463,696 $ 436,753 $ 443,603 $ 544,269 $
349,262 $ 89,364
Ratio of expenses to average net assets 1.77% 1.55%* .79%## .71%(h
diamond) .67%(h diamond) .61%(h diamond) .55%(h diamond) .55%(h diamond)
.54%(h diamond) .61% .63% .77%
Ratio of expenses to average net assets
before expense reductions 1.77% 1.55%* .80%## .79%(h diamond) .77%(h
diamond) .71%(h diamond) .65%(h diamond) .65%(h diamond) .61%(h diamond)
.61% .63% .77%
Ratio of net investment income
to average net assets 2.02% 3.39%* 3.00% 3.77% 5.66% 6.11% 6.09%
6.86% 5.58% 6.06% 7.36% 7.86%
Portfolio turnover rate 120% 51% 120% 51% 91% 103% 93% 78% 137%
107% 110%(dagger)(dagger)(dagger) 121%
FIDELITY ADVISOR INCOME & GROWTH FUND
January 6, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 14.41 $ 14.13 $ 10.41 $ 12.77 $ 11.07 $ 9.44 $ 10.00
Income from Investment Operations
Net investment income .48 .50 .51 .56 1.01(dagger)(dagger) .62 .27
Net realized and unrealized gain
(loss) on 2.18 .85 3.74 (1.34) 1.27 1.56 (.63)
investments
Total from investment operations 2.66 1.35 4.25 (.78) 2.28 2.18 (.36)
Less Distributions
From net investment income (.56) (.46) (.53) (1.06) (.58) (.55) (.20)
From net realized gain on
investments (.60) (.61) - (.52) - - -
Total distributions (1.16) (1.07) (.53) (1.58) (.58) (.55) (.20)
Net asset value, end of period $ 15.91 $ 14.41 $ 14.13 $ 10.41 $ 12.77 $ 11.07 $ 9.44
TOTAL RETURN (dagger)(double
dagger) 19.66% 10.27% 41.73% (7.15)% 21.15% 23.66% (3.90)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $ 1,654,124 $ 397,672 $ 135,533 $ 60,934 $ 46,139 $ 36,224 $ 34,376
Ratio of expenses to average
net assets 1.51%# 1.60% 1.71% 1.85% 1.91% 2.06% 2.06%*
#
Ratio of expenses to average
net assets before 1.52%# 1.60% 1.71% 1.85% 1.91% 2.06% 2.06%*
expense reductions #
Ratio of net investment income
to average net 3.24% 3.97% 4.19% 5.29% 8.80% 5.83% 3.95%*
assets
Portfolio turnover rate 200% 389% 220% 297% 151% 204% 206%*
</TABLE>
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(dagger)(dagger) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL
DIVIDEND WHICH AMOUNTED TO $ .26 PER SHARE.
(dagger)(dagger)(dagger) IN JULY 1985, THE SEC ADOPTED REVISIONS TO
EXISTING RULES WITH RESPECT TO THE CALCULATION OF THE PORTFOLIO TURNOVER
RATE. THE REVISED RULES REQUIRE THE INCLUSION IN THE CALCULATION OF
LONG-TERM U.S. GOVERNMENT SECURITIES WHICH, PRIOR TO THESE REVISIONS, WERE
EXCLUDED FROM THE CALCULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(h diamond) EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992, FMR REIMBURSED
.10% OF THE ANNUAL MANAGEMENT FEE OF .50%.
# INCLUDES $.04 PER-SHARE FROM FOREIGN TAXES RECOVERED.
## FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
FIDELITY ADVISOR HIGH YIELD FUND
January 5, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090 $ 10.000
Income from Investment Operations
Net investment income .980 1.146 1.115 1.144 1.237 1.165 .878
Net realized and unrealized gain (loss) on 1.153 .975 1.948 (.820) (.890) .770 (.910)
investments
Total from investment operations 2.133 2.121 3.063 .324 .347 1.935 (.032)
Less Distributions
From net investment income (.963) (1.171) (1.093) (1.144) (1.237) (1.165) (.878)
From net realized gain on investments (.230) - - - - - -
Total distributions (1.193) (1.171) (1.093) (1.144) (1.237) (1.165) (.878)
Net asset value, end of period $ 12.010 $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090
TOTAL RETURN (dagger)(double dagger) 20.47% 21.96% 39.67% 3.58% 3.34% 22.14% (.81)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 485,559 $ 136,316 $ 38,681 $ 15,134 $ 13,315 $ 11,900 $ 9,077
Ratio of expenses to average net assets 1.11% 1.10% 1.10% 1.10% 1.10% 1.10% 1.24%*
Ratio of expenses to average net assets before 1.11% 1.16% 1.76% 2.04% 2.17% 2.22% 2.25%*(dagger)
voluntary (dagger)
expense limitation
Ratio of net investment income to average net 8.09% 9.95% 12.20% 12.72% 12.98% 11.86% 10.74%*
assets
Portfolio turnover rate 79% 100% 103% 90% 131% 135% 166%*
</TABLE>
FIDELITY ADVISOR LIMITED TERM BOND FUND
Limited Term
Bond Fund - Class A Limited Term Bond Fund - Institutional
Class
Year Period February 2, 1984
Ended Ended (Commencement
Nov. 30, Nov. 30 Years Ended November 30, of Operations) to
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 November 30, 1984
Net asset value, beginning
of period $ 10.640 $ 10.960 $ 10.640 $ 10.550 $ 10.140 $ 10.410 $ 10.180
$ 10.250 $ 11.240 $ 10.550 $ 9.960 $ 10.000
Income from Investment Operations
Net investment income .785 .170 .832 .840 .884 .901 .937 .944
.953 1.026 1.053 .897
Net realized and unrealized gain (loss)
on investments .511 (.320)+ .531 .102 .411 (.270) .230 (.070)
(.770) .710 .590 (.040)
Total from investment operations 1.296 (.150) 1.363 .942 1.295 .631
1.167 .874 .183 1.736 1.643 .857
Less Distributions
From net investment income (.796) (.170) (.843) (.852) (.885)
(.901) (.937) (.944) (.953) (1.026) (1.053) (.897)
From net realized gain on investments - -- -- -- -- -- -- --
(.220) (.020) -- --
Total distributions (.796) (.170) (.843) (.852) (.885) (.901)
(.937) (.944) (1.173) (1.046) (1.053) (.897)
Net asset value, end of period $ 11.140 $ 10.640 $ 11.160 $ 10.640 $
10.550 $ 10.140 $ 10.410 $ 10.180 $ 10.250 $ 11.240 $ 10.550 $ 9.960
TOTAL RETURN (dagger)(double dagger) 12.50% (1.37)% 13.17% 9.21%
13.35% 6.46% 12.03% 8.81% 1.78% 17.04% 17.40% 9.33%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 59,184 $ 2,583 $ 183,790 $
160,156 $ 327,756 $ 356,564 $ 426,832 $ 418,929 $ 407,228 $ 418,632 $
253,913 $ 15,192
Ratio of expenses to average net assets 1.23% .82%* .64% .57% .57%
.58% .54% .54% .53% .53% .65% 1.50%*(dagger)(dagger)
Ratio of net investment income to
average net assets 6.81% 7.67%* 7.41% 7.96% 8.59% 8.90% 9.16%
9.16% 9.03% 9.22% 10.29% 11.01%*
Portfolio turnover rate 59% 7% 59% 7% 60% 59% 87% 48% 92% 59%
88%(dagger)(dagger)(dagger) 12%*
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
(dagger)(dagger)(dagger) IN JULY 1985, THE SEC ADOPTED REVISIONS TO
EXISTING RULES WITH RESPECT TO THE CALCULATION OF THE PORTFOLIO TURNOVER
RATE. THE REVISED RULES REQUIRE THE INCLUSION IN THE CALCULATION OF
LONG-TERM U.S. GOVERNMENT SECURITIES WHICH, PRIOR TO THESE REVISIONS, WERE
EXCLUDED FROM THE CALCULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
+ THE AMOUNT SHOWN IN THIS CAPTION, WHILE DETERMINABLE BY THE SUMMATION OF
AMOUNTS COMPUTED DAILY AS SHARES WERE SOLD OR REPURCHASED, IS ALSO THE
BALANCING FIGURE DERIVED FROM THE OTHER FIGURES IN THE STATEMENT AND HAS
BEEN SO COMPUTED. THE AMOUNT SHOWN FROM THE PERIOD ENDED NOVEMBER 30, 1992
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DOES NOT ACCORD WITH THE NET
REALIZED AND UNREALIZED GAIN ON INVESTMENTS FOR THE PERIOD BECAUSE OF THE
TIMING OF SALES AND REPURCHASES OF THE FUND SHARES IN RELATION TO
FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND
January 7, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200 $ 10.000
Income from Investment Operations
Net investment income .567 .666 .700 .735 .773 .769 .614
Net realized and unrealized gain (loss) on .601 .125 .419 (.160) .050 .060 (.800)
investments
Total from investment operations 1.168 .791 1.119 .575 .823 .829 (.186)
Less Distributions
From net investment income (.558) (.651) (.679) (.735) (.773) (.769) (.614)
From net realized gain on investments (.200) - - - - - -
Total distributions (.758) (.651) (.679) (.735) (.773) (.769) (.614)
Net asset value, end of period $ 10.140 $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200
TOTAL RETURN (dagger)(double dagger) 12.53% 8.49% 12.65% 6.48% 9.37% 9.34% (1.84)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 69,876 $ 23,281 $ 13,058 $ 9,822 $ 8,203 $ 6,590 $ 4,584
Ratio of expenses to average net assets .68% 1.10% 1.10% 1.10% 1.10% 1.10% 1.29%*
Ratio of expenses to average net assets before 1.32% 1.79% 2.46% 2.74% 2.75% 2.25% 2.36%*
voluntary
expense limitation
Ratio of net investment income to average net 6.11% 6.98% 7.47% 8.04% 8.45% 8.30% 8.12%*
assets
Portfolio turnover rate 333% 315% 54% 31% 42% 44% 32%*
</TABLE>
FIDELITY ADVISOR SHORT FIXED-INCOME FUND
September 16, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.950 $ 9.870 $ 9.620 $ 9.950 $ 9.940 $ 10.060 $ 10.000
Income from Investment Operations
Net investment income .732 .830 .848 .868 .832 .852 .101
Net realized and unrealized gain (loss) on .146 .071 .270 (.330) .010 (.120) .060
investments
Total from investment operations .878 .901 1.118 .538 .842 .732 .161
Less Distributions
From net investment income (.738) (.821) (.868) (.868) (.832) (.852) (.101)
Net asset value, end of period $ 10.090 $ 9.950 $ 9.870 $ 9.620 $ 9.950 $ 9.940 $ 10.060
TOTAL RETURN (dagger)(double dagger) 9.13% 9.44% 12.19% 5.59% 8.89% 7.56% 1.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 654,202 $ 170,558 $ 25,244 $ 13,062 $ 12,394 $ 13,433 $ 3,252
Ratio of expenses to average net assets .95% .90% .90% .90% .90% .90% .90%*
Ratio of expenses to average net assets before .95% 1.03% 1.74% 1.90% 2.22% 1.84% 2.15%*(dagger)
voluntary (dagger)
expense limitation
Ratio of net investment income to average net 6.77% 7.59% 8.50% 8.86% 8.45% 8.39% 7.65%*
assets
Portfolio turnover rate 58% 57% 127% 144% 157% 178% 119%*
</TABLE>
* ANNUALIZED.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND
September 16, 1987
(Commencement of
Years Ended October 31, Operations) to
SELECTED PER-SHARE DATA 1993 1992 1991 1990 1989 1988 October
31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850 $ 10.000
Income from Investment Operations
Net interest income .710 .774 .803 .811 .800 .750 .092
Net realized and unrealized gain (loss) on 1.100 .250 .660 .150 .410 .610 (.150)
investments
Total from investment operations 1.810 1.024 1.463 .961 1.210 1.360 (.058)
Less Distributions
From net interest income (.710) (.774) (.803) (.811) (.800) (.750) (.092)
From net realized gain on investments (.030) (.010) (.120) (.100) (.050) - -
Total distributions (.740) (.784) (.923) (.911) (.850) (.750) (.092)
Net asset value, end of period $ 12.720 $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850
TOTAL RETURN (dagger)(double dagger) 15.95% 9.21% 14.02% 9.28% 12.05% 14.22% (.58)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 497,575 $ 156,659 $ 67,135 $ 22,702 $ 6,669 $ 3,290 $ 1,275
Ratio of expenses to average net assets .92% .90% .90% .90% .90% .89% .80%*
Ratio of expenses to average net assets before .92% .96% 1.24% 2.09% 2.75% 2.25% 2.25%*
voluntary (h diamond) (h diamond) (h diamond)
expense limitation
Ratio of net interest income to average
net assets 5.59% 6.59% 7.08% 7.37% 7.60% 7.33% 7.24%*
Portfolio turnover rate 27% 13% 10% 11% 27% 19% -%
</TABLE>
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
Limited Term
Tax-Exempt Fund - Class A Limited Term Tax-Exempt Fund -
Institutional Class
September 19, 1985
Year Period (Commencement
Ended Ended of Operations) to
Nov. 30 Nov. 30 Years Ended November 30, November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987
1986 1985
Net asset value, beginning of period $ 11.080 $ 11.010 $ 11.080 $ 10.800 $
10.640 $ 10.610 $ 10.520 $ 10.380 $ 10.990 $ 10.280 $ 10.000
Income from Investment Operations
Net interest income .508 .131 .536 .666 .682 .689 .674 .650 .641
.671 .130
Net realized and unrealized gain (loss) on investments .260 .070 .260
.280 .160 .030 .090 .140 (.540) .760 .280
Total from investment operations .768 .201 .796 .946 .842 .719
.764 .790 .101 1.431 .410
Less Distributions
From net interest income (.508) (.131) (.536) (.666) (.682) (.689)
(.674) (.650) (.641) (.671) (.130)
From net realized gain on investments (.880) -- (.880) -- -- --
- -- -- (.070) (.050) --
Total distributions (1.388) (.131) (1.416) (.666) (.682) (.689)
(.674) (.650) (.711) (.721) (.130)
Net asset value, end of period $ 10.460 $ 11.080 $ 10.460 $ 11.080 $
10.800 $ 10.640 $ 10.610 $ 10.520 $ 10.380 $ 10.990 $ 10.280
TOTAL RETURN (dagger)(double dagger) 7.72% 1.37% 8.01% 9.01% 8.15%
7.04% 7.50% 7.77% .97% 14.39% 4.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 39,800 $ 1,752 $ 15,076 $ 28,428
$ 100,294 $ 111,506 $ 121,418 $ 132,443 $ 162,857 $ 161,045 $ 94,391
Ratio of expenses to average net assets .90% 1.04%* .65% .66% .61%
.62% .65% .63% .59% .58% .69%*
Ratio of expenses to average net assets before voluntary
expense limitation 1.36% 1.06%* .83% .67% .61% .62% .65% .63%
.59% .58% .69%*
Ratio of net investment income to average net assets 4.76% 5.65%* 5.01%
6.05% 6.40% 6.53% 6.45% 6.20% 6.01% 6.29% 6.33%*
Portfolio turnover rate 46% 36% 46% 36% 20% 32% 31% 24% 43% 34%
103%*
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 13, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND, FOR
PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(h diamond) EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE
LIMITATION.
FIDELITY ADVISOR SHORT-INTERMEDIATE TAX-EXEMPT FUND
<TABLE>
<CAPTION>
<S> <C>
March 16, 1994
(commencement
of operations) to
May 31, 1994
(Unaudited)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.000
Income from Investment Operations
.060
Net interest income
Net realized and unrealized gain (loss) on investments (.040)
Total from investment operations .020
Less Distributions
(.060)
From net interest income
Net asset value, end of period $ 9.960
TOTAL RETURN (dagger)(double dagger) .20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 9,222
Ratio of expenses to average net assets .75%*
Ratio of expenses to average net assets before voluntary expense reductions 2.46%*
Ratio of net interest income to average net assets 2.66%*
Portfolio turnover rate 43%*
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(double dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD THE ADVISOR
NOT REIMBURSED EXPENSES DURING THE PERIOD.
INVESTMENT OBJECTIVES
INTERNATIONAL FUNDS:
FIDELITY ADVISOR OVERSEAS FUND seeks growth of capital primarily through
investments in foreign securities.
FIDELITY ADVISOR 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.
EQUITY FUNDS:
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH seeks to achieve capital
appreciation by investing primarily in the common and preferred stock and
securities convertible into the common stock, of companies with above
average growth characteristics.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND seeks to provide capital growth
by investing primarily in common stocks and securities convertible into
common stocks.
FIDELITY ADVISOR 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 that supply goods and services to such
companies, or in physical commodities.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by
investing primarily in securities of companies believed by FMR to involve a
"special situation."
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME seeks a yield from dividend and
interest income which exceeds the composite dividend yield on securities
comprising the Standard & Poor's Composite Index of 500 Stocks (S&P
500).
FIDELITY ADVISOR 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.
FIXED-INCOME FUNDS:
FIDELITY ADVISOR 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.
FIDELITY ADVISOR LIMITED TERM BOND FUND seeks to provide a high rate of
income through investment in high and upper-medium grade fixed-income
obligations.
FIDELITY ADVISOR 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.
FIDELITY ADVISOR SHORT FIXED-INCOME FUND seeks to obtain a high level of
current income, consistent with preservation of capital, by investing
primarily in a broad range of investment grade fixed-income securities.
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR 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 reserves the right to invest up to 100% of its
assets in municipal obligations subject to the federal alternative minimum
tax.
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.
FIDELITY ADVISOR 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 by focusing on investment-grade municipal
securities.
The investment objective of each Fund is fundamental and can only be
changed by vote of a majority of the outstanding shares of the Fund. Except
as otherwise noted, the investment limitations and policies of Equity
Portfolio Growth, Strategic Opportunities, Income & Growth,
L imited Term Bond, Government Investment, High Income Municipal ,
and Limited Term Tax-Exemp t are fundamental and may not be
changed without shareholder approval. Except for the investment limitations
and policies identified as fundamental, the limitations and policies of
Overseas, E merging Markets Income, Growth Opportunities,
G lobal Resources, Equity Portfolio Income, High Yield, Short
Fixed-Income , and Short-Intermediate Tax-Exempt are not fundamental.
Non-fundamental investment limitations and policies may be changed without
shareholder approval.
The yield, return and potential price changes of each Fund depend on the
quality and maturity of the obligations in its portfolio, as well as on
market conditions. Risks vary based on the type of fund in which you are
investing. As is the case with any investment in securities, investment in
the Funds involve certain risks and , therefore , a Fund may
not always achieve its investment objective.
INVESTMENT POLICIES AND RISKS
Further information relating to the types of securities in which each Fund
may invest and the investment policies of each Fund in general are set
forth in the Appendix to this Prospectus and in each Fund's SAI.
INTERNATIONAL FUNDS: Risks associated with international investing include
currency values, the political and regulatory environment, and overall
economic factors in the countries in which a Fund invests. Investing in an
international fund may be more suitable for aggressive investors who want
to achieve an extra level of diversification in their investment portfolio
by participating in growth opportunities around the world. 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.
FIDELITY ADVISOR OVERSEAS FUND defines foreign securities as securities of
issuers whose principal activities are outside of the United States.
Normally, at least 65% of the Fund's total assets will be invested in
securities of issuers from at least three different countries outside of
North America (the U.S., Canada, Mexico, and Central America). 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 U.S.), the Far East and the Pacific Basin, and Western Europe. In
determining whether a company's or organization's principal activities are
in a particular region, FMR will look at such factors as the location of
assets, personnel, sales, and earnings.
FMR expects that opportunities for capital growth will come most often from
common stock and other equity securities, and therefore, expects that
equity securities will account for the majority of the Fund's investments.
However, the Fund also may find opportunities for capital growth from debt
securities of any quality or maturity by reason of anticipated changes in
such factors as interest rates, currency relationships, or the credit
standing of individual issuers. The Fund will not consider dividend income
as a primary factor in choosing securities, unless FMR believes the income
will contribute to the securities' growth potential.
When allocating the investments of the Fund among geographic regions and
individual countries, and among assets denominated in U.S. and foreign
currencies, FMR considers various factors, such as prospects for relative
economic growth among countries, regions or geographic areas; expected
levels of inflation; government policies influencing business conditions;
and the outlook for currency relationships. Although the Fund has the
ability under normal conditions to invest up to 35% of its total assets in
the U.S., FMR currently intends to manage the Fund to be as fully invested
outside the U.S. as is practicable in light of the Fund's cash flow and
cash needs.
The equity securities in which the Fund may invest include common stocks of
companies or closed-end investment companies, securities such as warrants
or rights that are convertible into common stock, preferred stocks, and
depositary receipts for those securities.
The Fund may invest in debt securities of any type of issuer, including
governments and governmental entities (including supranational
organizations such as the World Bank) as well as corporations and other
business organizations. The Fund has no limitation on the quality of debt
securities in which it may invest. The Fund may invest in lower-quality,
high-yielding debt securities sometimes referred to as "junk
bonds"), although it intends to limit its investments in these securities
to 35% of its assets. FMR may 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. When market conditions warrant, FMR can make
substantial temporary defensive investments in U.S. government securities
or investment-grade obligations of companies incorporated in, and having
principal business activities in, the U.S.
The Fund may also purchase or engage in indexed securities, illiquid
investments, loans and other direct debt instruments, options and futures
contracts, repurchase agreements and securities loans, restricted
securities, and swap agreements.
CONSIDERATIONS IN INVESTING IN SHARES OF OVERSEAS FUND:
Investing outside the U.S. involves different opportunities and different
risks from U.S. investments. FMR believes that it may be possible to obtain
significant returns from a portfolio of foreign investments, or a
combination of foreign investments and U.S. investments, and to achieve
increased diversification in comparison to a portfolio invested solely in
U.S. securities. By including international investments in your investment
portfolio, you may gain increased diversification by combining securities
from various countries and geographic areas that offer different investment
opportunities and are affected by different economic trends. At the same
time, these opportunities and trends involve risks that may not be
encountered with U.S. investments.
International investing in general may involve greater risks than U.S.
investments. There is generally less publicly available information about
foreign issuers, and there may be less government regulation and
supervision of foreign stock exchanges, brokers, and listed companies.
There may be difficulty in enforcing legal rights outside the U.S. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices, and requirements comparable to
those that apply to U.S. companies. Security trading practices abroad may
offer less protection to investors such as the Fund. Settlement of
transactions in some foreign markets may be delayed or may be less frequent
than in the U.S., which could affect the liquidity of the Fund.
Additionally, in some foreign countries, there is the possibility of
expropriation or confiscatory taxation; limitations on the removal of
securities, property, or other assets of the Fund; political or social
instability; or diplomatic developments which could affect U.S. investments
in foreign countries. FMR will take these factors into consideration in
managing the Fund's investments.
The Fund may invest a portion of its assets in developing countries, or in
countries with a new or developing capital market. The considerations noted
above are generally intensified for these investments. These countries may
have relatively unstable governments, economies based on only a few
industries, and securities markets that trade a small number of securities.
Securities of issuers located in these countries tend to have volatile
prices and may offer significant potential for loss as well as gain.
EMERGING MARKETS INCOME FUND will, under normal conditions, invest at least
65% of its total assets in debt securities and other instruments of issuers
in emerging markets. For this purpose, "emerging markets" will include any
countries (I) having an "emerging stock market" as defined by the
International Finance Corporation; (II) with low- to middle-income
economies according to the International Bank for Reconstruction and
Development (the World Bank); or (III) listed in World Bank publications as
"developing." Currently, the countries NOT included in these categories are
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom, and the U.S. For purposes of this 65%
policy, issuers whose principal activities are in countries with emerging
markets include issuers: (1) organized under the laws of, (2) whose
securities have their primary trading market in, (3) deriving at least 50%
of their revenues or profits from goods sold, investments made, or services
performed in, or (4) having at least 50% of their assets located in, a
country with an emerging market.
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. Many investments in emerging markets can be
considered speculative, and therefore may offer higher income potential
than the developed markets of the world. Investments in emerging markets
can involve significant risks and the Fund is designed for aggressive
investors.
Under current market conditions, FMR expects that emerging market
opportunities will be found mainly within Latin America, and to a lesser
extent in Africa, Asia and emerging European nations. FMR will actively
manage the allocation of the Fund's investments among countries, geographic
regions, and currency denominations in an attempt to achieve current income
and capital appreciation. In doing so, FMR will also consider such factors
as prospects for relative economic growth among countries, regions, or
geographic areas, expected levels of inflation, government policies
influencing business conditions, current and anticipated interest rates,
and the outlook for currency relationships. Although the Fund will normally
invest in at least three different countries, it is not limited to any
particular country or currency, and may invest substantially all of its
assets in any one country.
The Fund may invest in all types of fixed-income instruments, including
corporate debt securities, sovereign debt instruments issued by governments
or governmental entities, and all types of domestic and foreign money
market instruments. The Fund may invest in lower- quality ,
high-yielding U.S. corporate debt securities (sometimes referred to as
"junk bonds"). Many emerging market securities are of
below-investment-grade quality, and at any one time substantially all of
the Fund's assets may be invested in securities that are of poor quality or
are in default. Lower-quality debt securities are those rated below Baa
by Moody's or BBB by S&P.
Other investments the Fund may make or engage in include options and
futures contracts, swap agreements, indexed securities, loans and other
direct debt instruments, repurchase agreements and securities loans,
foreign repurchase agreements, illiquid investments, restricted securities,
mortgage-backed securities, asset-backed securities,
delayed-delivery transactions, and interfund borrowing. The Fund may also
invest a portion of its assets in common and preferred stocks of emerging
market issuers, debt securities of non-emerging market foreign issuers, and
lower-quality debt securities of U.S. issuers. Although the Fund may invest
up to 35% of its total assets in these securities, FMR does not currently
anticipate that these investments will exceed approximately 20% of the
Fund's total assets. Though these types of investments present the
possibility for significant capital appreciation over the long-term, they
may fluctuate dramatically in the short term and entail a high degree of
risk.
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. When, in FMR's judgment, market conditions
warrant, the Fund can make substantial temporary defensive investments in
money market instruments, U.S. government securities, or investment-grade
obligations of U.S. companies.
CONSIDERATIONS OF INVESTING IN THE SHARES OF EMERGING MARKETS INCOME FUND:
International investing in general may involve greater risks than U.S.
investments. There is generally less publicly available information about
foreign issuers, and there may be less government regulation and
supervision of foreign stock exchanges, brokers, and listed companies.
There may be difficulty in enforcing legal rights outside the U.S. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices, and requirements comparable to
those that apply to U.S. companies. Security trading practices abroad may
offer less protection to investors such as the Fund. Settlement of
transactions in some foreign markets may be delayed or may be less frequent
than in the U.S., which could affect the liquidity of the Fund.
Additionally, in some foreign countries, there is the possibility of
expropriation or confiscatory taxation; limitations on the removal of
securities, property, or other assets of the Fund; political or social
instability; or diplomatic developments which could affect U.S. investments
in foreign countries. FMR will take these factors into consideration in
managing the Fund's investments.
These risks may be intensified in the case of investments in emerging
markets or countries with limited or developing capital markets. Security
prices in emerging markets can be significantly more volatile than in more
developed nations, reflecting the greater uncertainties of investing in
less established markets and economies. In particular, countries with
emerging markets may have relatively unstable governments; present the risk
of nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets; and may have less protection of
property rights than more developed countries. The economies of countries
with emerging markets may be predominantly based on only a few industries,
may be highly vulnerable to changes in local or global trade conditions,
and may suffer from extreme and volatile debt burdens or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible
at times. Securities of issuers located in countries with emerging markets
may have limited marketability and may be subject to more abrupt or erratic
price movements.
By itself, the Fund does not constitute a balanced investment plan. The
Fund is designed for aggressive investors interested in the investment
opportunities and income potential offered by securities issued in emerging
markets. The value of the Fund's investments and the income they generate
will vary from day to day, generally reflecting changes in interest rates,
market conditions, and other political and economic news. The Fund's
performance will also depend on currency values, foreign economies, and
other factors relating to foreign investments. Because the Fund focuses on
emerging markets, it involves higher risks than U.S. bond investments.
Investors should be willing to assume a greater degree of investment risk
and should expect a higher level of volatility than is generally associated
with investing in more established markets. The Fund's yield and share
price will change based on changes in foreign interest rates, the value of
foreign currencies, and issuers' creditworthiness. In general, bond prices
rise when interest rates fall, and vice versa. The Fund's share price,
yield, and total return fluctuate, and your investment may be worth more or
less than your original cost when you redeem your shares.
The Fund is non-diversified, which means that it may invest a greater
portion of its assets in securities of a single issuer than would be the
case if it were diversified. As a result, changes in the financial
condition or market assessment of a single issuer could cause greater
fluctuation in the Fund's share value.
EQUITY FUNDS. Equity funds invest in common stock and other equity
securities in search of growth or a combination of growth and income. The
share value of equity funds depends heavily on stock market
conditions in the U.S. and abroad, and can also be affected by changes in
interest rates or other economic conditions. Investments in equity Funds
are more suitable for investors who take a long-term approach to investing.
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH as a general rule, will invest in
the securities of companies whose growth in the areas of earnings or gross
sales measured either in dollars or in unit volume (either on an absolute
or percentage basis) may exceed that of the average of the companies whose
securities are included in the S&P 500. These securities generally
command high multiples (price/earnings ratios) in the stock markets over
time. Above average growth characteristics are most often associated with
companies in new and emerging areas of the economy but occasionally can be
found in the stronger companies of more mature and even declining
industries. The Fund will, therefore, be invested in the securities of
smaller, less well-known companies except when FMR believes that
opportunities for above-average growth are presented by larger, more mature
companies which have undergone reformation and revitalization or possess a
strong position in relation to the market as a whole.
The market price of securities with above average growth characteristics
often can experience a more sudden and more dramatic downward reaction to
negative news than is the case with securities carrying a lower market
multiple. This can be particularly true for companies with a narrow product
line or whose securities are relatively thinly traded,
characteristics which are common to smaller, less well-known companies.
As a non-fundamental policy, at least 65% of the total assets of the Fund
normally will be invested in common and preferred stock. The balance of
the fund will tend to be invested in debt obligations, a high
percentage of which are expected to be convertible into common stocks.
As a non-fundamental policy t he Fund may invest in lower-quality,
high yielding debt securities (sometimes referred to as "junk bonds "),
although it currently intends to limit its investments in these
securities to 35% of its assets. The Fund also may purchase or engage in
foreign investments, indexed securities, illiquid investments, loans and
other direct debt instruments, options and futures contracts, repurchase
agreements and securities loans, restricted securities, swap agreements,
and warrants.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND. 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. Growth can be
considered either appreciation of the security itself or growth of the
company's earnings or gross sales. Accordingly, these securities will often
pay little, if any, income, which will be entirely incidental to the
objective of capital growth.
The Fund also has the ability to purchase other securities, such as
preferred stock and bonds that may produce capital growth. Securities may
be of all types or quality. The Fund may invest in lower-quality,
high-yielding debt securities (sometimes referred to as "junk bonds"),
although it intends to limit its investments in these securities to
35% of its assets.
The Fund may purchase foreign investments of all types without limitation
and may enter into foreign forward currency exchange contracts. T he
Fund may purchase or engage in indexed securities, illiquid investments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements and securities loans, restricted securities, reverse
repurchase agreements, swap agreements, and warrants.
The Fund may make substantial temporary investments in high-quality debt
securities and money market instruments, including commercial paper,
obligations of banks or the U.S. government and repurchase agreements for
defensive purposes when, in FMR's judgment, economic or market conditions
warrant.
FIDELITY ADVISOR GLOBAL RESOURCES FUND. Under normal circumstances, 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. The
remainder of the Fund may be invested in other investments including debt
securities of any kind including asset-backed securities, obligations of
foreign governments or their political subdivisions, foreign companies and
supranational organizations, and common and preferred stocks of
corporations not necessarily engaged in natural resources. FMR will seek
securities that are priced relative to the intrinsic value of the relevant
natural resource or that are issued by companies which are positioned to
benefit during particular portions of the economic cycle. Accordingly, the
Fund may shift its emphasis from one natural resource industry to another
depending upon prevailing trends or developments. For example, when FMR
anticipates significant economic, political or financial pressures or major
dislocations in the foreign currency exchange markets, the Fund may, in
seeking to protect the purchasing power of shareholders' capital, invest a
substantial portion of its assets in companies that explore for, extract,
process, or deal in precious metals, and/or invest in precious metals
themselves. The Fund expects to invest a majority of its assets to be
invested in securities of companies that have their principal business
activities in at least three different countries (including the U.S.).
A company will be deemed to have substantial ownership of, or activities
in, natural resources if, at the time of the Fund's acquisition of its
securities, at least 50% of the company's assets are involved in, either
directly or through subsidiaries, exploring, mining, refining, processing,
transporting, fabricating, dealing in, or owning natural resources. Natural
resources include precious metals (such as gold, palladium, platinum and
silver), ferrous and nonferrous metals (such as iron, aluminum and copper),
strategic metals (such as uranium and titanium), hydrocarbons (such as
coal, oil and natural gases), chemicals, forest products, real estate, food
products and other basic commodities which, historically, have been
produced and marketed profitably during periods of rising inflation.
The Fund may purchase foreign securities of all types without limitation
and may enter into forward foreign currency exchange contracts for the
purpose of managing exchange rate risks. The Fund may invest in
lower-quality, high-yielding debt securities ( sometimes referred to
as "junk bonds''), rated as low as CCC by Standard & Poor's Corporation
(S&P) or Caa by Moody's Investors Service, Inc. (Moody's). The Fund
does not currently intend to invest more than 35% of its net assets in debt
securities rated below BBB or Baa. Debt securities ordinarily will make up
a relatively small portion of the Fund's assets.
The Fund may purchase ADRs and EDRs. The Fund may purchase indexed
securities, illiquid investments, loans and other direct debt instruments,
options and futures contracts, repurchase agreements and securities loans,
restricted securities, and warrants. The Fund may also purchase securities
on a delayed-delivery basis.
As a fundamental policy, the Fund is authorized to invest up to 50% of its
assets in physical commodities. In order to permit the sale of the Fund's
shares in certain states, the Fund has adopted a non-fundamental policy of
limiting investments in physical commodities to precious metals (i.e.,
gold, palladium, platinum and silver) to 25% of the Fund's total assets.
Investments in other types of physical commodities could present concerns,
including practical problems of delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and increased
expenses. When a precious metal is purchased, FMR currently intends that it
will be only in a form that is readily marketable and that it will be
delivered to and stored 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. The Fund may be required, therefore, either to hold its
metals or 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.
Since the Fund may invest in physical commodities and utilize investment
techniques which are subject to market fluctuations and/or foreign market
risk, an investment in the Fund may be considered more speculative than an
investment in other funds that seek capital growth. The value of equity
securities of natural resource companies will fluctuate pursuant to market
conditions generally, as well as the market for the particular natural
resource in which the issuer is involved. In addition, the values of
natural resources are subject to numerous factors, including nature and
international politics.
During periods when, in FMR's opinion, a temporary defensive posture in the
market is appropriate, the Fund may invest without limitation in cash or
high-quality money market instruments including, but not limited to,
certificates of deposit, commercial paper and obligations issued by the
U.S. government or any of its agencies or instrumentalities.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND. As a non-fundamental policy,
the Fund normally 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:
(bullet) A technological advance or discovery, the offering of a new or
unique product or service, or changes in consumer demand or consumption
forecasts.
(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.
(bullet) New or changed management, or material changes in management
policies or corporate structure.
(bullet) Significant economic or political occurrences abroad, including
changes in foreign or domestic import and tax laws or other regulations.
(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. As a non-fundamental
investment policy, the Fund may invest in lower-quality, high-yielding debt
securities ( sometimes referred to as "junk bonds") , although
it intends to limit its investments in these securities to 35% of its
assets. The Fund also may invest in unrated securities. The Fund may invest
up to 30% of its assets in foreign investments of all types and may enter
into forward foreign currency exchange contracts for the purpose of
managing exchange rate risks. The Fund may purchase or engage in indexed
securities, illiquid instruments, loans and other direct debt instruments,
options and futures contracts, repurchase agreements and securities loans,
restricted securities, swap agreements, warrants, and zero coupon bonds.
The Fund expects to be fully invested under most market conditions. The
Fund may make substantial temporary investments in high-quality debt
securities for defensive purposes when, in FMR's judgment, a more
conservative approach to investment is desirable.
An investment in the Fund may be considered more speculative than an
investment in other funds that seek capital appreciation. There are greater
risks involved in investing in securities of smaller companies rather than
companies operating according to established patterns and having longer
operating histories. The Fund may invest in securities in which other
investors have not shown significant interest or confidence, and which are
more sensitive to stock market fluctuations. Larger well-established
companies experiencing a special situation may involve, to a certain
extent, breaks with past experience, which may pose greater risks. There
are also greater risks involved in investing in securities of companies
that are not currently favored by the public but show potential for capital
appreciation.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME. It is the policy of the Fund that
at least 65% of its total assets normally will be invested in
income-producing equity securities. For purposes of this policy, equity
securities are defined as common stocks and preferred stocks.
The balance of the Fund will tend to be invested in debt obligations, a
high percentage of which are expected to be convertible into common stocks.
As a non-fundamental policy, the Fund may invest in lower-quality
high-yielding debt securities ( sometimes referred to as "junk
bonds"), although it currently intends to limit its investments in these
securities to 35% of its assets. H owever, the Fund does not
int end to invest in securities of issuers without proven
earnings a nd/or credit histories. T he Fund may purchase or
engage in foreign investments, indexed securities, illiquid investments,
loans and other direct debt instruments, futures and options, repurchase
agreements and securities loans, restricted securities, short sales, swap
agreements, and warrants.
Because of the income considerations, investors should not expect capital
appreciation comparable to the appreciation which could be achieved by
funds whose primary objective is capital appreciation. While the investment
portfolio will not mirror the stocks in the S&P 500 , the yield
on the overall investment portfolio 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.
The Fund may make temporary investments in securities such as
investment-grade bonds or short-term notes for defensive purposes.
FIDELITY ADVISOR INCOME & GROWTH FUND. I n vests in equity
securities, convertible securities, preferred and common stocks paying any
combination of dividends and capital gains and in fixed-income securities.
The Fund also may buy securities that are not providing dividends but offer
prospects for growth of capital or future income. The proportion of the
Fund's assets invested in each type of security will vary from time to time
in accordance with FMR's assessment of economic conditions.
In selecting securities for the Fund, FMR will consider such factors as the
company's financial strength, its outlook for increased dividend or
interest payments (defined herein as "growth of income") and capital gains.
In addition, industry factors and overall economic conditions may be
considered. The Fund may invest in equity securities of some smaller, more
rapidly growing companies. Investing in smaller, less well-known companies,
especially those that have a narrow product line or are thinly traded,
often involves greater risk than investing in established companies with
proven track records. In selecting fixed-income securities for the Fund
(such as bonds, notes, mortgage securities, convertible securities, and
short-term obligations such as bankers' acceptances, certificates of
deposit, and commercial paper), FMR will consider several factors,
including maturity, quality and expected yield.
The Fund may invest in lower-quality high-yielding debt securities
( sometimes referred to as "junk bonds"). The Fund currently intends
to limit its investments in these securities to 35% of its assets. The Fund
also may invest in or engage in foreign investments, currency exchange
contracts, indexed securities, illiquid instruments, loans and other direct
debt instruments, options and futures contracts, repurchase agreements and
securities loans, restricted securities, swap agreements, warrants, and
zero coupon bonds. The Fund may, for temporary defensive purposes, invest
without limit in short-term securities.
FIXED-INCOME FUNDS. Fixed-Income Funds invest primarily in debt securities
(e.g., bonds, debentures, notes and similar obligations). The share value
of fixed-income funds tends to move inversely with changes in prevailing
interest rates. Shorter-term bonds are less sensitive to interest rate
changes, but longer-term bonds generally offer higher yields. It also is
important to note that high-yielding, lower-quality bonds involve greater
risks, because there is a greater possibility of a financial reversal
affecting the issuer's ability to pay interest and principal on time. Share
value and yield are not guaranteed and will fluctuate based on credit
quality and changes in interest rates.
FMR will use its extensive research facilities in addition to considering
the ratings of Nationally Recognized Statistical Rating Organizations
(NRSROs) in selecting investments for the Funds. Unrated securities are not
necessarily of lower quality than rated securities, but they may not be
attractive to as many buyers. This credit analysis includes consideration
of the economic feasibility, the financial condition of the issuer with
respect to liquidity, cash flow and political developments that may affect
credit quality. Since the risk of default is higher for lower-quality
obligations, FMR's research and analysis are an integral part of choosing a
Fund's securities. Through portfolio diversification and careful credit
analysis, FMR can reduce risk, although there can be no assurance that
losses will not occur. FMR also considers trends in the economy, in
geographic areas, in various industries, and in the financial markets.
FIDELITY ADVISOR HIGH YIELD FUND. As a non-fundamental policy, the Fund
normally will invest at least 65% of its total assets in high-yielding,
income producing debt securities and preferred stocks, including
convertible and zero coupon bonds. The Fund may invest all or a
substantial portion of its assets in lower-quality debt securities
(sometimes referred to as "junk bonds"). Please refer to "Risks of
Lower-Quality Taxable Debt Securities, page ." In addition, the Fund
also may invest in government securities, securities of any state or any of
its subdivisions, agencies or instrumentalities, and securities of foreign
issuers, including securities of foreign governments. The Fund may invest
up to 35% of its assets in equity securities, including common stocks,
warrants and rights.
Debt instruments include securities such as bonds, notes, convertible
bonds, and mortgage-backed or asset-backed securities; commercial paper and
other money market instruments, including repurchase agreements; and loans,
trade claims, and similar instruments representing indebtedness of a
corporate borrower. These instruments may provide for interest payments in
cash or in kind, may pay no interest, or may be in default, and may have
warrants attached or otherwise include rights to purchase common stocks.
The Fund may purchase debt instruments in public offerings or through
private placements. The Fund has no specific limitations on the maturity or
credit ratings of the debt instruments in which it invests.
The Fund may enter into forward currency contracts and may purchase
or engage in foreign investments, indexed securities, illiquid investments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements and securities loans, restricted securities, reverse
repurchase agreements, and swap agreements.
RISKS OF LOWER-QUALITY TAXABLE DEBT SECURITIES :
Lower-quality debt securities usually are defined as securities rated Ba or
lower by Moody's or BB or lower by S&P. Lower- quality debt
securities are considered speculative and involve greater risk of loss than
higher- quality debt securities, and are more sensitive to changes in
the issuer's capacity to pay. This is an aggressive approach to income
investing.
The 1980s saw a dramatic increase in the use of lower- quality debt
securities to finance highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of lower- quality debt securities, especially
during periods of economic recession. In fact, from 1989 to 1991, the
percentage of lower- quality debt securities that defaulted rose
significantly above prior levels, although the default rate decreased in
1992 and 1993 .
Lower- quality debt securities may be thinly traded, which can
adversely affect the prices at which these securities can be sold and can
result in high transaction costs. If market quotations are not available,
lower- quality debt securities will be valued in accordance with
standards set by the Boards of Trustees, including the use of outside
pricing services. Judgment plays a greater role in valuing
lower- quality debt securities than securities for which more
extensive 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
the Fund's ability to dispose of these securities.
The market prices of lower- quality debt securities may decline
significantly in periods of general economic difficulty, which may follow
periods of rising interest rates. During an economic downturn or a
prolonged period of rising interest rates, the ability of issuers of
lower- quality debt to service their payment obligations, meet
projected goals, or obtain additional financing may be impaired.
The Fund may choose, at its own 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 interest of Fund shareholders.
The considerations discussed above for lower- quality debt securities
also apply to lower-quality, unrated debt instruments of all types,
including loans and other direct indebtedness of businesses with poor
credit standing. Unrated debt instruments are not necessarily of
lower-quality than rated securities, but they may not be attractive to as
many buyers. The Fund relies more on FMR's credit analysis when investing
in debt instruments that are unrated. Please refer to page for a
discussion of Moody's and S&P ratings.
FIDELITY ADVISOR LIMITED TERM BOND FUND. Under no rmal
circums ta nces the Fund will invest in fixed-income securities
as follows:
(I) Corporate obligations which are rated AAA, AA, or A by S&P, or Aaa,
Aa, or A by Moody's;
(II) Obligations issued or guaranteed as to interest and principal by the
government of the U.S., or any agency or instrumentality thereof;
(III) Obligations (including certificates of deposit 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 annual financial statements) in excess of $100,000,000;
(IV) Commercial paper which at the date of investment is rated A-1 or A-2
by S&P or Prime-1 or Prime-2 by Moody's or, if not rated, is issued by
companies which at the date of investment have an outstanding debt issue
rated AAA, AA, or A by S&P or Aaa, Aa, or A by Moody's; and
(V) Such other fixed-income instruments as the Board of Trustees, in its
judgment, deems to be of comparable quality to those enumerated above.
The Fund also may invest in unrated instruments, and may at times purchase
instruments rated below A if FMR judges them to be of comparable quality to
those rated A or better. Currently, the Fund does not intend to invest in
debt obligations rated below Baa/BBB. Instruments in which the Fund may
invest include asset-backed securities, collateralized mortgage
obligations, convertible securities, loans and other direct debt
instruments, mortgage-backed securities, and zero coupon bonds. For
purposes of the Fund's investment policies, those instruments described in
this paragraph and in (i) through (v) above are considered "bonds."
FMR's standards for determining high- and upper-medium grades are
essentially the same as those described by S&P and Moody's as
characteristic of their ratings of A and above. Such instruments have
strong protection of principal and interest payments. In addition to
reliance on S&P's or Moody's ratings, FMR also performs its own credit
analysis. Investment-grade bonds are generally of medium to high quality.
Those rated in the lower end of the category (Baa/BBB), however, may
possess speculative characteristics and may be more sensitive to economic
changes and changes in the financial condition of issuers.
In addition, the Fund may seek capital appreciation when consistent with
its primary objective. In seeking capital appreciation, FMR will select
securities for the Fund based on its judgment as to economic and market
conditions and the prospects for interest rate changes.
The Fund may purchase or engage in foreign investments, indexed securities,
illiquid investments, options and futures contracts, repurchase
agreements and securities loans, restricted securities, and swap
agreements. The Fund also may engage in reverse repurchase agreements for
temporary or emergency purposes and not for investment purposes.
The Fund will maintain a dollar-weighted average maturity of 10 years or
less. B ased on FMR's assessment of interest rate trends, generally,
the average maturity will be shortened when interest rates are expected to
rise and lengthened up to 10 years when interest rates are expected to
decline.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND. Under normal circumstances, as
a non-fundamental policy at least 65% of the Fund's total assets
will be invested in government securities.
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). The U.S. government securities the Fund invests
in may or may not be fully backed by the U.S. government. The Fund may
enter into repurchase agreements involving any securities in which it may
invest and also may enter into reverse repurchase agreements. The Fund
considers "government securities" to include U.S. government securities
subject to repurchase agreements. The Fund is not restricted as to the
percentage of its assets that may be invested in any one type of U.S.
government security. The Fund may for temporary defensive purposes invest
without limit in U.S. government securities having a maturity of 365 days
or less. The Fund may invest in delayed-delivery transactions, options and
futures contracts, indexed securities, swap agreements and zero coupon
bonds. In seeking current income, the Fund also may consider the potential
for capital gain.
FIDELITY ADVISOR SHORT FIXED-INCOME FUND. Under normal conditions, at least
65% of the Fund's total assets will be invested in fixed-income securities.
Where consistent with its investment objective, 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. Investment-grade fixed-income securities are
considered to be securities rated Baa or higher by Moody's or BBB or higher
by S&P, and unrated securities that are of equivalent quality in FMR's
opinion. The Fund may invest in lower-quality, high-yielding securities
( sometimes referred to as "junk bonds"), as long as they are
consistent with the Fund's objective of obtaining a high level of current
income consistent with the preservation of capital. The Fund currently
intends to limit its investments in these securities to 35% of its assets.
As a non-fundamental policy, the Fund does not currently expect to invest
in securities rated lower than B by S&P or Moody's.
Fixed-income securities may include, in any proportion, bonds, notes, U.S.
government and government agency obligations, mortgage-related and
asset-backed securities, zero coupon securities, foreign securities,
indexed securities and convertible securities, and short-term obligations
such as certificates of deposit, repurchase agreements, bankers'
acceptances and commercial paper. The Fund also may purchase or engage in
illiquid investments, loans and other direct debt instruments, options and
futures contracts, restricted securities, and swap agreements.
In making investment decisions for the Fund, FMR will consider many factors
other than current yield, including the preservation of capital, the
potential for realizing capital appreciation, maturity and yield to
maturity. FMR will adjust the Fund's investments in particular securities
or in types of debt securities in response to its appraisal of changing
economic conditions and trends. FMR may sell securities in anticipation of
a market decline or purchase securities in anticipation of a market rise.
In addition, FMR may sell one security and purchase another security of
comparable quality and maturity to take advantage of what FMR believes to
be short-term differentials in market values or yield disparities. The Fund
may invest a portion of its assets in securities issued by foreign
companies and foreign governments, which may be less liquid or more
volatile than domestic investments. The Fund's investments, other than
those backed by the U.S. government, are subject to the ability of the
issuer to make payment at maturity.
The Fund will maintain a dollar-weighted maturity of three years or less.
The Fund may hold individual securities with remaining maturities of more
than three years, as long as the Fund's average maturity is three years or
less.
MUNICIPAL/TAX-EXEMPT FUNDS. Tax-Exempt Funds invest primarily in municipal
securities which are issued by state and local governments and their
agencies to raise money for various public purposes, including general
purpose financing for state and local governments as well as financing for
specific projects or public facilities. Municipal securities may be backed
by the full taxing power of a municipality or by the revenues from a
specific project or the credit of a private organization. Some municipal
securities are insured by private insurance companies, while others may be
supported by letters of credit furnished by domestic or foreign banks. FMR
monitors the financial condition of parties (including insurance companies,
banks, and corporations) whose creditworthiness is relied upon in
determining the credit quality of securities the Funds may purchase.
Yields on municipal bonds, and therefore the yield of High Income
Municipal , Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt depend on factors such as general market conditions,
interest rates, the size of a particular offering, the maturities of the
obligations and the quality of the issues. The ability of the Funds to
achieve their investment objectives is also dependent on the continuing
ability of the issuers of the municipal obligations in which the Funds
invest to meet their obligations for the payment of interest and principal
when due.
Bonds generally are considered to be interest rate sensitive, which means
that their values move inversely to interest rates. Long-term municipal
bonds generally are more exposed to market fluctuations resulting from
changes in interest rates than are short-term municipal bonds.
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 the Fund's ability to dispose of lower- quality bonds. The
outside pricing services are consistently monitored to assure that
securities are valued by a method that the Boards believe accurately
reflects fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
The Funds' investments in municipal securities may include fixed, variable,
or floating rate general obligation and revenue bonds (including municipal
lease obligations and resource recovery bonds); zero coupon and
asset-backed securities; inverse floaters; tax, revenue, or bond
anticipation notes; and tax-exempt commercial paper. The Funds may buy or
sell securities on a when-issued or delayed-delivery basis (including
refunding contracts), and may purchase restricted and illiquid
securities. The Funds may also buy and sell options and futures contracts.
Municipal obligations, including industrial development revenue bonds, are
issued by or on behalf of states, territories, and possessions of the U.S.
and the District of Columbia and their political subdivisions, agencies,
and instrumentalities.
Each Fund may invest more than 25% 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.
As a result, a fund may be more susceptible to economic, business
or political development s than would a portfolio of bonds
with a greater variety of issuers. These developments include proposed
legislation or pending court decisions affecting the financing of such
projects and market factors affecting the demand for their services or
products.
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND. Interest from all or a portion
of the Fund's municipal bonds may be a "tax preference" item for some
shareholders in determining their federal alternative minimum tax.
Stability and growth of principal also will be considered when choosing
securities.
Interest on some "private activity" municipal obligations is subject to the
federal alternative minimum tax AMT bonds. AMT bonds are municipal
obligations that benefit a private or industrial user or finance a private
facility. The Fund reserves the right to invest up to 100% of its assets in
AMT bonds.
The Fund may invest in municipal obligations which are rated in the medium
and lower quality categories of NRSROs (such as obligations rated
Caa by Moody's or CCC by S&P) or which are unrated, but judged by FMR,
pursuant to procedures established by the Board of Trustees, to meet the
quality standards of the Fund. Municipal obligations which are in the
medium and lower rating categories or which are unrated generally offer a
higher current yield than those offered by municipal obligations which are
in the higher rating categories. Since available yields and the yield
differential between higher and lower- quality obligations vary over
time, no specific level of income or yield differential can be assured.
Lower- quality bonds (those rated Ba/BB or lower) involve greater
risk, including risk of default.
The Fund also may purchase tax-exempt instruments that become available in
the future as long as FMR believes that their quality is equivalent to
those rated Caa or CCC or better by Moody's or S&P, respectively.
The Fund's yield depends in part on the quality of its investments.
Obligations rated investment grade or better (Baa/BBB or higher) generally
are of medium to high quality. These securities typically have moderate to
poor protection of principal and interest payments and have speculative
characteristics.
Unrated obligations may be either investment grade or lower quality, but
usually are not attractive to as many buyers. The Fund relies heavily on
FMR's credit analysis when purchasing unrated or lower- quality
bonds.
While lower- quality bonds traditionally have been less sensitive to
interest rate changes than higher- quality investments, as with all
bonds, the prices of lower- quality bonds will be affected by
interest rate changes. Economic changes may affect lower- quality
securities differently than other securities. Lower- quality
municipal bonds may be more sensitive to adverse economic changes
(including recession) in specific regions or localities or among specific
types of issuers. During an economic downturn or a prolonged period of
rising interest rates, issuers of lower- quality debt may have
problems servicing their debt, meeting projected revenue goals, or
obtaining additional financing. Periods of economic uncertainty and
interest rate changes may cause market price volatility for
lower- quality bonds and corresponding volatility in the Fund's share
price.
During periods when, in FMR's opinion, a temporary defensive posture in the
market is appropriate, the Fund may invest without limitation in cash or in
obligations whose interest payments may be federally taxable. Taxable
obligations include, but are not limited to, certificates of deposit,
commercial paper, obligations issued by the U.S. government or any of its
agencies or instrumentalities, and repurchase agreements.
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. Since the Fund's objective is to
provide a high current yield, the Fund will purchase municipals with an
emphasis on income. FMR may vary the Fund's average maturity depending on
anticipated market conditions. Generally, the average maturity will be
shortened when interest rates are expected to rise and lengthened when
rates are expected to decline.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND. 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 will
maintain a dollar-weighted average maturity of 10 years or less.
The Fund will invest in municipal obligations which, in the judgment of
FMR, are high quality or at least upper-medium quality. The Fund's
standards for high quality and upper-medium quality obligations are
essentially the same as those described by Moody's in rating municipal
obligations within its three highest ratings of Aaa, Aa, and A and as those
described by S&P in rating such obligations within its three highest
ratings of AAA, AA and A. As a non-fundamental policy, the Fund will not
purchase a security rated by Moody's or S&P unless it has received at
least an A rating from either rating service.
The Fund m a y invest up to 20% of its total assets in municipal
obligations which are unrated by Moody's or S&P if, in the judgment of
FMR, such municipal obligations meet the standards of quality as set forth
above. Unrated bonds are not necessarily of lower quality and may have
higher yields than rated bonds, but the market for rated bonds is usually
broader.
The Fund may invest up to 25% of its total assets in a single issuer's
securities.
The Fund currently does not intend to invest in taxable obligations;
however, consistent with that portion of its investment objective concerned
with the preservation of capital, from time to time the Fund may invest a
portion (normally not to exceed 20%) of its net assets on a temporary basis
in fixed-income obligations whose interest is subject to federal income
tax. These taxable obligations may include repurchase agreements. The Fund
does not currently intend to invest in AMT bonds.
FIDELITY ADVISOR SHORT - INTERMEDIATE TAX-EXEMPT . Under
normal conditions, the Fund will invest so that 80% or more of its net
assets will be invested in securities whose interest is exempt from federal
income tax. The Fund maintains the ability under normal circumstances, to
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 tax. If you are subject to the federal
alternative minimum tax, a portion of your income may not be exempt from
federal income tax.
The Fund normally invests at least 60% of its net assets in securities that
FMR judges to be of equivalent quality to those rated A or better by
Moody's or S&P. The Fund may not invest more than 5% of its net assets
in securities rated below Baa by Moody's or BBB by S&P, or in unrated
securities of equivalent quality, and does not currently intend to purchase
securities rated lower than Ba or BB.
The Fund normally maintains a dollar-weighted average maturity of
between two and four years. Although the Fund is permitted to hold
securities with maturities of more than four years, its dollar-weighted
average maturity is limited to a maximum of four years.
The Fund may temporarily change its investment focus for defensive
purposes. During periods when, in FMR's opinion, a temporary defensive
posture in the market is appropriate, the Fund may hold cash that is not
earning interest or invest without limitation in short-term municipal
obligations and money market instruments, including obligations whose
interest may be federally taxable. Under such circumstances, the Fund may
temporarily invest so that less than 80% of its net assets will be invested
in securities whose interest is exempt from federal income tax. Federally
taxable obligations include, but are not limited to, obligations issued by
the U.S. government or any of its agencies or instrumentalities,
high-quality commercial paper, certificates of deposit, and repurchase
agreements. The Fund does not intend to invest in federally taxable
obligations under normal conditions.
The Fund is non-diversified, which means that it may invest a greater
portion of its assets in securities of a single issuer than would be the
case if it were diversified. As a result, changes in the financial
condition or market assessment of a single issuer could cause greater
fluctuation in the Fund's share value.
INVESTMENT LIMITATIONS
Each Fund has adopted the following investment limitations designed to
reduce investment risk. The policies and limitations discussed below, and
in the Appendix beginning on page , are considered at the time of purchase.
With the exception of each Fund's borrowing policy, the sale of portfolio
securities is not required in the event of a subsequent change in
circumstances.
DIVERSIFICATION: These limitations do not apply to U.S. government
securities and are fundamental unless otherwise noted.
(bullet) Equity Portfolio Growth and Strategic Opportunities each may not
purchase a security if, as a result, more than 5% of its total assets would
be invested in the securities of any issuer;
(bullet) As a non-fundamental policy, generally to meet federal tax
requirements at the close of each quarter, Emerging Markets Income and
Short-Intermediate Tax-Exempt may not (1) with respect to 50% of its total
assets, purchase a security if more than 5% of its total assets would be
invested in the securities of a single issuer; and (2) invest more than 25%
of its total assets in securities of a single issuer.
(bullet) With respect to 75% of its total assets, each other Fund may not
purchase a security if, as a result, more than 5% of its total assets would
be invested in the securities of any issuer.
(bullet) Each Fund (except Emerging Markets Income and
Short-Intermediate Tax-Exempt) may not purchase a security if, as a
result, it would hold more than 10% of the outstanding voting securities of
any issuer (except that Overseas, Growth Opportunities, Equity
Portfolio Income, Income & Growth, High Yield, Government
Investment, Short Fixed-Income and High Income Municipal each
may invest up to 25% of its total assets without regard to this
limitation .)
(bullet) Limited Term Tax-Exempt 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.
(bullet) Each other Fund may not purchase the securities of any issuer 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. Limited Term Bond may, however, invest more than 25% of its
total assets in obligations of banks, although it has no current intention
of so doing.
(bullet) As a non-fundamental policy, Short-Intermediate Tax-Exempt 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.
BORROWING: The following limitations are fundamental.
(bullet) Each fund may borrow money for temporary or emergency purposes,
in an amount not exceeding 33 1/3% of the value of its total assets;
(bullet) Strategic Opportunities, Limited Term Bond, and Limited Term
Tax-Exempt may not purchase any security while borrowings representing more
than 5% of its total assets are outstanding.
(bullet) Growth Opportunities, Income & Growth, Government Investment
Short Fixed - Income and High Income Municipal may not purchase any
security while borrowings representing more than 5% of its net assets are
outstanding.
The following limitations are non-fundamental.
(bullet) Each other fund may not purchase any security while borrowings
representing more than 5% of its total assets are outstanding.
(bullet) Each Fund may borrow money from banks or from other funds advised
by FMR, or by engaging in reverse repurchase agreements.
LENDING: Percentage limitations are fundamental.
(bullet) High Income Municipal , Limited Term Tax-Exempt and
Short-Intermediate Tax-Exempt do not currently intend to engage in
repurchase agreements or make loans (but this limitation does not apply to
purchases of debt securities).
(bullet) Each other Fund (A) may lend securities to a broker-dealer or
institution when the loan is fully collateralized; and (B) may lend money
to a mutual fund advised by FMR or an affiliate. Each Fund will limit loans
in the aggregate to 33 1/3% of its total assets.
Each Fund has received permission from the SEC to lend money to and borrow
money from other funds advised by FMR or its affiliates, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt will
participate only as borrowers. If a Fund borrows money, its share price may
be subject to greater fluctuation until the borrowing is paid off. To this
extent, purchasing securities when borrowings are outstanding may involve
an element of leverage.
As a non-fundamental policy, each Fund may not purchase a security, if as a
result, more than 15% (Overseas, Emerging Markets Income and High Yield) or
10% (all others) of its net assets would be invested in illiquid
investments.
HOW TO BUY SHARES
S hares of each Fund are offered continuously to investors who engage
an investment professional for investment advice and may be purchased at
the public offering price (the offering price) next determined after the
transfer agent receives your order to purchase. State Street Bank and Trust
Company (the Transfer Agent), P.O. Box 8302, Boston, Massachusetts
02266-8302, provides transfer and dividend paying services for Class A
shares of each Fund.
The offering price is equal to the net asset value per share (NAV) plus a
sales charge, which is a variable percentage of the offering price
depending upon the amount of the purchase. The table above shows total
sales charges and concessions to securities dealers and banks (investment
professionals) with which Distributors has Agreements.
You can open an account with a minimum initial investment of $2,500 by
completing and returning an account application. You can make additional
investments of $250 or more. For tax-deferred retirement plans, including
IRA accounts, there is a $500 minimum initial investment and a $100
subsequent investment minimum. For accounts established under the Fidelity
Advisor Systematic Investment Program or the Fidelity Advisor Systematic
Exchange Program, there is a $1,000 initial and $100 monthly subsequent
investment minimum requirement. FOR FURTHER INFORMATION ON OPENING AN
ACCOUNT, PLEASE CONSULT YOUR INVESTMENT PROFESSIONAL OR REFER TO THE
CLASS A ACCOUNT APPLICATION.
It is the responsibility of your investment professional to transmit your
order to purchase shares to the Transfer Agent before 4:00 p.m. Eastern
time in order for you to receive that day's Class A share price. The
Transfer Agent must receive payment within five business days after an
order is placed ; otherwise, the purchase order may be canceled and
you could be held liable for resulting fees and/or losses. To eliminate
the need for safekeeping, the Funds will issue certificates for shares only
upon request.
All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. Each Fund reserves the right to limit the number of your
checks processed at one time. If your check does not clear, the Fund may
cancel your purchase and you could be held liable for any fees and/or
losses incurred. When you purchase directly by check, the Fund can hold the
proceeds of redemptions until the Transfer Agent is reasonably satisfied
that the purchase payment has been collected (which can take up to seven
calendar days). You may avoid a delay in receiving redemption proceeds by
purchasing shares with a certified check. S hares of the fixed-income
funds purchased through investment professionals utilizing an automated
order placement and settlement system that guarantees payment for orders on
a specified date, begin to earn income dividends on that date. Direct
purchases and all other orders begin to earn dividends on the business day
after the Fund receives payment.
Each Fund and Distributors reserve the right to suspend the offering of
shares for a period of time and to reject any order for the purchase of
shares, including certain purchases by exchange (see "How to Exchange,''
page ).
2.SALES CHARGES AND INVESTMENT PROFESSIONAL CONCESSIONS
SALES CHARGES AS % OF INVESTMENT PROFESSIONAL
AMOUNT OF PURCHASE OFFERING NET AMOUNT CONCESSION AS %
IN SINGLE TRANSACTIONS PRICE INVESTED OF OFFERING PRICE
FIDELITY ADVISOR FUNDS
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*
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*
* INVESTMENT PROFESSIONALS WILL BE COMPENSATED WITH A FEE OF .25% FOR
PURCHASES OF $1 MILLION OR MORE, IF THE ASSETS ON WHICH THE .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 BELOW. ALL ASSETS ON WHICH THE .25% FEE IS PAID
MUST REMAIN IN CLASS A SHARES OF THE FIDELITY ADVISOR FUNDS, INITIAL CLASS
SHARES OF DAILY MONEY FUND, OR SHARES OF DAILY TAX-EXEMPT MONEY FUND FOR A
PERIOD OF ONE UNINTERRUPTED YEAR OR THE INVESTMENT PROFESSIONAL WILL BE
REQUIRED TO REFUND THIS FEE TO DISTRIBUTORS.
3.MINIMUM ACCOUNT BALANCE. You must maintain an account balance of $1,000
in Class A shares. If your account falls below $1,000 due to redemption of
Class A shares, the Transfer Agent may close it at the NAV next determined
on the day your account is closed and mail you the proceeds at the address
shown on the Transfer Agent's records. The Transfer Agent will give you 30
days' notice that your account will be closed unless you make an investment
to increase your account balance to the $1,000 minimum. The minimum account
balance does not apply to IRA accounts.
4.SALES CHARGE WAIVERS. Sales charges do not apply to Class A shares of a
Fund purchased:
(1) by registered representatives, bank trust officers and other employees
(and their immediate families) of investment professionals having
Agreements with Distributors;
(2) by a current or former Trustee or officer of a Fidelity fund or a
current or retired officer, director or regular employee of FMR Corp. or
its direct or indirect subsidiaries (a "Fidelity Trustee or employee"), the
spouse of a Fidelity Trustee or employee, a Fidelity Trustee or employee
acting as custodian for a minor child, or a person acting as trustee of a
trust for the sole benefit of the minor child of a Fidelity Trustee or
employee;
(3) by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more;
(4) by 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) by trust institutions (including bank trust departments) investing on
their own behalf or on behalf of their clients;
(6) in accounts as to which a bank or broker-dealer charges an asset
management fee, provided the bank or broker-dealer has an Agreement
with Distributors;
(7) as part of an employee benefit plan having more than 200 eligible
employees or a minimum of $1,000,000 invested in Fidelity Advisor Funds;
(8) in a Fidelity or Fidelity Advisor IRA account purchased with the
proceeds of a distribution from (i) 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, or (ii) an insurance company separate account
qualifying under (9) below, or funding annuity contracts purchased by
employee benefit plans which in the aggregate have at least $3,000,000 in
plan assets invested in Fidelity mutual funds;
(9) by an insurance company separate account used to fund annuity contracts
purchased by employee benefit plans which in the aggregate have more than
200 eligible employees or $1,000,000 invested in Fidelity Advisor mutual
funds;
(10) by any state, county, city, or any governmental instrumentality,
department, authority or agency; or
(11) with redemption proceeds from other mutual fund complexes on which the
investor has paid a front-end sales charge only.
Qualification for sales charge waivers must be cleared through Distributors
in advance, and employee benefit plan investors must meet additional
requirements specified in the Funds' SAIs. YOUR INVESTMENT PROFESSIONAL
SHOULD CALL FIDELITY FOR MORE INFORMATION.
INVESTOR SERVICES
You may initiate many transactions by telephone. Note that the Transfer
Agent will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the
identity of the caller. The Transfer Agent will request personalized
security codes or other information, and may also record calls. You should
verify the accuracy of your confirmation statements immediately after you
receive them. If you do not want the ability to redeem and exchange by
telephone, call the Transfer Agent for instructions.
5.QUANTITY DISCOUNTS. Reduced sales charges are applicable to purchases of
Class A shares of a Fund in amounts of $50,000 or more ($1,000,000 or more
for Short Fixed-Income or Short-Intermediate Tax-Exempt). Your purchases
of Class B shares may be included for purposes of qualifying for a Class A
front-end sales charge reduction in the following programs. To obtain
the reduction of the sales charge, 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 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 Investment Company Act of 1940 (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 single fiduciary account or for a
single or a parent-subsidiary group of "employee benefit plans" (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974);
and tax-exempt organizations as defined under Section 501(c)(3) of the
Internal Revenue Code.
6.COMBINED PURCHASES. When you invest in Class A shares of a Fund for
several accounts at the same time, you may combine these investments into a
single transaction to qualify for the quantity discount if purchased
through one investment professional and if the total is at least $50,000
(at least $1,000,000 for Short Fixed-Income or Short-Intermediate
Tax-Exempt).
7.RIGHTS OF ACCUMULATION. Your "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.
You may add the value of currently held Class A and Class B shares of
Fidelity Advisor Funds, and the value of Initial Class shares and Class
B shares of Daily Money Fund : U.S. Treasury Portfolio and shares of
Daily Money Fund: Money Market Portfolio and Daily Tax-Exempt Money
Fund ACQUIRED BY EXCHANGE FROM ANY FIDELITY ADVISOR FUND, determined at the
current day's NAV at the close of business, to the amount of your new
purchase valued at the current offering price , to determine your
reduced front-end sales charge.
8.LETTER OF INTENT. If you anticipate purchasing a Fund's Class A shares
in amounts of $50,000 or more ($1,000,000 for Short Fixed-Income or
Short-Intermediate Tax-Exempt) alone or in combination with Class A
or Class B shares of other Fidelity Advisor Funds , 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, within a 13-month
period, you may obtain Class A shares at the same reduced sales charge as
though the total quantity were invested in one lump sum, by filing a
non-binding Letter of Intent (the Letter) within 90 days of the start of
the purchases. Each Class A investment you make after signing the Letter
will be entitled to the sales charge applicable to the total investment
indicated in the Letter. For example, a $2,500 purchase of Class A shares
toward a $50,000 Letter would receive the same reduced sales charge as if
the $50,000 ($1,000,000 for Short Fixed-Income or Short-Intermediate
Tax-Exempt) had been invested at one time. To ensure that the reduced price
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 dividends nor capital gain
distributions reinvested 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 further 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 the total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, you will receive 30 days' written notice to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
FOR MORE INFORMATION ON THE TERMS OF QUANTITY DISCOUNTS, PLEASE CONSULT
YOUR INVESTMENT PROFESSIONAL.
9.FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A shares of a Fidelity Advisor Fund with the
Systematic Investment Program by completing the appropriate section of the
account application and attaching a voided personal check. Investments may
be made monthly by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time. There is a $1,000 minimum initial investment requirement for the
Systematic Investment Program. S hares will be purchased at the
offering price next determined following receipt of the investment by the
Transfer Agent. You may cancel the Systematic Investment Program at any
time without payment of a cancellation fee. You will receive a confirmation
from the Transfer Agent for every transaction, and a debit entry will
appear on your bank statement.
SHAREHOLDER COMMUNICATIONS
The Transfer Agent or your investment professional will send you a
confirmation after every transaction that affects your share balance or
account registration. In addition, a consolidated statement will be
provided at least quarterly. At least twice a year each shareholder will
receive the Fund's financial statements, with a summary of its portfolio
composition and performance. To reduce expenses, only one copy of most
shareholder reports (such as a Fund's Annual Report) will be mailed to each
shareholder address. Please write to the Transfer Agent or contact your
investment professional if you need to have additional reports sent each
time.
Each Fund pays for these shareholder communications, but not for special
services that are required by a few shareholders, such as a request for a
historical transcript of an account. You may be required to pay a fee for
such special services. If you are purchasing shares of a Fund through a
program of administrative services offered by an investment professional,
you should read the additional materials pertaining to that program in
conjunction with this prospectus. Certain features of each Fund, such as
the minimum initial or subsequent investment, may be modified in these
programs, and administrative charges may be imposed for the services
rendered.
HOW TO EXCHANGE
An exchange is the redemption of Class A shares of one Fund and the
purchase of Class A shares of another Fund, each at the next determined
NAV. The exchange privilege is a convenient way to buy and sell Class A
shares of the Fidelity Advisor Funds, Initial Class s hares of Daily
Money Fund : U.S. Treasury Portfolio , and shares of Daily Money
Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund ,
provided such Funds are registered in your state.
To protect each Fund's performance and shareholders, FMR discourages
frequent trading in response to short-term market fluctuations. Each Fund
reserves the right to refuse exchange purchases by any person or group if,
in FMR's opinion, the Fund would be unable to invest effectively in
accordance with its investment objective and policies, or would otherwise
be affected adversely. Your exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant
portions of a Fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to a Fund.
Exchange restrictions may be imposed at any time. The Funds may modify or
terminate the exchange privilege. The exchange limit may be modified for
certain institutional retirement plans.
Exchange instructions may be given by you in writing or by telephone
directly to the Transfer Agent or through your investment professional .
If you choose to exchange by writing, you must send a letter of instruction
with your signature guaranteed either directly to the Transfer Agent or to
your investment professional, accompanied by either the certificates
representing the shares to be redeemed or, if no certificates have been
issued, by a stock power form with your signature guaranteed. FOR MORE
INFORMATION ON ENTERING AN EXCHANGE TRANSACTION, PLEASE CONSULT YOUR
INVESTMENT PROFESSIONAL.
Before you make an exchange:
1. Read the prospectus of the Fund into which you want to exchange.
2. Class A shares of a Fund may be exchanged for Class A shares of another
Fidelity Advisor Fund seven calendar days after purchase, at NAV. If you
have held Class A shares of Short Fixed-Income Fund or Short-Intermediate
Tax-Exempt for less than six months, you will pay a sales charge equal to
the difference between the front-end sales charge on the Class A shares of
the Fund you are exchanging into and the front-end sales charge applicable
to Class A shares of Short Fixed-Income or Short-Intermediate Tax-Exempt
being exchanged. For example, if you paid the full 1.50 % front-end
sales charge when you purchased your Short Fixed-Income Class A shares, you
will have to pay a sales charge of up to 3.25% when you exchange these
shares into Class A shares of another Fidelity Advisor Fund with a maximum
front-end sales charge of 4.75%. After six months, shares may be exchanged
at NAV. Exchanges of Initial Class shares of Daily Money Fund: U.S.
Treasury Portfolio or shares of Daily Money Fund: Money Market Portfolio
and Daily Tax-Exempt Money Fund into Class A shares of a Fidelity Advisor
Fund will be processed at the next determined offering price (unless
the shares were acquired by exchange from another Fidelity Advisor Fund).
3. You may exchange only between accounts that are registered in the
same name, address, and taxpayer identification number.
4. You may make four exchanges out of each Fund per calendar year.
If you exceed this limit, your future purchases of (including exchanges
into) Fidelity Advisor Funds may be permanently refused. For purposes of
the four exchange limit, accounts under common ownership or control,
including accounts having the same taxpayer identification number, will be
aggregated. Systematic exchanges are not subject to this four exchange
limit (see following section).
5. TAXES: The exchange of Class A shares is considered a sale and
may be taxable. The Transfer Agent will send you or your
investment professional a confirmation of each exchange transaction.
10.FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. You can exchange a
specific dollar amount of Class A shares from a Fund into Class A shares of
another Fidelity Advisor Fund , Initial Class shares of Daily Money Fund:
U.S. Treasury Portfolio or shares of Daily Money Fund: Money Market
Portfolio and Daily Tax-Exempt Money Fund on a periodic basis
under the following conditions:
1. The account from which the exchanges are to be processed must have a
minimum balance of $10,000.
2. The account into which the exchanges are to be processed must be an
existing account with a minimum balance of $1,000.
3. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount that can be exchanged
systematically into a Fund is $100.
4. Systematic e xchanges will be processed at the NAV determined on
the transaction date, except that s ystematic e xchanges into
Class A shares of a Fidelity Advisor Fund from Initial Class s hares
of Daily Money Fund : U.S. Treasury Portfolio or shares of Daily
Money Fund: Money Market Portfolio and Daily Tax-Exempt Money Fund,
will be processed at the offering price next determined on the transaction
date (unless the shares were acquired by exchange from another Fidelity
Advisor Fund).
HOW TO SELL SHARES
You may sell (redeem) all or a portion of your shares on any day the New
York Stock Exchange (NYSE) is open, at the NAV next determined after the
Transfer Agent receives your request to sell. Orders to sell may be placed
by you in writing or by telephone or through your investment professional.
If you choose to sell shares by written instruction, you must send a
letter of instruction with your signature guaranteed either directly to the
Transfer Agent or to your investment professional, accompanied by either
the certificates representing the shares to be redeemed or, if no
certificates have been issued, by a stock power form with your signature
guaranteed. Orders to sell received by the Transfer Agent before 4:00
p.m. Eastern time will receive that day's Class A share price. For
orders to sell placed through your investment professional, it is the
investment professional's responsibility to transmit such orders to the
Transfer Agent by 4:00 p.m. Eastern time for you to receive that day's
Class A share price.
Once your Class A shares are redeemed, a Fund normally will send the
proceeds on the next business day to the address of record. If making
immediate payment could adversely affect the Fund, the Fund may take up to
seven days to pay you. A Fund may withhold redemption proceeds until it is
reasonably satisfied that it has collected investments that were made by
check (which may take up to seven calendar days).
When the NYSE is closed (or when trading is restricted) for any reason
other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, a
Fund may suspend redemption or postpone payment dates for more than seven
days. The Transfer Agent requires additional documentation to redeem shares
registered in the name of a corporation, agent or fiduciary or a surviving
joint owner. Call 1-800-526-0084 for specific requirements.
11.REDEMPTION REQUESTS BY TELEPHONE .
TO RECEIVE A CHECK. You may sell shares of a Fund having a value of
$100,000 or less from your account by calling the Transfer Agent.
Redemption proceeds must be sent to the address of record listed on the
account, and a change of address must not have occurred within the
preceding 3 0 days.
TO RECEIVE A WIRE. You may sell shares of a Fund and have the proceeds
wired to a pre-designated bank account. Wires will generally be sent the
next business day following the redemption of shares from your
account.
Telephone redemptions cannot be processed for Fidelity Advisor Fund
prototype retirement accounts where State Street Bank and Trust Company is
the custodian.
12.REDEMPTION REQUESTS IN WRITING. For your protection, if you sell shares
of a Fund having a value of more than $100,000, if you are sending
the proceeds of a redemption of any amount to an address other than the
address of record listed on the account, if you have requested a
change of address within the preceding 3 0 days, or if you wish to
have the proceeds wired to a non - predesignated bank account, you
must send a letter of instruction signed by all registered owners with
signature(s) guaranteed to the Transfer Agent. A signature guarantee is a
widely recognized way to protect you by guaranteeing the signature on your
request; it may not be provided by a notary public. Signature guarantee(s)
will be accepted from banks, brokers, dealers, municipal securities
dealers, municipal securities brokers, government securities dealers,
government securities brokers, credit unions (if authorized under state
law), national securities exchanges, registered securities associations,
clearing agencies and savings associations.
13.REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A
shares of a Fund you may reinvest an amount equal to all or a portion of
the redemption proceeds in Class A shares of the Fund or in Class A shares
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. You must reinstate your Class A 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.
14.FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A
shares of a Fund worth $10,000 or more, you may periodically have proceeds
sent automatically from your account to you, to a person named by you, or
to your bank checking account. Your Systematic Withdrawal Program payments
are drawn from Class A share redemptions. If Systematic Withdrawal Program
redemptions exceed distributions earned on your Class A shares, your
account eventually may be exhausted. Since a sales charge is applied on new
Class A shares you buy, it is to your disadvantage to buy Class A shares
while also making systematic redemptions. You may obtain information about
the Systematic Withdrawal Program by contacting your investment
professional.
15.CHECKWRITING SERVICE. Short Fixed-Income and Short-Intermediate
Tax-Exempt each offer a checkwriting service ($500 minimum)
to allow the redemption of shares from your account. Refer to the Class
A account application or each SAI and complete the attached signature
card. Upon receipt of the properly completed Class A account
application and signature card, the Fund will provide checks. If you redeem
by check from the Fund 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.
DISTRIBUTION OPTIONS
When you fill out your account Class A application, you can choose
from four Distribution Options:
1. REINVESTMENT OPTION. Dividends and capital gain distributions will be
automatically reinvested in additional Class A shares of a Fund. If you do
not indicate a choice on your account application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Capital gain distributions will be automatically
reinvested, but a check will be sent for each dividend distribution.
3. CASH OPTION. A check will be sent for each dividend and capital gain
distribution.
4. DIRECTED DIVIDENDS(Registered trademark) PROGRAM. Dividends and capital
gain distributions will be automatically invested in Class A shares
of another identically registered Fidelity Advisor Fund.
You may change your Distribution Option at any time by notifying the
Transfer Agent in writing. Distribution checks for fixed-income funds will
be mailed no later than seven days after the last day of the month. On the
day a Fund goes ex-dividend, the amount of the distribution is deducted
from its share price. Reinvestment of distributions will be made at that
day's NAV. If you select option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
distribution checks will be reinvested in your account at the current NAV
and your election may be converted to the Reinvestment Option.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Funds distribute substantially all of their net
investment income and capital gains, if any, to shareholders each year
pursuant to the following schedule. Each Fund may pay capital gains in
December. In addition, Equity Portfolio Growth, Equity Portfolio Income,
Limited Term Bond and Limited Term Tax-Exempt may pay capital gains in
January as well. Emerging Markets Income may also pay capital gains in
February.
Equity Portfolio Growth pays net investment income, if any, in January and
December; Overseas, Growth Opportunities, Global Resources, and Strategic
Opportunities pay in December; Emerging Markets Income, High Yield,
Limited Term Bond, Government Investment, Short Fixed-Income, High Income
Municipal, Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
declare dividends daily and pay monthly; and Equity Portfolio Income and
Income & Growth declare dividends in March, June, September, and
December and pay the following month.
16.CAPITAL GAINS. You may realize a gain or loss when you sell (redeem) or
exchange shares. For most types of accounts, a Fund will report the
proceeds of your redemptions to you and the IRS annually. However, because
the tax treatment also depends on your purchase price and your personal tax
position, YOU SHOULD KEEP YOUR REGULAR ACCOUNT STATEMENTS TO USE IN
DETERMINING YOUR TAX.
17."BUYING A DIVIDEND." On the record date for a distribution from a Fund,
the Fund's share price is reduced by the amount of the distribution. If you
buy shares just before the record date (buying a dividend), you will pay
the full offering price for the shares, and then receive a portion of the
price back as a taxable distribution.
18.FEDERAL TAXES. Distributions from each Fund's income and short-term
capital gains are taxed as dividends, and long-term capital gain
distributions are taxed as long-term capital gains. Gains on the sale of
tax-free bonds results in a taxable distribution. Short-term capital gains
and a portion of the gain on bonds purchased at a discount after April 30,
1993 are taxed as dividends. Distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares, except
that distributions declared in December and paid in January are taxable as
if paid on December 31. Each Fund will send you a tax statement by January
31 showing the tax status of the distributions you received in the past
year. A copy will be filed with the Internal Revenue Service (IRS).
To the extent that a Fund invest s in municipal obligations whose
interest is subject to the federal alternative minimum tax for individuals
(AMT bonds) , i ndividuals who are subject to the AMT will be required
to report a portion of the Fund's dividends as a "tax-preference item" in
determining their federal tax. Federally tax-free interest earned by the
Funds is federally tax-free when distributed as income dividends. During
the most recent fiscal year ended, 100% of the income dividends for High
Income Municipal and Limited Term Tax-Exempt were free from federal tax. If
the Funds earn taxable income from any of their investments, it will be
distributed as a taxable dividend. Some of the Funds may be eligible for
the dividends-received deduction for corporations.
EFFECT OF FOREIGN TAXES. A Fund may pay withholding or other
taxes to foreign governments during the year. These taxes would reduce the
Fund's dividends, but would be 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 the Fund. Your tax statement
will generally show the amount of foreign tax for which a credit or
deduction will be available.
STATE AND LOCAL TAXES. Mutual fund dividends from U.S. government
securities generally are free from state and local income taxes. However,
particular states may limit this benefit, and some tupes of securitites,
such as repurchase agreements and some agency backed securitites, may not
qualify for the benefit. Ginnie mae securities and other mortgage-backed
securities are notable exceptions in most states. Some states may impose
intangible property taxes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the Funds and their
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information on the tax laws in
their state to determeine whether the fund is suitable to their particular
tax situation.
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.
FEES
19.MANAGEMENT AND OTHER SERVICES. For managing its investments and business
affairs, each Fund pays a monthly fee to FMR.
Each Fund (with the exception of Equity Portfolio Income, see below) pays a
monthly fee to FMR based on a basic fee rate, which is the sum of two
components:
1. A group fee rate based on the monthly average net assets of all of the
mutual funds advised by FMR. This rate for Equity Funds cannot rise above
.52% and it drops (to as low as a marginal rate of .31%*) as total assets
in all of these funds rise. The effective Equity Fund group fee rate for
September 1993, October 1993 and November 1993 was .3262%, .3254% and
.3250%, respectively. The group fee rate for Fixed-Income Funds cannot rise
above .37% and it drops (to as low as a marginal rate of .15%*) as total
assets in all of these funds rise. The effective Fixed-Income group fee
rate for October 1993 and November 1993 was .1631% and .1627%,
respectively.
2. An individual fund fee rate, which varies for each Fund.
* FMR VOLUNTARILY AGREED TO ADOPT REVISED GROUP FEE RATE SCHEDULES WHICH
PROVIDE FOR A MARGINAL RATE AS LOW AS .285% (EQUITY FUNDS) AND .1325%
(FIXED-INCOME FUNDS) WHEN AVERAGE GROUP NET ASSETS EXCEED $336 BILLION.
(THE MANAGEMENT CONTRACTS FOR EMERGING MARKETS INCOME, HIGH YIELD, AND
SHORT-INTERMEDIATE TAX-EXEMPT CONTAIN THE REVISED GROUP FEE RATE
SCHEDULES.) A NEW MANAGEMENT CONTRACT WITH A REVISED GROUP FEE RATE
SCHEDULE WILL BE PRESENTED FOR APPROVAL AT EACH FUND'S NEXT SHAREHOLDER
MEETING.
One-twelfth of the annual basic fee rate is applied to each Fund's
net assets averaged over the most recent month, giving a dollar amount
which is the management fee for that month.
Equity Portfolio Income pays FMR a monthly management fee at an annual rate
of .50% of its average net assets.
The following are the individual fund fee rates and total management fees
for each Fund's most recent fiscal year end.
TOTAL
MANAGEMENT FEE
INDIVIDUAL (AS A PERCENT OF AVERAGE
FUND FEE RATE NET ASSETS)
(AS A PERCENTAGE OF BEFORE REIMBURSEMENTS,
AVERAGE NET ASSETS) IF ANY
INTERNATIONAL FUNDS:
Overseas 0.45% 0.77%(dagger)
Emerging Markets Income* 0.55% 0.71%
EQUITY FUNDS:
Equity Portfolio Growth 0.33% 0.66%
Growth Opportunities 0.30% 0.68%
Global Resources 0.45% 0.77%(dagger)
Strategic Opportunities 0.30% 0.54%
Equity Portfolio Income .NA 0.50%
Income & Growth 0.20% 0.53%
FIXED-INCOME FUNDS:
High Yield 0.45% 0.51%
Limited Term Bond 0.25% 0.42%
Government Investment 0.30% 0.46%
Short Fixed-Income 0.30% 0.47%
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal Fund 0.25% 0.42%
Limited Term Tax-Exempt Fund 0.25% 0.42%
Short-Intermediate Tax -Exempt * 0.25% 0.41%
(dagger) TOTAL MANAGEMENT FEES ARE HIGHER THAN THOSE CHARGED BY MOST 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.
* PROJECTIONS FOR FIRST YEAR OF OPERATIONS.
In addition to the basic fee, the management fees for Overseas, Growth
Opportunities, and Strategic Opportunities vary based on performance. The
performance adjustment is added to or subtracted from the management
fee and is calculated monthly. It is based on a comparison of each Fund's
performance to that of an index, over the most recent 36-month period. The
difference is converted into a dollar amount that is added to or subtracted
from the management fee. This adjustment rewards FMR when the Fund
outperforms the index and reduces FMR's fee when the Fund underperforms the
index. The maximum annualized performance index adjustment rate for each
Fund is +/- .20%. Overseas compares itself to the Morgan Stanley Capital
International Europe, Australia, Far East Index. (Prior to December 1,
1992, Overseas Fund's performance adjustment was based on a comparison with
the Morgan Stanley Capital International Europe Index.) Growth
Opportunities and Strategic Opportunities compare themselves to the S&P
500. See "The Trusts and the Fidelity Organization" for information
regarding performance calculations for Strategic Opportunities.
FMR may, from time to time, agree to reimburse a Fund for expenses
(excluding interest, taxes, brokerage commissions, and extraordinary
expenses) above a specified percentage of average net assets. FMR retains
the ability to be repaid by a Fund for these expense reimbursements in the
amount that expenses fall below the limit prior to the end of the fiscal
year. Fee reimbursements by FMR will increase a Fund's yield and total
return, and repayment by a Fund will lower its yield and total return. FMR
has voluntarily agreed to reimburse expenses of the Class A shares of
Emerging Markets Income, (effective July 1, 1994) Limited Term Bond,
Government Investment, Limited Term Tax-Exempt and Short-Intermediate Tax
Exempt to the extent that total expenses exceed, 1.50%, 0.90%,
0.95 %, .90% and .75%, respectively, of average net assets of Class A
shares.
FMR has entered into sub-advisory agreements on behalf of certain Funds.
Sub-advisors provide research and investment advice and research services
with respect to issuers based outside the United States and FMR may
grant sub-advisers investment management authority to buy and sell
securities if FMR believes it would be beneficial to a Fund.
Overseas, Emerging Markets Income, Equity Portfolio Growth,
Strategic Opportunities, Equity Portfolio Income , High Yield and
Limited Term Bond each have entered into sub-advisory agreements with
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 . FMR U.K. focuses primarily on
issuers based in Europe, and FMR Far East focuses primarily on
issuers based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, not the Fund, pay s FMR U.K. and FMR Far East fees
equal to 110% and 105%, respectively, of each sub-advisor's costs incurred
in connection with its sub-advisory agreement.
In addition, Overseas and Emerging Markets Income each have entered into a
sub-advisory agreement with Fidelity International Investment Advisors
(FIIA) , in Pembroke, Bermuda, and Fidelity Investments Japan Limited
(FIJ), in Tokyo, Japan. FIJ and FIIA are both Bermuda-based subsidiaries of
Fidelity International Limited (FIL). FIIA, in turn, has entered into a
sub-advisory agreement with its wholly owned subsidiary Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.) , in Kent,
England . Currently, FIIAL U.K. focuses on issuers based in
countries other than the United States , including countries in
Europe, Asia, and the Pacific Basin. Under the sub-advisory agreement, FMR
pays FIIA 30% of its monthly management fee with respect to the average
market value of investments held by the Fund for which FIJ and
FIIA , respectively, have provided FMR with investment advice.
FIIA, in turn, 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. For providing investment management services, the subadvisers
are compensated as follows: (a) FMR pays FMR (U.K.), FMR Far East, FIJ and
FIIA 50% of its monthly management fee with respect to Emerging Markets
Income's average net assets managed by the sub-advisers on a discretionary
basis; and (b) FIIA pays FIIAL U.K.'s costs incurred in connection with
providing investment management services.
The Transfer Agent is paid fees based on the type, size and number of
accounts in Class A shares of a Fund and the number of transactions made by
Class A shareholders. The Transfer Agent has a sub-arrangement
with Fidelity Investments Institutional Operations Company (FIIOC), 82
Devonshire Street, Boston, Massachusetts 02109, an affiliate of FMR for
certain transfer dividend paying and shareholder services . The Transfer
Agent 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.
The fees for pricing and bookkeeping services are based on a Fund's average
net assets, but must fall within a range of $45,000 to $750,000 per year.
Fidelity Service Co. (Service), 82 Devonshire Street, Boston, Massachusetts
02109, an affiliate of FMR, calculates each Fund's daily Class A
share price, and maintains its general accounting records (with the
exception of High Income Municipal and Limited Term Tax-Exempt, see below).
For those Funds which can engage in securities lending, Service also
administers its securities lending program. For the most recent fiscal
year , each Fund's fees for pricing and bookkeeping services
(including related out-of-pocket expenses) amounted to: $57,711 (Overseas);
$234,813 (Equity Portfolio Growth); $513,950 (Growth Opportunities);
$45,425 (Global Resources); $145,494 (Strategic Opportunities); $113,026
(Equity Portfolio Income); $410,561 (Income & Growth); $121,204 (High
Yield); $81,106 (Limited Term Bond); $46,457 (Government Investment); and
$143,813 (Short Fixed-Income).
For High Income Municipal, Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt, United Missouri Bank, N.A. (United Missouri), 1010 Grand
Avenue, Kansas City, Missouri 64106, acts as the custodian, transfer agent
for Class A shares and pricing and bookkeeping agent. United
Missouri has a sub-arrangement with the Transfer Agent for transfer agent
services and a sub-arrangement with Service for pricing and bookkeeping
services. For the most recent fiscal year ended, fees paid to Service
(including related out-of-pocket expenses) amounted to $157,559 (High
Income Municipal) and $45,724 (Limited Term Tax-Exempt). All of the fees
are paid to the Transfer Agent and Service by United Missouri, which is
reimbursed by the Funds for such payments.
20.DISTRIBUTION AND SERVICE PLANS. The Board of Trustees of each Trust has
adopted a Distribution and Service Plan (the Plans) on behalf of each
Fund's Class A shares, pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not engage
directly or indirectly in financing any activity that is intended primarily
to result in the sale of shares of a fund except pursuant to a plan adopted
by the fund under the Rule. The Boards of Trustees have adopted the Plans
to allow Class A shares and FMR to incur certain expenses that might be
considered to constitute direct or indirect payment by Class A
shares of distribution expenses.
Under each Plan, Class A shares are authorized to pay Distributors a
monthly distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares of the Fund. The
Class A shares of e ach Fund pay Distributors a distribution fee at an
annual percentage of average net assets of Class A shares of
that Fund determined as of the close of business on each day
throughout the month. The Class A shares of Overseas, Growth Opportunities,
Global Resources, Strategic Opportunities, and Income & Growth each pay
a distribution fee of .65% of their respective average net
assets . The Class A shares of Equity Portfolio Growth and Equity
Portfolio Income each pay a distribution fee of .65% of their
respective average net assets (the Board can approve a maximum rate of
.75%). The Class A shares of Emerging Markets Income, High Yield, Limited
Term Bond, Government Investment, High Income Municipal and Limited Term
Tax-Exempt each pay a distribution fee of .25% of their
respective average net assets (the Board can approve a maximum rate of
.40%). The Class A shares of Short Fixed-Income and Short-Intermediate
Tax-Exempt each pay a distribution fee of .15% of their
respective average net assets . Up to the full amount of the
distribution fee paid by Class A of each Fund to Distributors may be
reallowed to investment professionals based upon the level of marketing and
distribution services provided.
Each Plan also provides that, through Distributors, FMR may make
payments from its management fee or other resources to investment
professionals in connection with the distribution of Class A shares.
Distributors will compensate investment professionals with a
fee of .25% if the assets on which the .25% is paid remain in Class A
shares of the Fidelity Advisor Funds for one uninterrupted year or the
investment professional will be required to refund this fee to
Distributors. The fee will not be paid on purchases through a bank or
bank-affiliated broker-dealers that qualifies for a Sales Charge
Waiver described on page 12. FMR may terminate the program at any time.
Class A shares of each Fund bear the f ees paid pursuant to
their Plan . Such fees are not borne by individual accounts, and
will comply with the restrictions imposed by the NASD rule
regarding asset based sales charges . Distribution fees
will reduce the net investment income and total return of a Fund's Class A
shares.
Investment professionals who provide enhanced inquiry, order entry and
sales facilities in connection with transactions in Class A shares by their
clients may receive an administrative fee up to the maximum applicable
sales charge described in "Sales Charges and Investment Professional
Concessions," on page . In addition, Distributors may , at its
expense, provide promotional incentives such as sales contests and
luxury trips to investment professionals who support the sale of
shares of the Funds. In some instances, these incentives will be
offered only to certain types of investment professionals, such as
bank-affiliated or non-bank affiliated broker-dealers, or to investment
professionals whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
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 fully defined, in Distributors' opinion it
should not prohibit banks from being paid for shareholder servicing and
recordkeeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or a Fund were prevented from
continuing these arrangements, it is expected that the Board would make
other arrangements for these services and that shareholders would not
suffer adverse financial consequences. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
VALUATION
A Fund's shares are valued at NAV. NAV for Class A shares of each Fund
is determined by adding Class A's pro rata share of the value of
all security holdings and other assets of the Fund, deducting Class A's
pro rata share of the liabilities of the Fund, deducting the
liabilities allocated to Class A and then dividing the result by the
n umber of Class A shares of the Fund outstanding.
NAV normally is calculated as of the close of business of the NYSE
(normally 4:00 p.m. Eastern time). The Funds are open for business and NAV
is calculated each day the NYSE is open for trading. Fund securities and
other assets are valued primarily on the basis of market quotations
furnished by pricing services, or if quotations are not available, by a
method that the Board of Trustees believes accurately reflects fair value.
Foreign securities are valued based on quotations from the primary market
in which they are traded and are converted from the local currency into
U.S. dollars using current exchange rates.
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of
total return. All performance information is historical and is not intended
to indicate future performance. Share price and total return fluctuate in
response to market conditions and other factors, and the value of a Fund's
shares when sold may be worth more or less than their original cost.
Excluding a sales charge from a performance calculation produces a higher
total return figure. 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. When an average
annual return covers a period of less than one year, the calculation
assumes that performance will remain constant for the rest of the year.
Since this may or may not occur, the average annual returns should be
viewed as a hypothetical rather than actual performance figure. Average
annual and cumulative total returns usually will include the effect of
paying a Fund's maximum sales charge.
The Funds also may quote performance in terms of yield. 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. High Income
Municipal , Limited Term Tax-Exempt and Short-Intermediate Tax-Exempt
may quote a TAX-EQUIVALENT YIELD, which shows the taxable yield an investor
would have to earn before taxes to equal the Fund's tax-free yield.
A tax-equivalent yield is calculated by dividing a Fund's yield by the
result of one minus a stated federal or state tax rate. Because yield
calculations differ from other accounting methods, the quoted yield may not
equal the income actually paid to shareholders. This difference may be
significant for funds whose investments are denominated in foreign
currencies. In calculating yield, the Funds 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.
For additional performance information, please contact your investment
professional or Distributors for a free Annual Report and SAI.
PORTFOLIO TRANSACTIONS
FMR uses various brokerage firms to carry out each Fund's equity security
transactions. Fixed-income securities are generally traded in the
over-the-counter market through broker-dealers. A broker-dealer is a
securities firm or bank which makes a market for securities by offering to
buy at one price and sell at a slightly higher price. The difference is
known as a spread. Foreign securities are normally traded in foreign
countries since the best available market for foreign securities is often
on foreign markets. In transactions on foreign stock exchanges, brokers'
commissions are generally fixed and are often higher than in the U.S.,
where commissions are negotiated. Since FMR, directly or through affiliated
sub-advisers, places a large number of transactions, including those of
Fidelity's other funds, the Funds pay lower commissions than those paid by
individual investors, and broker-dealers are willing to work with the Funds
on a more favorable spread.
The Funds have authorized FMR to allocate transactions to some
broker-dealers who help distribute the Fund's shares or the shares of
Fidelity's other funds to the extent permitted by law, and on an agency
basis to Fidelity Brokerage Services, Inc. (FBSI) and Fidelity Brokerage
Services Ltd. (FBSL), affiliates of FMR. FMR will make such allocations if
commissions are comparable to those charged by non- affiliated qualified
broker-dealers for similar services.
FMR may also allocate brokerage transactions to a Fund's custodian, acting
as a broker-dealer, or other broker-dealers, so long as transaction quality
and commission rates are comparable to those of other broker-dealers, where
the broker-dealer will allocate a portion of the commissions paid toward
payment of a Fund's expenses. These expenses currently include transfer
agent fees and custodian fees.
Higher commissions may be paid to those firms that provide research,
valuation and other services to the extent permitted by law. FMR also is
authorized to allocate brokerage transactions to FBSI in order to secure
from FBSI research services produced by third party, independent entities.
FMR may use this research information in managing each Fund's assets, as
well as assets of other clients.
When consistent with its investment objective, each Fixed-Income fund may
engage in short-term trading. Also, a security may be sold and another of
comparable quality simultaneously purchased to take advantage of what FMR
believes to be a temporary disparity in the normal yield relationship of
the two securities.
The frequency of portfolio transactions - the turnover rate - will vary
from year to year depending on market conditions. Each Fund's turnover rate
for the most recent fiscal year ended was: 42% (Overseas); 160% (Equity
Portfolio Growth); 69% (Growth Opportunities); 208% (Global Resources);
183% (Strategic Opportunities); 120% (Equity Portfolio Income); 200%
(Income & Growth); 79% (High Yield); 59% (Limited Term Bond); 333%
(Government Investment); 58% (Short Fixed Income); 27% (High Income
Municipal); and 46% (Limited Term Tax-Exempt). The annualized portfolio
turnover rates of Emerging Market Income and Short-Intermediate Tax-Exempt
are not expected to exceed 200% and 75%, respectively, for their first
fiscal periods ending December 31, 1994 and November 30, 1994,
respectively.
Because a high portfolio turnover rate increases transaction costs
and may increase taxable capital gains, FMR carefully weighs the
anticipated benefits of short-term investing against these consequences.
THE TRUSTS AND THE FIDELITY ORGANIZATION
Each Trust is an open-end management investment company. Each Trust
was established by a separate Declaration of Trust as a Massachusetts
business trust on each date as follows: June 24, 1983, Fidelity Advisor
Series I; April 24, 1986, Fidelity Advisor Series II; May 17, 1982,
Fidelity Advisor Series III; May 6, 1983, Fidelity Advisor Series IV; April
24, 1986, Fidelity Advisor Series V; June 1, 1983, Fidelity Advisor Series
VI; March 21, 1980, Fidelity Advisor Series VII; and September 23, 1983,
Fidelity Advisor Series VIII. Each Trust has its own Board of Trustees that
supervises Fund activities and reviews the Fund s' contractual
arrangements with companies that provide the Funds with services. As
Massachusetts business trusts, the Trusts are not required to hold annual
shareholder meetings, although special meetings may be called for a class
of shares, a Fund or the Trust as a whole for purposes such as electing or
removing Trustees, changing fundamental investment policies or limitations
or approving a management contract or plan of distribution. As a
shareholder, you receive one vote for each share and fractional votes for
fractional shares of the Fund you own. For shareholders of Equity Portfolio
Income the number of votes to which you are entitled is based on 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. There is a remote possibility that one Fund might become
liable for any misstatement in the p rospectus about another Fund.
Each class of shares is offered through a separate prospectus.
CLASS B. Fidelity Advisor Emerging Markets Income Fund, Fidelity Advisor
Strategic Opportunities Fund, Fidelity Advisor Equity Portfolio Income,
Fidelity Advisor High Yield Fund, Fidelity Advisor Limited Term Bond Fund,
Fidelity Advisor Government Investment Fund, Fidelity Advisor High Income
Municipal Fund, and Fidelity Advisor Limited Term Tax-Exempt Fund 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 of each Fund are
subject to an annual distribution fee of .75% of their respective
average net assets, an annual service fee of .25% of their
respective 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 a
Fidelity Advisor 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 Fidelity Advisor Emerging Markets Income Fund, Fidelity
Advisor Strategic Opportunities Fund, Fidelity Advisor Equity Portfolio
Income, Fidelity Advisor High Yield Fund, Fidelity Advisor Limited Term
Bond Fund and Fidelity Advisor Government Investment Fund are performed by
FIIOC ; and for Class B shares of Fidelity Advisor High Income
Municipal Fund and Fidelity Advisor Limited Term Tax-Exempt Fund are
performed by United Missouri Bank . For the current fiscal year, total
operating expenses for Class B shares are estimated to be as follows:
2.25%, after reimbursement, for Fidelity Advisor Emerging Markets Income
Fund; 1.67% for Fidelity Advisor High Income Municipal Fund; 1.86% for
Fidelity Advisor High Yield Fund; 1.70% , after reimbursement, for
Fidelity Advisor Government Investment Fund; 2.12% for Fidelity Advisor
Equity Portfolio Income; 1.92% for Fidelity Advisor Strategic Opportunities
Fund; 1.65%, after reimbursement, for Fidelity Advisor Limited Term Bond
Fund; and 1.65%, after reimbursement, for Fidelity Advisor Limited Term
Tax-Exempt Fund. Investment professionals may receive different levels of
compensation with respect to one particular class of shares over another
class of shares in the Funds.
INSTITUTIONAL SHARES. Fidelity Advisor Equity Portfolio Growth, Fidelity
Advisor Equity Portfolio Income, Fidelity Advisor Limited Term Bond Fund
and Fidelity Advisor Limited Term Tax-Exempt Fund each offers shares to
institutional and retail investors. Shares offered to institutional
investors (Institutional 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 shares are $100,000 and
$2,500, respectively. The minimum account balance is $40,000. Institutional
shares of one fund may be exchanged for Institutional shares of another
Fidelity Advisor Fund. Transfer agent and shareholder services for
Institutional shares are performed by FIIOC. For the fiscal year ended
November 30, 1993, total operating expenses for Institutional shares as a
percent of average net assets were as follows: .94% for Fidelity Advisor
Equity Portfolio Growth, .79% for Fidelity Advisor Equity Portfolio Income,
.64% for Fidelity Advisor Limited Term Bond and .65% for Fidelity Advisor
Limited Term Tax-Exempt. Institutional Shares have Distribution and Service
Plans that do 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 shares. Institutional 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 shares.
Strategic Opportunities offers a class of shares with a maximum 4.75%
front-end sales charge to current holders of such shares (Initial Shares).
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. An investor in Initial
Shares also may qualify for a reduction of the sales charge under the
Rights of Accumulation or Letter of Intent programs. Sales charges on
Initial Shares are waived for certain groups of investors. Transfer agent
and shareholders services for Initial Shares are performed by Service. For
the fiscal year ended September 30, 1993, total operating expenses as a
percentage of net asset value for Initial Shares were .89%.
Strategic Opportunities offers three classes of shares, Initial Shares,
Class A shares and Class B shares. Class A shares are offered through
this prospectus. Initial Shares and Class B shares are described above and
offered through separate prospectuses. Investment performance will be
measured separately for Initial Shares, Class A shares and Class B 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.
Fidelity Investments is one of the largest investment management
organizations in the U.S. and has its principal business address at 82
Devonshire Street, Boston, MA 02109. It includes a number of different
companies that provide a variety of financial services and products. The
Trusts employ various Fidelity companies to perform certain activities
required to operate the Funds.
Fidelity Management & Research Company is the original Fidelity company
founded in 1946. It provides a number of mutual funds and other clients
with investment research and portfolio management services. It maintains a
large staff of experienced investment personnel and a full complement of
related support facilities. As of April 30, 1994 FMR advised funds
having approximately 1 6 million shareholder accounts with a total
value of more than $225 billion. Fidelity Distributors Corp. distributes
shares for the Fidelity funds.
FMR Corp. is the parent company for the Fidelity companies. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the Trust), Johnson family members, and various trusts for the
benefit of Johnson family members form a controlling group with respect to
FMR Corp.
Peter J. Allegrini is manager of Advisor High Income Municipal, which he
has managed since February 1992. Mr. Allegrini also manages Spartan
Connecticut Municipal High Yield, Michigan Tax-Free High Yield and Ohio
Tax-Free High Yield. Mr. Allegrini joined Fidelity in 1982.
Robert K. Citrone is manager of Advisor Emerging Market 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 September 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 and VIP:
Overseas. 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.
Previously, he managed Fidelity Fund and Convertable Securities. Mr.
MacNaught joined Fidelity in 1968.
David Murphy is manager of Advisor Short-Intermediate Tax-Exempt Fund
which he has managed since March 1994 . He also manages Limited Term
Municipals, 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. Mr. Taylor also
manages Short-Term Bond, Spartan Short-Term Income , 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.
APPENDIX
The following paragraphs provide a brief description of securities in which
the Funds may invest and transactions they may make . T he Funds are
not limited by this discussion, however, and may purchase other
types of securities securities and enter into other types of
transactions if they are consistent with the Funds' investment objectives
and policies.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and sold on a
when-issued or delayed-delivery basis, with payment and delivery taking
place at a future date. The market value of securities purchased in this
way may change before the delivery date which could increase fluctuations
in a Fund's yield. Ordinarily, a Fund will not earn interest on securities
purchased until they are delivered.
EQUITY SECURITIES include common stocks, preferred stocks, convertible
securities, and warrants. While FMR believes that these types of
investments in emerging markets present the possibility for significant
capital appreciation over the long-term, they also entail a high degree of
risk. The prices of emerging market equities can fluctuate dramatically in
response to company, market, economic, or political news.
FOREIGN CURRENCIES. The value of investments and the value of dividends and
interest earned may be significantly affected by changes in currency
exchange rates. Some foreign currency values may be volatile, and there is
the possibility of governmental controls on currency exchange or
governmental intervention in currency markets, which could adversely affect
a fund. Although FMR may attempt to manage currency exchange rate risks,
there is no assurance that FMR will do so at an appropriate time or that
FMR will be able to predict exchange rates accurately. For example, if FMR
increases a fund's exposure to a foreign currency, and that currency's
value subsequently falls, FMR's currency management may result in increased
losses to the Fund. Similarly, if FMR hedges the Fund's exposure to a
foreign currency, and that Currency's value rises, the Fund will lose the
opportunity to participate in the currency's appreciation.
CURRENCY MANAGEMENT. The relative performance of foreign currencies is an
important factor in a Fund's performance. FMR may manage a Fund's exposure
to various currencies to take advantage of different yield, risk, and
return characteristics that different currencies can provide for U.S.
investors.
To manage exposure to currency fluctuations, the Fund may enter into
currency exchange contracts (agreements to exchange one currency for
another at a future date) or currency swap agreements, buy and sell options
and futures contracts relating to foreign currencies, and purchase
securities indexed to foreign currencies. A Fund will use currency exchange
contracts in the normal course of business to lock in an exchange rate in
connection with purchases and sales of securities denominated in foreign
currencies. Other currency management strategies allow FMR to hedge
portfolio securities, to shift investment exposure from one currency to
another, or to attempt to profit from anticipated declines in the value of
a foreign currency relative to the U.S. dollar. There is no limitation on
the amount of a Fund's assets that may be committed to currency management
strategies.
FOREIGN INVESTMENTS involve additional risks. Foreign securities and
securities denominated in or indexed to foreign currencies may be affected
by the strength of foreign currencies relative to the U.S. dollar, or by
political or economic developments in foreign countries. Foreign companies
may not be subject to accounting standards or governmental supervision
comparable to U.S. companies, and there may be less public information
about their operations. 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. FMR considers these factors in making investments for the
Funds.
A Fund may enter into currency exchange contracts (agreements to exchange
one currency for another at a future date) to manage currency risks and to
facilitate transactions in foreign securities. Although currency forward
contracts can be used to protect the Fund from adverse exchange rate
changes, they involve a risk of loss if FMR fails to predict foreign
currency values correctly.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of each Fund's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price.
INDEXED SECURITIES. Indexed securities values are linked to currencies,
interest rates, commodities, indices, or other financial indicators. Most
indexed securities are short to intermediate term fixed-income securities
whose values at maturity or interest rates rise or fall according to the
change in one or more specified underlying instruments. Indexed securities
may be positively or negatively indexed (i.e., their value may increase or
decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument
or to one or more options on the underlying instrument. Indexed securities
may be more volatile than the underlying instrument itself.
INTERFUND BORROWING PROGRAM. Interfund loans and borrowings normally will
extend overnight, but can have a maximum duration of seven days. A Fund
will lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Each Fund will not
lend more than 5% (Equity Funds) or 7.5% (Fixed-Income Funds) of its assets
to other funds, and will not borrow through the program if, after doing so,
total outstanding borrowings would exceed 15% of total assets. 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. Any
delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed by a
corporate, governmental or other borrower to another party. They may
represent amounts owed to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments involve the risk
of loss in case of default or insolvency of the borrower and may offer less
legal protection to a Fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending
bank or other financial intermediary. Direct debt instruments may also
include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand.
LOWER-QUALITY DEBT SECURITIES are those rated Ba or lower by Moody's or BB
or lower by S&P that have poor protection against default in the
payment of principal and interest 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-rated debt securities may fluctuate more than those of
higher-rated debt securities, and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates. See "Debt Obligations" on page .
SOVEREIGN DEBT OBLIGATIONS debt instruments issued or guaranteed by foreign
governments or their agencies, including debt of Latin American nations or
other developing countries. Sovereign debt may be in the form of
conventional securities or other types of debt instruments such as loans or
loan participations. Sovereign debt of developing countries may involve a
high degree of risk, and may be in default or present the risk of default.
Governmental entities responsible for repayment of the debt may be unable
or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as
economic factors.
MORTGAGE-BACKED SECURITIES are issued by government entities and
non-government entities such as banks, mortgage lenders, or other financial
institutions.
A mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as collateralized mortgage
obligations (CMOs), make payments of both principal and interest at a
variety of intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties. Other
types of mortgage-backed securities will likely be developed in the future,
and a Fund may invest in them if FMR determines they are consistent with a
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.
ASSET-BACKED SECURITIES represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend
on payment of the underlying loans by individuals, although the securities
may be supported by letters of credit or other credit enhancements. The
value of asset-backed securities may also depend on the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing the credit enhancement.
A Fund may purchase units of beneficial interest in pools of purchase
contracts, financing leases, and sales agreements entered into by
municipalities. These municipal obligations may be created when a
municipality enters into an installment purchase contract or lease with a
vendor and may be secured by the assets purchased or leased by the
municipality. However, except in very limited circumstances, there will be
no recourse against the vendor if the municipality stops making payments.
The market for tax-exempt asset-backed securities is still relatively new.
These obligations are likely to involve unscheduled prepayments of
principal, which may lower total returns .
OPTIONS AND FUTURES CONTRACTS are bought and sold to manage a Fund's
exposure to changing interest rates, security prices, and currency exchange
rates. Some options and futures strategies, including selling futures,
buying puts, and writing calls, tend to hedge a Fund's investment against
price fluctuations. Other strategies, including buying futures, writing
puts, and buying calls, tend to increase market exposure. Options and
futures may be combined with each other or with forward contracts in order
to adjust the risk and return characteristics of the overall strategy. A
Fund may invest in options and futures based on any type of security,
index, or currency, including options and futures traded on foreign
exchanges and options not traded on exchanges.
Options and futures can be volatile investments and involve certain risks.
If FMR applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower a Fund's return. A
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other investments, or if it could
not close out its positions because of an illiquid secondary market.
Options and futures do not pay interest, but may produce taxable capital
gains.
Each Fund will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition each Fund will not buy futures or write puts whose underlying
value exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
REAL ESTATE BACKED SECURITIES. Real estate industry companies may include
among others: real estate investment trusts; brokers or real estate
developers; and companies with substantial real estate holdings, such as
paper and lumber producers and hotel and entertainment companies. Companies
engaged in the real estate industry may be subject to certain risks
including: declines in the value of real estate, risks related to general
and local conditions, overbuilding and increased competition, increases in
property taxes and operating expenses, and variations in rental income.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, a
Fund buys a security at one price and simultaneously agrees to sell it back
at a higher price. A Fund may also make securities loans to broker-dealers
and institutional investors, including FBSI. In the event of the bankruptcy
of the other party to either a repurchase agreement or a securities loan, a
Fund could experience delays in recovering its cash or the securities it
lent. To the extent that, in the meantime, the value of the securities
purchased had decreased or the value of the securities lent had increased,
a Fund could experience a loss. In all cases, FMR must find the
creditworthiness of the other party to the transaction satisfactory.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also involve
greater risk of loss of the counterparty defaults. Some counterparties in
these transactions may be less creditworthy than those in U.S. markets.
RESTRICTED SECURITIES are securities which cannot be sold to the public
without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated
transactions or pursuant to an exemption from registration.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund
temporarily transfers possession of a portfolio instrument to another
party, such as a bank or broker-dealer, in return for cash. At the same
time, the Fund agrees to repurchase the instrument at an agreed-upon price
and time. A Fund expects that it will engage in reverse repurchase
agreements for temporary purposes such as to fund redemptions. Reverse
repurchase agreements may increase the risk of fluctuation in the market
value of a Fund's assets or in its yield.
SHORT SALES. If a Fund enters into short sales with respect to stocks
underlying its convertible security holdings, the transaction may help to
hedge against the effect of stock price declines, but may result in losses
if a convertible security's price does not track the price of its
underlying equity. Under normal conditions convertible securities hedged
with short sales are not currently expected to exceed 15% of a Fund's total
assets.
SWAP AGREEMENTS. As one way of managing its exposure to different types of
investments, a Fund may enter into interest rate swaps, currency swaps, and
other types of swap agreements such as caps, collars, and floors. In a
typical interest rate swap, one party agrees to make regular payments equal
to a floating interest rate times a "notional principal amount," in return
for payments equal to a fixed rate times the same amount, for a specified
period of time. If a swap agreement provides for payments in different
currencies, the parties might agree to exchange the notional principal
amount as well. Swaps may also depend on other prices or rates, such as the
value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of a Fund's investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on a Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. A Fund may also
suffer losses if it is unable to terminate outstanding swap agreements or
reduce its exposure through offsetting transactions.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal obligations, have interest rate adjustment formulas
that help to stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
WARRANTS entitle the holder to buy equity securities at a specific price
for a specific period of time. Warrants tend to be more volatile than their
underlying securities. 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.
ZERO COUPON BONDS do not make 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.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros. Government Investment Fund has
been advised that the staff of the Division of Investment Management of the
SEC does not consider these instruments U.S. government securities as
defined by the 1940 Act. Therefore, Government Investment Fund will not
treat these obligations as U.S. government securities for purposes of the
65% portfolio composition test mentioned on page 21.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. government or a government agency.
DEBT OBLIGATIONS. The table below provides a summary of ratings assigned to
debt holdings (not including money market instruments) in Funds which have
the ability to invest over 5% in lower-rated debt securities. These figures
are dollar-weighted averages of month-end portfolio holdings during the
thirteen months ended September 30, 1993 (Strategic Opportunities), October
31, 1993 (Income & Growth, High Yield, Short Fixed-Income, and High
Income Municipal,) and November 30, 1993 (and Equity Portfolio Income),
presented as a percentage of total investments. These percentages are
historical and are not necessarily indicative of the quality of current or
future portfolio holdings, which may vary.
The dollar-weighted average of debt securities not rated by either Moody's
or S&P amounted to 0% (Equity Portfolio Growth), .89% (Strategic
Opportunities), .57% (Equity Portfolio Income), 6.72% (Income &
Growth), 18.74% (High Yield), 5.85% (Short Fixed-Income), and 25.23% (High
Income Municipal) of total investments. This may include securities rated
by other nationally recognized rating organizations, as well as unrated
securities. Unrated securities are not necessarily lower-quality
securities.
As of October 31, 1993, (Global Resources) and December 31, 1993
(Emerging Markets Income) had no investments below Baa/BBB.
MOODY'S RATING & PERCENTAGE OF INVESTMENTS
MOOD EQUITY STRATE EQUITY INCOME HIGH SHORT HIGH
Y'S PORTFOLI GIC PORTFOLIO & YIELD FIXED- INCOME
RATIN O OPPORT INCOME GROWTH INCOME MUNICI
G GROWTH UNITIES PAL
Aaa/A -- 15.99 1.02% 22.75% .02% 25.81% 27.39%
a/A %
Baa -- -- .77% .86% -- 34.74% 20.40%
Ba -- .18% 1.25% 6.09% 6.60% 12.76% 8.10%
B .07% .22% 1.27% 3.89% 34.26% 1.08% .63%
Caa -- 1.63 .06% .66% 9.09% -- --
%
Ca/C -- -- -- -- 4.50% -- --
S&P RATING & PERCENTAGE OF INVESTMENTS
S&AM EQUITY STRATE EQUITY INCOM HIGH SHORT HIGH
P;P PORTFO GIC PORTFO E YIELD FIXED INCOM
RATIN LIO OPPORT LIO & - E
G GROWT UNITIES INCOM GROWT INCO MUNICI
H E H ME PAL
AAA/A -- 15.99 1.03 21.9 .97% 27.08 29.05
A/A % % 8% % %
BBB -- -- .84% 2.03 1.09% 33.92 18.73
% % %
BB -- -- .98% 2.22 6.94% 7.55 4.37
% % %
B .07% .80% 1.35 2.51 33.28 1.13 1.75
% % % % %
CCC -- -- .15% .69% 7.62% .04%
CC/C -- -- -- --% 1.55%
D -- .89% .03% 5.58%
THE FOLLOWING DESCRIBES MUNICIPAL INSTRUMENTS:
MUNICIPAL SECURITIES include GENERAL OBLIGATION SECURITIES, which are
backed by the full taxing power of a municipality, and REVENUE SECURITIES,
which are backed by the revenues of a specific tax, project, or facility.
INDUSTRIAL REVENUE BONDS are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. PRIVATE
ACTIVITY MUNICIPAL SECURITIES, which may be subject to the federal
alternative minimum tax, include securities issued to finance housing
projects, student loans, and privately owned solid waste disposal
and water and sewage treatment facilities.
TAX AND REVENUE ANTICIPATION NOTES are issued by municipalities in
expectation of future tax or other revenues, and are payable from those
specific taxes or revenues. BOND ANTICIPATION NOTES normally provide
interim financing in advance of an issue of bonds or notes, the proceeds of
which are used to repay the anticipation notes. TAX-EXEMPT COMMERCIAL PAPER
is issued by municipalities to help finance short-term capital or operating
needs.
MUNICIPAL LEASE OBLIGATIONS are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If
funds are not appropriated for the following year's lease payments, the
lease may terminate, with the possibility of significant loss to a Fund.
CERTIFICATES OF PARTICIPATION in municipal lease obligations or installment
sales contracts entitle the holder to a proportionate interest in the
lease-purchase payments made.
RESOURCE RECOVERY BONDS are a type of revenue bond issued to build
facilities such as solid waste incinerators or waste-to-energy plants.
Typically, a private corporation will be involved, at least during the
construction phase, and the revenue stream will be secured by fees or rents
paid by municipalities for use of the facilities. The viability of a
resource recovery project, environmental protection regulations, and
project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
A DEMAND FEATURE is a put that entitles the security holder to repayment of
the principal amount of the underlying security, upon notice at any time or
at specified intervals. A STANDBY COMMITMENT is a put that entitles the
security holder to same-day settlement at amortized cost plus accrued
interest.
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy securities on demand by
obtaining LETTERS OF CREDIT (LOCS) or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for other types of
municipal instruments. FMR may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. 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.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
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 the 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.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'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 C 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 STANDARD & POOR'S CORPORATION'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 rated 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.
The ratings from AA to D may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAIs, in connection with
the offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the Fund or Distributors. This Prospectus and the related
SAIs do not constitute an offer by a Fund or by Distributors to sell or to
buy shares of a Fund to any person to whom it is unlawful to make such
offer.
FIDELITY ADVISOR FUNDS CLASS B
PROSPECTUS
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
JUNE 30 , 1994
The Fidelity Advisor Funds (the Funds) offer investors a broad selection
o f portfolios.
INTERNATIONAL FUND:
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND
EQUITY FUNDS:
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
FIXED-INCOME FUNDS:
FIDELITY ADVISOR HIGH YIELD FUND
FIDELITY ADVISOR LIMITED TERM BOND FUND
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
Fidelity Advisor High Yield Fund and Fidelity Advisor Government Investment
Fund are portfolios of Fidelity Advisor Series II. Fidelity Advisor Equity
Portfolio Income is a portfolio of Fidelity Advisor Series III. Fidelity
Advisor Limited Term Bond Fund is a portfolio of Fidelity Advisor Series
IV. Fidelity Advisor High Income Municipal Fund is a portfolio of Fidelity
Advisor Series V. Fidelity Advisor Limited Term Tax-Exempt Fund is a
portfolio of Fidelity Advisor Series VI. Fidelity Advisor Strategic
Opportunities Fund and Fidelity Advisor Emerging Markets Income Fund are
portfolios of Fidelity Advisor Series VIII. Each Fund sells two classes of
shares to retail investors: Class A shares and Class B shares. Class B
shares are offered through this prospectus. Class A shares are offered
through a separate prospectus.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND, FIDELITY ADVISOR HIGH
YIELD FUND AND FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND MAY 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 POLICIES AND RISKS" ON PAGE FOR FURTHER INFORMATION.
Please read this Prospectus before investing. It is designed to provide you
with information and help you decide if a Fund's goals match your own.
RETAIN THIS DOCUMENT FOR FUTURE REFERENCE.
A Statement of Additional Information (SAI) dated June 30 , 1994 has
been filed with the Securities and Exchange Commission (SEC) for each Fund
and each is incorporated herein by reference. SAIs and each Fund's Annual
Report are available free upon request from Fidelity Distributors
Corporation (Distributors), 82 Devonshire Street, Boston, MA 02109, or from
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.
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.
(registered trademark)
TABLE OF CONTENTS PAGE
FINANCIAL HISTORY
Shareholder Transaction Expenses
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES
INVESTMENT POLICIES AND RISKS
INVESTMENT LIMITATIONS
HOW TO BUY SHARES
Minimum Account Balance
INVESTOR SERVICES
Quantity Discounts
Combined Purchases
Rights of Accumulation
Letter of Intent
Fidelity Advisor Systematic Investment Program
SHAREHOLDER COMMUNICATIONS
HOW TO EXCHANGE
Fidelity Advisor Systematic Exchange Program
HOW TO SELL SHARES
Redemption Requests by Telephone
Redemption Requests in Writing
Reinstatement Privilege
Contingent Deferred Sales Charge
DISTRIBUTION OPTIONS
DISTRIBUTIONS AND TAXES
Distributions
Capital Gains
"Buying a Dividend"
Federal Taxes
Effect of Foreign Taxes
State and Local Taxes
Other Tax Information
FEES
Management and Other Services
Distribution and Service Plans
VALUATION
PERFORMANCE
PORTFOLIO TRANSACTIONS
THE TRUSTS AND THE FIDELITY ORGANIZATION
APPENDIX
FINANCIAL HISTORY
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in Class B shares of each Fund
would bear directly or indirectly. This standard format was
developed for use by all mutual funds to help investors make
investment decisions. This expense information should be
considered along with other important information such as each Fund's
investment objective and past performance.
21.SHAREHOLDER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds) 4.00%*
Sales Charge on Reinvested Distributions None
Exchange Fees None
* DECLINES FROM 4.00% TO 0.00% FOR CLASS B SHARES HELD UP TO A MAXIMUM OF 5
YEARS.
SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you purchase,
sell or exchange Class B shares of a Fund. See "How to Buy Shares" and "How
to Sell Shares" on pages and , respectively.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
INTERNATIONAL FUND: MANAGEM 12B-1 FEE OTHER TOTAL
ENT (INC LUDES EXPENSE OPERATING
FEE .25% S EXPENSES
SHAREHOLDER
SERVICE FEE)
Emerging Markets Income1 . 71 1.00 . 54 2.25
% % % * %
EQUITY FUNDS:
Strategic Opportunities .54 1.00 .38 1.92
% % % 1 %
Equity Portfolio Income .50 1.00 .62 2.12
% % % *1 %
FIXED-INCOME FUNDS:
High Yield .51 1.00 .35 1.86
% % % 1 %
Limited Term Bond . 42 1.00 . 23 1. 65
% % % *1 %
Government Investment . 46 1.00 . 24 1.70
% % % *1 %
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal .42 1.00 .25 1.67
% % % 1 %
Limited Term Tax-Exempt . 42 1.00 . 23 1.65
%* % % *1 %
</TABLE>
* AFTER EXPENSE REDUCTIONS
1 ESTIMATED FOR FIRST FISCAL YEAR.
ANNUAL OPERATING EXPENSES are based on historical expenses for the most
recent fiscal year ended . Management fees are paid by each Fund to
Fidelity Management & Research Company (FMR) for managing its
investments and business affairs. Management fees for Strategic
Opportunities will vary based on performance. 12b-1 fees include a
distribution fee and a shareholder service fee. Distribution
f ees are paid by Class B shares of the Funds to Distributors for
services and expenses in connection with the distribution of Class B
shares. Shareholder service fees are paid by Class B shares of the Funds
to investment professionals for services and expenses incurred in
connection with providing personal service and/or maintenance of
shareholder accounts to Class B shareholders. 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 . The Funds incur other expenses for
maintaining shareholder records, furnishing shareholder statements and
reports, and custodial, legal and accounting services, registering a
Trust or Fund with federal and state regulatory authorities and other
miscellaneous services. FMR has voluntarily agreed to reimburse
Emerging Markets Income, Government Investment , Limited Term
Tax-Exempt and (effective July 1, 1994) Limited Term Bond to the
extent that total operating expenses for Class B shares (exclusive of
taxes, interest, brokerage commissions, and extraordinary expenses) are in
excess of an annual rate of 2.25%, 1.70%, 1.65% and 1.65%,
respectively, of average net assets. If reimbursements were not in effect,
the management fees, other expenses (including Distribution Fees and
Shareholder Service Fees ) and total operating expenses for Class B
shares would have been estimated to be .71%, 1.83%, and 2.54%
(Emerging Markets Income); .46%, 1.61%, and 2.07%, (Government Investment);
.42%, 1.69%, and 2.11% (Limited Term Tax-Exempt) ; and .42%, 1.56% and
1.98% (Limited Term Bond) . Please refer to the section "Fees," page .
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
EXPENSE TABLE EXAMPLE:
You would pay the following expenses on a $1,000 investment in Class B shares of a Fund assuming a 5% annual return
and
either (1) redemption at the end of each time period or (2) no redemption at the end of each time period:
INTERNATIONAL FUND:
1 YEAR 3 YEARS 5 YEARS 10 YEARS (dagger)
(1)** (2) (1)** (2) (1)** (2) (1) (2)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets Income1 $ $ $ 10 $ 70 -- -- -- --
63 23 0
EQUITY FUNDS:
Strategic Opportunities $ $ $ 90 $ 60 $ 11 $ 10 $ 20 $20
59 19 4 4 7 7
Equity Portfolio Income $ $ $ 96 $ 66 $ 12 $ 11 $ 2 2 $ 2 2
62 22 4 4 8 8
FIXED-INCOME FUNDS:
High Yield $ $ $ 88 $ 58 $ 11 $ 10 $ 1 8 $ 1 8
59 19 1 1 0 0
Limited Term Bond $ $ $ 8 2 $ 5 2 $ 1 0 $ 90 $ 15 $ 15
57 17 0 7 7
Government Investment $ $ $ 84 $ 54 $ 10 $ 92 $ 16 $ 16
57 17 2 3 3
MUNICIPAL/TAX-
EXEMPT FUNDS:
High Income Municipal $ $ $ 83 $ 53 $ 10 $ 91 $ 1 5 $ 1 5
57 17 1 9 9
Limited Term Tax-Exempt $ $ $ 82 $ 52 $ 10 $ 90 $ 1 5 $ 1 5
57 17 0 7 7
</TABLE>
** REFLECTS DEDUCTION OF APPLICABLE CONTINGENT DEFERRED SALES
CHARGE.
(dagger) REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
The HYPOTHETICAL EXAMPLE illustrates the estimated expenses associated with
a $1,000 investment in Class B shares of each Fund over periods of one,
three, five and ten years, based on the expenses (after reimbursements, if
any) in the table above , an assumed annual return of 5% and
deduction of applicable contingent deferred sales charge (CDSC) in years 1,
3 and 5. A CDSC IS IMPOSED ONLY IF YOU REDEEM CLASS B SHARES WITHIN 5
YEARS. SEE "HOW TO SELL SHARES," PAGE , FOR INFORMATION ABOUT THE CDSC. THE
RETURN OF 5% AND ESTIMATED EXPENSES SHOULD NOT BE CONSIDERED INDICATIONS OF
ACTUAL OR EXPECTED CLASS B PERFORMANCE OR EXPENSES, BOTH OF WHICH
MAY VARY.
FINANCIAL HIGHLIGHTS
The tables that follow are included in each Fund's Annual Report and
have been audited by each Fund's independent accountant (except for
Emerging Markets Income). Their reports on the Financial Statements and
Financial Highlights are included in each Fund's Annual Report. The
Financial Statements and Financial Highlights are incorporated by reference
into each Fund's Statement of Additional Information. The Strategic
Opportunities table provides semiannual information and is unaudited. On or
about June 30, 1994, Class B shares of the Funds will be offered to retail
investors. The information in the tables regarding Class A shares and,
where appropriate, shares offered to institutional investors, does not
reflect Class B 12b-1 fees paid, and may not be representative of the
actual operational results of Class B shares.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND
<TABLE>
<CAPTION>
<S> <C>
March 10, 1994
(commencement
of
operations) to
May 31, 1994
(Unaudited)
SELECTED PER-SHARE DATA
Net asset value beginning of period $ 10.000
Income from Investment Operations
Not Investment income .086
Net realized and unrealized gain (loss) on investments .247
Total from investment operations .333
Less Distributions
From net investment income (.083)
Net asset value end of period $ 10.250
TOTAL RETURN (dagger) (double dagger) 3.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 7,119
Ratio of expenses to average net assets 1.50%*
Ratio of expenses to average net assets before voluntary expense reductions 2.60%*+
Ratio of net investment income to average net assets 3.83%*
Portfolio turnover rate 107%
</TABLE>
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND
August 20, 1986
Six Months (Commencement
Ended of Operations) to
March 31, 1994 Years Ended September 30, September 30,
(Unaudited) 1993 1992(dagger)(dagger) 1991 1990 1989 1988
1987 1986
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 22.52 $ 19.53 $ 21.38 $ 17.21
$ 19.55 $ 15.53 $ 19.06 $ 16.71 $ 17.81
Income from Investment Operations
Net investment income (.24) .33 .61 .66 .70 .50 .42 .46
.08(s diamond)
Net realized and unrealized gain (loss) on investments (.69)
4.44 .58 4.26 (2.49) 4.08 (1.80) 2.95 (1.18)
Total from investment operations (.93) 4.77 1.19 4.92 (1.79)
4.58 (1.38) 3.41 (1.10)
Less Distributions
From net investment income (.43) (.57) (.62) (.75) (.55)
(.56) (.24) (.09) --
From net realized gain on investments (1.71) (1.21) (2.42) -
-- -- (1.91) (.97) --
Total distributions (2.14) (1.78) (3.04) (.75) (.55) (.56)
(2.15) (1.06) -
Net asset value, end of period $ 19.45 $ 22.52 $ 19.53 $ 21.38 $
17.21 $ 19.55 $ 15.53 $ 19.06 $ 16.71
TOTAL RETURN (dagger)(double dagger) (4.73%) 26.33% 7.26%
29.51% (9.49)% 30.45% (4.98)% 21.28% (6.23)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 331,650 $ 269,833 $ 194,694 $
199,604 $ 172,083 $ 198,198 $ 191,454 $ 283,117 $ 22,141
Ratio of expenses to average net assets 1.88%* 1.57%++ 1.46% 1.56%
1.59% 1.51% 1.71% 1.67%+ 1.50%*+
Ratio of net investment income to average net assets 1.49%* 2.06% 3.22%
3.61% 3.70% 3.23% 3.10% 2.36% 2.77%*
Portfolio turnover rate 241%* 183% 211% 223% 114% 89% 160% 225% --
* ANNUALIZED
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND,
FOR PERIODS OF LESS THAN ONE YEAR, IS NOT ANNUALIZED.
(dagger)(dagger) AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF
EQUALIZATION ACCOUNTING.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN
ACCORDANCE WITH A STATE EXPENSE LIMITATION.
++ INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR ADJUSTMENTS TO
PRIOR PERIODS' FEES. IF THIS REIMBURSEMENT HAD NOT EXISTED THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.73%.
(s diamond) NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
UNDISTRIBUTED NET INVESTMENT INCOME PER SHARE OF THE FUND AT AUGUST 20,
1986.
(h diamond) DURING THE PERIOD JULY 1, 1986 THROUGH OCTOBER 31, 1987, FMR
WAIVED .05% OF THE ANNUAL INDIVIDUAL FUND FEE OF .35%.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
Equity Portfolio
Income - Class A Equity Portfolio Income - Institutional
Class
Year Period
Ended Ended
Nov. 30 , Nov. 30 , Years Ended November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 1984
Net asset value, beginning of period $ 12.86 $ 12.37 $ 12.88 $ 11.08 $
9.52 $ 12.27 $ 11.10 $ 10.93 $ 13.54 $ 11.95 $ 10.24 $ 10.49
Income from Investment Operations
Net investment income .33 .13 .39 .49 .63 # .69 .75 .75 .76
.78 .79 .72
Net realized and unrealized gain
(loss) on investments 1.97 .47 2.02 1.79 1.52 (2.42) 1.17
1.81 (1.53) 1.92 1.69 (.14)
Total from investment operations 2.30 .60 2.41 2.28 2.15 (1.73)
1.92 2.56 (.77) 2.70 2.48 .58
Less Distributions
From net investment income (.30) (.11) (.36) (.48) (.59) (.72)
(.75) (.74) (.70) (.77) (.77) (.74)
From net realized gain on investments - - - - - (.30) -
(1.65) (1.14) (.34) - (.09)
Total distributions (.30) (.11) (.36) (.48) (.59) (1.02) (.75)
(2.39) (1.84) (1.11) (.77) (.83)
Net asset value, end of period $ 14.86 $ 12.86 $ 14.93 $ 12.88 $ 11.08 $
9.52 $ 12.27 $ 11.10 $ 10.93 $ 13.54 $ 11.95 $ 10.24
TOTAL RETURN (dagger)(double dagger) 18.03% 4.88% 18.90% 20.91%
22.97% (14.90)% 17.58% 26.99% (7.28)% 23.48% 24.86% 6.20%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000 omitted) $ 42,326 $ 1,462 $ 191,138 $
139,391 $ 168,590 $ 253,049 $ 463,696 $ 436,753 $ 443,603 $ 544,269 $
349,262 $ 89,364
Ratio of expenses to average net assets 1.77% 1.55%* .79%## .71%(h
diamond) .67%(h diamond) .61%(h diamond) .55%(h diamond) .55%(h diamond)
.54%(h diamond) .61% .63% .77%
Ratio of expenses to average net assets
before expense reductions 1.77% 1.55%* .80%## .79%(h diamond) .77%(h
diamond) .71%(h diamond) .65%(h diamond) .65%(h diamond) .61%(h diamond)
.61% .63% .77%
Ratio of net investment income
to average net assets 2.02% 3.39%* 3.00% 3.77% 5.66% 6.11% 6.09%
6.86% 5.58% 6.06% 7.36% 7.86%
Portfolio turnover rate 120% 51% 120% 51% 91% 103% 93% 78% 137%
107% 110%(dagger)(dagger)(dagger) 121%
FIDELITY ADVISOR HIGH YIELD FUND
January 5, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090 $ 10.000
Income from Investment Operations
Net investment income .980 1.146 1.115 1.144 1.237 1.165 .878
Net realized and unrealized gain (loss) on 1.153 .975 1.948 (.820) (.890) .770 (.910)
investments
Total from investment operations 2.133 2.121 3.063 .324 .347 1.935 (.032)
Less Distributions
From net investment income (.963) (1.171) (1.093) (1.144) (1.237) (1.165) (.878)
From net realized gain on investments (.230) - - - - - -
Total distributions (1.193) (1.171) (1.093) (1.144) (1.237) (1.165) (.878)
Net asset value, end of period $ 12.010 $ 11.070 $ 10.120 $ 8.150 $ 8.970 $ 9.860 $ 9.090
TOTAL RETURN (dagger)(double dagger) 20.47% 21.96% 39.67% 3.58% 3.34% 22.14% (.81)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 485,559 $ 136,316 $ 38,681 $ 15,134 $ 13,315 $ 11,900 $ 9,077
Ratio of expenses to average net assets 1.11% 1.10% 1.10% 1.10% 1.10% 1.10% 1.24%*
Ratio of expenses to average net assets 1.11% 1.16% 1.76% 2.04% 2.17% 2.22% 2.25%*(dagger)
before voluntary (dagger)
expense limitation
Ratio of net investment income to average 8.09% 9.95% 12.20% 12.72% 12.98% 11.86% 10.74%*
net assets
Portfolio turnover rate 79% 100% 103% 90% 131% 135% 166%*
</TABLE>
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE
AND , FOR PERIODS OF LESS THAN ONE YEAR IS NOT ANNUALIZED.
(dagger)(dagger)(dagger) IN JULY 1985, THE SEC ADOPTED REVISIONS TO
EXISTING RULES WITH RESPECT TO THE CALCULATION OF THE PORTFOLIO TURNOVER
RATE. THE REVISED RULES REQUIRE THE INCLUSION IN THE CALCULATION OF
LONG-TERM U.S. GOVERNMENT SECURITIES WHICH, PRIOR TO THESE REVISIONS, WERE
EXCLUDED FROM THE CALCULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(h diamond) EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992 , FMR
REDUCED .10% OF THE ANNUAL MANAGEMENT FEE OF .50%.
(dagger)(dagger) EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE
NET ASSETS IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
# INCLUDES $.04 PER-SHARE FROM FOREIGN TAXES RECOVERED.
## FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A PORTION
OF THE FUND'S EXPENSES.
FIDELITY ADVISOR LIMITED TERM BOND FUND
Limited Term
Bond Fund - Class A Limited Term Bond Fund -
Institutional Class
Year Period February 2, 1984
Ended Ended (Commencement
Nov. 30, Nov. 30 , Years Ended November 30, of Operations) to
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987 1986
1985 November 30, 1984
Net asset value, beginning
of period $ 10.640 $ 10.960 $ 10.640 $ 10.550 $ 10.140 $ 10.410 $ 10.180
$ 10.250 $ 11.240 $ 10.550 $ 9.960 $ 10.000
Income from Investment Operations
Net investment income .785 .170 .832 .840 .884 .901 .937 .944
.953 1.026 1.053 .897
Net realized and unrealized gain (loss)
on investments .511 (.320)# .531 .102 .411 (.270) .230 (.070)
(.770) .710 .590 (.040)
Total from investment operations 1.296 (.150) 1.363 .942 1.295 .631
1.167 .874 .183 1.736 1.643 .857
Less Distributions
From net investment income (.796) (.170) (.843) (.852) (.885)
(.901) (.937) (.944) (.953) (1.026) (1.053) (.897)
From net realized gain on investments - -- -- -- -- -- -- --
(.220) (.020) -- --
Total distributions (.796) (.170) (.843) (.852) (.885) (.901)
(.937) (.944) (1.173) (1.046) (1.053) (.897)
Net asset value, end of period $ 11.140 $ 10.640 $ 11.160 $ 10.640 $
10.550 $ 10.140 $ 10.410 $ 10.180 $ 10.250 $ 11.240 $ 10.550 $ 9.960
TOTAL RETURN (dagger)(double dagger) 12.50% (1.37)% 13.17% 9.21%
13.35% 6.46% 12.03% 8.81% 1.78% 17.04% 17.40% 9.33%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 59,184 $ 2,583 $ 183,790 $
160,156 $ 327,756 $ 356,564 $ 426,832 $ 418,929 $ 407,228 $ 418,632 $
253,913 $ 15,192
Ratio of expenses to average net assets 1.23% .82%* .64% .57% .57%
.58% .54% .54% .53% .53% .65% 1.50%*(dagger)(dagger)
Ratio of net investment income to
average net assets 6.81% 7.67%* 7.41% 7.96% 8.59% 8.90% 9.16%
9.16% 9.03% 9.22% 10.29% 11.01%*
Portfolio turnover rate 59% 7% 59% 7% 60% 59% 87% 48% 92% 59%
88%(dagger)(dagger)(dagger) 12%*
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND
January 7, 1987
(Commencement of
Years Ended October 31, Operations) to
1993 1992 1991 1990 1989 1988 October 31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200 $ 10.000
Income from Investment Operations
Net investment income .567 .666 .700 .735 .773 .769 .614
Net realized and unrealized gain (loss) .601 .125 .419 (.160) .050 .060 (.800)
on investments
Total from investment operations 1.168 .791 1.119 .575 .823 .829 (.186)
Less Distributions
From net investment income (.558) (.651) (.679) (.735) (.773) (.769) (.614)
From net realized gain on investments (.200) - - - - - -
Total distributions (.758) (.651) (.679) (.735) (.773) (.769) (.614)
Net asset value, end of period $ 10.140 $ 9.730 $ 9.590 $ 9.150 $ 9.310 $ 9.260 $ 9.200
TOTAL RETURN (dagger)(double dagger) 12.53% 8.49% 12.65% 6.48% 9.37% 9.34% (1.84)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 69,876 $ 23,281 $ 13,058 $ 9,822 $ 8,203 $ 6,590 $ 4,584
Ratio of expenses to average net assets .68% 1.10% 1.10% 1.10% 1.10% 1.10% 1.29%*
Ratio of expenses to average net assets 1.32% 1.79% 2.46% 2.74% 2.75% 2.25% 2.36%*
before voluntary
expense limitation
Ratio of net investment income to average 6.11% 6.98% 7.47% 8.04% 8.45% 8.30% 8.12%*
net assets
Portfolio turnover rate 333% 315% 54% 31% 42% 44% 32%*
</TABLE>
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 10, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE
AND , FOR PERIODS OF LESS THAN ONE YEAR , IS NOT ANNUALIZED.
(dagger)(dagger) EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET
ASSETS IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
(dagger)(dagger)(dagger) IN JULY 1985, THE SEC ADOPTED REVISIONS TO
EXISTING RULES WITH RESPECT TO THE CALCULATION OF THE PORTFOLIO TURNOVER
RATE. THE REVISED RULES REQUIRE THE INCLUSION IN THE CALCULATION OF
LONG-TERM U.S. GOVERNMENT SECURITIES WHICH, PRIOR TO THESE REVISIONS, WERE
EXCLUDED FROM THE CALCULATION.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
# THE AMOUNT SHOWN IN THIS CAPTION, WHILE DETERMINABLE BY THE SUMMATION OF
AMOUNTS COMPUTED DAILY AS SHARES WERE SOLD OR REPURCHASED, IS ALSO THE
BALANCING FIGURE DERIVED FROM THE OTHER FIGURES IN THE STATEMENT AND HAS
BEEN SO COMPUTED. THE AMOUNT SHOWN FROM THE PERIOD ENDED NOVEMBER 30, 1992
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DOES NOT ACCORD WITH THE NET
REALIZED AND UNREALIZED GAIN ON INVESTMENTS FOR THE PERIOD BECAUSE OF THE
TIMING OF SALES AND REPURCHASES OF THE FUND SHARES IN RELATION TO
FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND
September 16, 1987
(Commencement of
Years Ended October 31, Operations) to
SELECTED PER-SHARE DATA 1993 1992 1991 1990 1989 1988 October
31, 1987
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850 $ 10.000
Income from Investment Operations
Net interest income .710 .774 .803 .811 .800 .750 .092
Net realized and unrealized gain (loss) 1.100 .250 .660 .150 .410 .610 (.150)
on investments
Total from investment operations 1.810 1.024 1.463 .961 1.210 1.360 (.058)
Less Distributions
From net interest income (.710) (.774) (.803) (.811) (.800) (.750) (.092)
From net realized gain on investments (.030) (.010) (.120) (.100) (.050) - -
Total distributions (.740) (.784) (.923) (.911) (.850) (.750) (.092)
Net asset value, end of period $ 12.720 $ 11.650 $ 11.410 $ 10.870 $ 10.820 $ 10.460 $ 9.850
TOTAL RETURN (dagger)(double dagger) 15.95% 9.21% 14.02% 9.28% 12.05% 14.22% (.58)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 497,575 $ 156,659 $ 67,135 $ 22,702 $ 6,669 $ 3,290 $ 1,275
Ratio of expenses to average net assets .92% .90% .90% .90% .90% .89% .80%*
Ratio of expenses to average net assets .92% .96% 1.24% 2.09% 2.75% 2.25% 2.25%*
before voluntary (h diamond) (h diamond)(h diamond)
expense limitation
Ratio of net interest income to average net 5.59% 6.59% 7.08% 7.37% 7.60% 7.33% 7.24%*
assets
Portfolio turnover rate 27% 13% 10% 11% 27% 19% -%
</TABLE>
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
Limited Term
Tax-Exempt Fund - Class A Limited Term Tax-Exempt Fund -
Institutional
September 19, 1985
Year Period (Commencement
Ended Ended of Operations) to
Nov. 30 Nov. 30 Years Ended November 30, November 30,
SELECTED PER-SHARE DATA 1993 1992** 1993 1992 1991 1990 1989 1988 1987
1986 1985
Net asset value, beginning of period $ 11.080 $ 11.010 $ 11.080 $ 10.800 $
10.640 $ 10.610 $ 10.520 $ 10.380 $ 10.990 $ 10.280 $ 10.000
Income from Investment Operations
Net interest income .508 .131 .536 .666 .682 .689 .674 .650 .641
.671 .130
Net realized and unrealized gain (loss) on investments .260 .070 .260
.280 .160 .030 .090 .140 (.540) .760 .280
Total from investment operations .768 .201 .796 .946 .842 .719
.764 .790 .101 1.431 .410
Less Distributions
From net interest income (.508) (.131) (.536) (.666) (.682) (.689)
(.674) (.650) (.641) (.671) (.130)
From net realized gain on investments (.880) -- (.880) -- -- --
- -- -- (.070) (.050) --
Total distributions (1.388) (.131) (1.416) (.666) (.682) (.689)
(.674) (.650) (.711) (.721) (.130)
Net asset value, end of period $ 10.460 $ 11.080 $ 10.460 $ 11.080 $
10.800 $ 10.640 $ 10.610 $ 10.520 $ 10.380 $ 10.990 $ 10.280
TOTAL RETURN (dagger)(double dagger) 7.72% 1.37% 8.01% 9.01% 8.15%
7.04% 7.50% 7.77% .97% 14.39% 4.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 39,800 $ 1,752 $ 15,076 $ 28,428
$ 100,294 $ 111,506 $ 121,418 $ 132,443 $ 162,857 $ 161,045 $ 94,391
Ratio of expenses to average net assets .90% 1.04%* .65% .66% .61%
.62% .65% .63% .59% .58% .69%*
Ratio of expenses to average net assets before voluntary
expense limitation 1.36% 1.06%* .83% .67% .61% .62% .65% .63%
.59% .58% .69%*
Ratio of net investment income to average net assets 4.76% 5.65%* 5.01%
6.05% 6.40% 6.53% 6.45% 6.20% 6.01% 6.29% 6.33%*
Portfolio turnover rate 46% 36% 46% 36% 20% 32% 31% 24% 43% 34%
103%*
* ANNUALIZED.
** INITIAL OFFERING OF CLASS A SHARES, SEPTEMBER 15, 1992.
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR IS NOT ANNUALIZED.
(double dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
(h diamond) EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN
ACCORDANCE WITH A STATE EXPENSE LIMITATION.
INVESTMENT OBJECTIVES
INTERNATIONAL FUND:
FIDELITY ADVISOR 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.
EQUITY FUNDS :
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by
investing primarily in securities of companies believed by FMR to involve a
"special situation."
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME seeks a yield from dividend and
interest income which exceeds the composite dividend yield on securities
comprising the Standard & Poor's Composite Index of 500 Stocks (S&P
500).
FIXED-INCOME FUNDS:
FIDELITY ADVISOR 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.
FIDELITY ADVISOR LIMITED TERM BOND FUND seeks to provide a high rate of
income through investment in high and upper-medium grade fixed-income
obligations.
FIDELITY ADVISOR 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.
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR 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 reserves the right to invest up to 100% of
its assets in municipal obligations subject to the federal alternative
minimum tax.
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.
The investment objective of each Fund is fundamental and can only be
changed by vote of a majority of the outstanding shares of the Fund.
Except as otherwise noted, the investment limitations and policies of
Strategic Opportunities, Limited Term Bond, Government Investment, High
Income Municipal, and Limited Term Tax-Exempt are fundamental and may not
be changed without shareholder approval. Except for the investment
limitations and policies identified as fundamental, the limitations and
policies of Emerging Markets Income, Equity Portfolio Income, and High
Yield are not fundamental. Non-fundamental investment limitations and
policies may be changed without shareholder approval.
The yield, return and potential price changes of each Fund depend on the
quality and maturity of the obligations in its portfolio, as well as on
market conditions. Risks vary based on the type of fund in which you are
investing. As is the case with any investment in securities, invest ment
in the Funds involve certain risks and, therefore, a Fund may not always
achieve its investment objective.
INVESTMENT POLICIES AND RISKS
Further information relating to the types of securities in which each Fund
may invest and the investment policies of each Fund in general are set
forth in the Appendix to this Prospectus and in each Fund's SAI.
INTERNATIONAL FUND: Risks associated with international investing include
currency values, the political and regulatory environment, and overall
economic factors in the countries in which a Fund invests. Investing in an
international fund may be more suitable for aggressive investors who want
to achieve an extra level of diversification in their investment portfolio
by participating in opportunities available in developing countries. 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.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND will, under normal
conditions, invest at least 65% of its total assets in debt securities and
other instruments of issuers in emerging markets. For this purpose,
"emerging markets" will include any countries (I) having an "emerging stock
market" as defined by the International Finance Corporation; (II) with low-
to middle-income economies according to the International Bank for
Reconstruction and Development (the World Bank); or (III) listed in World
Bank publications as "developing." Currently, the countries NOT included in
these categories are Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Spain, Sweden, Switzerland, the United Kingdom, and the U.S. For
purposes of this 65% policy, issuers whose principal activities are in
countries with emerging markets include issuers: (1) organized under the
laws of, (2) whose securities have their primary trading market in, (3)
deriving at least 50% of their revenues or profits from goods sold,
investments made, or services performed in, or (4) having at least 50% of
their assets located in, a country with an emerging market.
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. Many investments in emerging markets can be
considered speculative, and therefore may offer higher income potential
than the developed markets of the world . Investments in emerging markets
can involve significant risks and the Fund is designed for aggressive
investors.
Under current market conditions, FMR expects that emerging market
opportunities will be found mainly within Latin America, and to a lesser
extent in Africa, Asia and emerging European nations. FMR will actively
manage the allocation of the Fund's investments among countries, geographic
regions, and currency denominations in an attempt to achieve current income
and capital appreciation. In doing so, FMR will also consider such factors
as prospects for relative economic growth among countries, regions, or
geographic areas, expected levels of inflation, government policies
influencing business conditions, current and anticipated interest rates,
and the outlook for currency relationships. Although the Fund will normally
invest in at least three different countries, it is not limited to any
particular country or currency, and may invest substantially all of its
assets in any one country.
The Fund may invest in all types of fixed-income instruments, including
corporate debt securities, sovereign debt instruments issued by governments
or governmental entities, and all types of domestic and foreign money
market instruments. The Fund may invest in lower- quality , high
yielding U.S. c orporate debt securities (sometimes referred to as
"junk bonds"). Many emerging market securities are of below
investment-grade quality, and at any one time substantially all of the
Fund's assets may be invested in securities that are of poor quality or are
in default. Lower quality debt securities are those rated below Baa by
Moody's or BBB by S&P.
Other investments the Fund may make or engage in include options and
futures contracts, swap agreements, indexed securities, loans and other
direct debt instruments, repurchase agreements and securities loans,
foreign repurchase agreements, illiquid investments, restricted securities,
mortgage-backed securities, asset-backed securities,
delayed-delivery transactions , and interfund borrowing. 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. Although the
Fund may invest up to 35% of its total assets in these securities, FMR does
not currently anticipate that these investments will exceed approximately
20% of the Fund's total assets. Though common and preferred stocks and
convertible securities present the possibility for significant capital
appreciation over the long-term, they may fluctuate dramatically in the
short-term and entail a high degree of risk.
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. When, in FMR's judgment, market conditions
warrant, the Fund can make substantial temporary defensive investments in
money market instruments, U.S. government securities, or investment-grade
obligations of U.S. companies.
CONSIDERATIONS OF INVESTING IN THE SHARES OF EMERGING MARKETS INCOME FUND:
International investing in general may involve greater risks than U.S.
investments. There is generally less publicly available information about
foreign issuers, and there may be less government regulation and
supervision of foreign stock exchanges, brokers, and listed companies.
There may be difficulty in enforcing legal rights outside the U.S. Foreign
companies generally are not subject to uniform accounting, auditing, and
financial reporting standards, practices, and requirements comparable to
those that apply to U.S. companies. Security trading practices abroad may
offer less protection to investors such as the Fund. Settlement of
transactions in some foreign markets may be delayed or may be less frequent
than in the U.S., which could affect the liquidity of the Fund.
Additionally, in some foreign countries, there is the possibility of
expropriation or confiscatory taxation; limitations on the removal of
securities, property, or other assets of the Fund; political or social
instability; or diplomatic developments which could affect U.S. investments
in foreign countries. FMR will take these factors into consideration in
managing the Fund's investments.
These risks may be intensified in the case of investments in emerging
markets or countries with limited or developing capital markets. Security
prices in emerging markets can be significantly more volatile than in more
developed nations, reflecting the greater uncertainties of investing in
less established markets and economies. In particular, countries with
emerging markets may have relatively unstable governments; present the risk
of nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets; and may have less protection of
property rights than more developed countries. The economies of countries
with emerging markets may be predominantly based on only a few industries,
may be highly vulnerable to changes in local or global trade conditions,
and may suffer from extreme and volatile debt burdens or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible
at times. Securities of issuers located in countries with emerging markets
may have limited marketability and may be subject to more abrupt or erratic
price movements.
By itself, the Fund does not constitute a balanced investment plan. The
Fund is designed for aggressive investors interested in the investment
opportunities and income potential offered by securities issued in emerging
markets. The value of the Fund's investments and the income they generate
will vary from day to day, generally reflecting changes in interest rates,
market conditions, and other political and economic news. The Fund's
performance will also depend on currency values, foreign economies, and
other factors relating to foreign investments. Because the Fund focuses on
emerging markets, it involves higher risks than U.S. bond investments.
Investors should be willing to assume a greater degree of investment risk
and should expect a higher level of volatility than is generally associated
with investing in more established markets. The Fund's yield and share
price will change based on changes in domestic or foreign interest rates,
the value of foreign currencies, and issuers' creditworthiness. In general,
bond prices rise when interest rates fall, and vice versa. The Fund's
share price, yield and total return fluctuate and your investment may be
worth more or less than your original cost when you redeem your shares.
The Fund is non-diversified, which means that it may invest a greater
portion of its assets in securities of a single issuer than would be the
case if it were diversified. As a result, changes in the financial
condition or market assessment of a single issuer could cause greater
fluctuation in the Fund's share value.
EQUITY FUNDS. Equity f unds invest in common stock and other equity
securities in search of growth or a combination of growth and income.
The share value of equity funds depends heavily on stock market
conditions in the U.S. and abroad, and can also be affected by changes in
interest rates or other economic conditions. Investments in e quity
f unds are more suitable for investors who take a long-term approach
to investing.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND . As a
non-fundamental policy, the Fund normally 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 group or companies
in an industry. A special situation may involve one or more of the
following characteristics:
(bullet) A technological advance or discovery, the offering of a new or
unique product or service, or changes in consumer demand or consumption
forecasts.
(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.
(bullet) New or changed management, or material changes in management
policies or corporate structure.
(bullet) Significant economic or political occurrences abroad, including
changes in foreign or domestic import and tax laws or other regulations.
(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. As a non-fundamental
investment policy, the Fund may invest in lower -quality ,
high-yielding debt securities ( sometimes referred to as "junk
bonds") , although it intends to limit its investments in these
securities to 35% of its assets. The Fund also may invest in unrated
securities. The Fund may invest up to 30% of its assets in foreign
investments of all types and may enter into forward foreign currency
exchange contracts for the purpose of managing exchange rate risks. The
Fund may purchase or engage in indexed securities, illiquid instruments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements and securities loans, restricted securities, swap
agreements, warrants, and zero coupon bonds.
The Fund expects to be fully invested under most market conditions. The
Fund may make substantial temporary investments in high-quality debt
securities for defensive purposes when, in FMR's judgment, a more
conservative approach to investment is desirable.
An investment in the F und may be considered more speculative than an
investment in other funds that seek capital appreciation. There are
greater risks involved in investing in securities of smaller companies
rather than companies operating according to established patterns and
having longer operating histories. The Fund may invest in securities in
which other investors have not shown significant interest or confidence,
and which are subject to stock market fluctuations. Larger
well-established companies experiencing a special situation may involve, to
a certain extent, breaks with past experience, which may pose greater
risks. There are also greater risks involved in investing in securities of
companies that are not currently favored by the public but show potential
for capital appreciation.
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME . It is the policy of the
Fund that at least 65% of its total assets normally will be invested in
income-producing equity securities. For purposes of this policy, equity
securities are defined as common stocks and preferred stocks.
The balance of the Fund will tend to be invested in debt obligations, a
high percentage of which are expected to be convertible into common stocks.
As a non-fundamental policy, the Fund may invest in lower- quality
high-yielding debt securities (sometimes referred to as "junk bonds"),
although it currently intends to limit its investments in these securities
to 35% of its assets. However, the Fund does not intend to invest in
securities of issuers without proven earnings and/or credit
histories. T he Fund may purchase or engage in foreign investments,
indexed securities, illiquid investments, loans and other direct debt
instruments, futures and options, repurchase agreements and securities
loans, restricted securities, short sales, swap agreements, and warrants.
Because of the income considerations, investors should not expect capital
appreciation comparable to the appreciation which could be achieved by
funds whose primary objective is capital appreciation. While the
investment portfolio will not mirror the stocks in the S&P 500, the
yield on the overall investment portfolio 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.
The Fund may make temporary investments in securities such as
investment-grade bonds or short-term notes for defensive purposes.
FIXED-INCOME FUNDS. Fixed-Income Funds invest primarily in debt securities
(e.g., bonds, debentures, notes and similar obligations). The share value
of fixed-income funds tends to move inversely with changes in prevailing
interest rates. Shorter-term bonds are less sensitive to interest rate
changes, but longer-term bonds generally offer higher yields. It also is
important to note that high-yielding, lower-quality bonds involve greater
risks, because there is a greater possibility of a financial reversal
affecting the issuer's ability to pay interest and principal on time.
Share value and yield are not guaranteed and will fluctuate based on credit
quality and changes in interest rates.
FMR will use its extensive research facilities in addition to considering
the ratings of Nationally Recognized Statistical Rating Organizations
(NRSROs) in selecting investments for the Funds. Unrated securities are
not necessarily of lower quality than rated securities, but they may not be
attractive to as many buyers. This credit analysis includes consideration
of the economic feasibility, the financial condition of the issuer with
respect to liquidity, cash flow and political developments that may affect
credit quality. Since the risk of default is higher for lower-quality
obligations, FMR's research and analysis are an integral part of choosing a
Fund's securities. Through portfolio diversification and careful credit
analysis, FMR can reduce risk, although there can be no assurance that
losses will not occur. FMR also considers trends in the economy, in
geographic areas, in various industries, and in the financial markets.
FIDELITY ADVISOR HIGH YIELD FUND. As a non-fundamental policy, the Fund
normally will invest at least 65% of its total assets in
high-yielding, income producing debt securities and preferred stocks,
including convertible and zero coupon bonds . The Fund may invest
all or a substantial portion of its assets in lower- quality,
high-yielding debt securities ( sometimes referred to as "junk
bonds"). Please refer to "Risks of Lower- Quality Taxable Debt
Securities," page 11. In addition, the Fund also may invest in
government securities, securities of any state or any of its subdivisions,
agencies or instrumentalities, and securities of foreign issuers, including
securities of foreign governments. The Fund may invest up to 35% of its
assets in equity securities, including common stocks, warrants and rights.
Debt instruments include securities such as bonds, notes, convertible
bonds, and mortgage-backed or asset-backed securities; commercial paper and
other money market instruments, including repurchase agreements; and loans,
trade claims, and similar instruments representing indebtedness of a
corporate borrower. These instruments may provide for interest payments in
cash or in kind, may pay no interest, or may be in default, and may have
warrants attached or otherwise include rights to purchase common stocks.
The Fund may purchase debt instruments in public offerings or through
private placements. The Fund has no specific limitations on the maturity
or credit ratings of the debt instruments in which it invests.
The Fund may enter into forward currency contracts and may purchase
or engage in foreign investments, indexed securities, illiquid investments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements and securities loans, restricted securities, reverse
repurchase agreements, and swap agreements.
RISKS OF LOWER- QUALITY TAXABLE DEBT SECURITIES. Lower-quality
debt securities usually are defined as securities rated Ba or lower by
Moody's or BB or lower by S&P. Lower-quality debt securities are
considered speculative and involve greater risk of loss than higher-rated
debt securities, and are more sensitive to changes in the issuer's capacity
to pay. This is an aggressive approach to income investing.
The 1980s saw a dramatic increase in the use of lower- quality debt
securities to finance highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of lower- quality debt securities, especially
during periods of economic recession. In fact, from 1989 to 1991, the
percentage of lower- quality debt securities that defaulted rose
significantly above prior levels, although the default rate decreased in
1992 and 1993 .
Lower- quality debt securities may be thinly traded, which can
adversely affect the prices at which these securities can be sold and can
result in high transaction costs. If market quotations are not available,
lower- quality debt securities will be valued in accordance with
standards set by the Boards of Trustees, including the use of outside
pricing services. Judgment plays a greater role in valuing
lower- quality debt securities than securities for which more
extensive 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
the Fund's ability to dispose of these securities.
The market prices of lower- quality debt securities may decline
significantly in periods of general economic difficulty, which may follow
periods of rising interest rates. During an economic downturn or a
prolonged period of rising interest rates, the ability of issuers of
lower- quality debt to service their payment obligations, meet
projected goals, or obtain additional financing may be impaired.
The Fund may choose, at its own 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 interest of Fund shareholders.
The considerations discussed above for lower- quality debt securities
also apply to lower-quality, unrated debt instruments of all types,
including loans and other direct indebtedness of businesses with poor
credit standing. Unrated debt instruments are not necessarily of
lower-quality than rated securities, but they may not be attractive to as
many buyers. The Fund relies more on FMR's credit analysis when investing
in debt instruments that are unrated. Please refer to pages 25 and
26 for a discussion of Moody's and S&P ratings.
FIDELITY ADVISOR LIMITED TERM BOND FUND. Under normal
circumstances, the Fund will invest in fixed-income securities
as follows:
(I) Corporate obligations which are rated AAA, AA, or A by S&P, or Aaa,
Aa, or A by Moody's;
(II) Obligations issued or guaranteed as to interest and principal by the
government of the U.S., or any agency or instrumentality thereof;
(III) Obligations (including certificates of deposit 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 annual financial statements) in excess of $100,000,000;
(IV) Commercial paper which at the date of investment is rated A-1 or A-2
by S&P or Prime-1 or Prime-2 by Moody's or, if not rated, is issued by
companies which at the date of investment have an outstanding debt issue
rated AAA, AA, or A by S&P or Aaa, Aa, or A by Moody's; and
(V) Such other fixed-income instruments as the Board of Trustees, in its
judgment, deems to be of comparable quality to those enumerated above.
The Fund also may invest in unrated instruments, and may at times
purchase instruments rated below A if FMR judges them to be of comparable
quality to those rated A or better. Currently, the Fund does not intend to
invest in debt obligations rated below Baa/BBB. Instruments in which the
Fund may invest include asset-backed securities, collateralized mortgage
obligations, convertible securities, loans and other direct debt
instruments, mortgage-backed securities, and zero coupon bonds. For
purposes of the Fund's investment policies, those instruments described in
this paragraph and in (i) through (v) above are considered "bonds".
FMR's standards for determining high- and upper-medium grades are
essentially the same as those described by S&P and Moody's as
characteristic of their ratings of A and above. Such instruments have
strong protection of principal and interest payments. In addition to
reliance on S&P's or Moody's ratings, FMR also performs its own credit
analysis. Investment-grade bonds are generally of medium to high quality.
Those rated in the lower end of the category (Baa/BBB), however, may
possess speculative characteristics and may be more sensitive to economic
changes and changes in the financial condition of issue r s.
In addition, the Fund may seek capital appreciation when consistent with
its primary objective. In seeking capital appreciation, FMR will select
securities for the Fund based on its judgment as to economic and market
conditions and the prospects for interest rate changes.
The Fund may purchase or engage in foreign investments, indexed securities,
illiquid investments, options and futures contracts, repurchase agreements
and securities loans, restricted securities, and swap agreements. The Fund
also may engage in reverse repurchase agreements for temporary or emergency
purposes and not for investment purposes.
The Fund will maintain a dollar-weighted average maturity of 10 years or
less. Based on FMR's assessment of interest rate trends, generally,
the average maturity will be shortened when interest rates are expected to
rise and lengthened up to 10 years when interest rates are expected to
decline.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND. Under normal
circumstances, as a non-fundamental policy at least 65% of the Fund's
total assets will be invested in government securities.
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). The U.S. government securities the Fund
invests in may or may not be fully backed by the U.S. government. The Fund
may enter into repurchase agreements involving any securities in which it
may invest and also may enter into reverse repurchase agreements. The Fund
considers "government securities" to include U.S. government securities
subject to repurchase agreements. The Fund is not restricted as to the
percentage of its assets that may be invested in any one type of U.S.
government security. The Fund may for temporary defensive purposes invest
without limit in U.S. government securities having a maturity of 365 days
or less. The Fund may invest in delayed-delivery transactions, options and
futures contracts, indexed securities, swap agreements and zero coupon
bonds. In seeking current income, the Fund also may consider the potential
for capital gain.
MUNICIPAL/TAX-EXEMPT FUNDS. Tax-Exempt Funds invest primarily in municipal
securities which are issued by state and local governments and their
agencies to raise money for various public purposes, including general
purpose financing for state and local governments as well as financing for
specific projects or public facilities. Municipal securities may be backed
by the full taxing power of a municipality or by the revenues from a
specific project or the credit of a private organization. Some municipal
securities are insured by private insurance companies, while others may be
supported by letters of credit furnished by domestic or foreign banks. FMR
monitors the financial condition of parties (including insurance companies,
banks, and corporations) whose creditworthiness is relied upon in
determining the credit quality of securities the Funds may purchase.
Yields on municipal bonds, and therefore the yield of High Income Municipal
and Limited Term Tax-Exempt, depend on factors such as general market
conditions, interest rates, the size of a particular offering, the
maturities of the obligations and the quality of the issues. The ability
of the Funds to achieve their investment objectives is also dependent on
the continuing ability of the issuers of the municipal obligations in which
the Funds invest to meet their obligations for the payment of interest and
principal when due.
Bonds generally are considered to be interest rate sensitive, which means
that their values move inversely to interest rates. Long-term municipal
bonds generally are more exposed to market fluctuations resulting from
changes in interest rates than are short-term municipal bonds.
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 the Fund's ability to dispose of lower- quality bonds. The
outside pricing services are consistently monitored to assure that
securities are valued by a method that the Board believes accurately
reflects fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
The Funds' investments in municipal securities may include fixed, variable,
or floating rate general obligation and revenue bonds (including municipal
lease obligations and resource recovery bonds); zero coupon and
asset-backed securities; inverse floaters; tax, revenue, or bond
anticipation notes; and tax-exempt commercial paper. The Funds may buy or
sell securities on a when-issued or delayed-delivery basis (including
refunding contracts), and may purchase restricted and illiquid
securities. The Funds may also buy and sell options and futures
contracts.
Municipal obligations, including industrial development revenue bonds, are
issued by or on behalf of states, territories, and possessions of the U.S.
and the District of Columbia and their political subdivisions, agencies,
and instrumentalities.
Each Fund may invest more than 25% 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.
As a result, a fund may be more susceptible to economic, business
or political developments than would a portfolio of bonds with a
greater variety of issuers. These developments include proposed
legislation or pending court decisions affecting the financing of such
projects and market factors affecting the demand for their services or
products.
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND. Interest from all or a
portion of the Fund's municipal bonds may be a "tax preference" item for
some shareholders in determining their federal alternative minimum tax.
Stability and growth of principal also will be considered when choosing
securities.
Interest on some "private activity" municipal obligations is subject to the
federal alternative minimum tax AMT bonds. AMT bonds are municipal
obligations that benefit a private or industrial user or finance a private
facility. The Fund reserves the right to invest up to 100% of its assets
in AMT bonds.
The Fund may invest in municipal obligations which are rated in the medium
and lower rating categories of NRSROs (such as obligations rated Caa by
Moody's or CCC by S&P) or which are unrated, but judged by FMR,
pursuant to procedures established by the Board of Trustees, to meet the
quality standards of the Fund. Municipal obligations which are in the
medium and lower rating categories or which are unrated generally offer a
higher current yield than those offered by municipal obligations which are
in the higher rating categories. Since available yields and the yield
differential between higher and lower-rated obligations vary over time, no
specific level of income or yield differential can be assured.
Lower- quality bonds (those rated Ba/BB or lower) involve greater
risk, including risk of default.
The Fund also may purchase tax-exempt instruments that become available in
the future as long as FMR believes that their quality is equivalent to
those rated Caa or CCC or better by Moody's or S&P, respectively.
The Fund's yield depends in part on the quality of its investments.
Obligations rated investment grade or better (Baa/BBB or higher) generally
are of medium to high quality. These securities typically have moderate to
poor protection of principal and interest payments and have speculative
characteristics.
Unrated obligations may be either investment grade or lower quality, but
usually are not attractive to as many buyers . The Fund relies
heavily on FMR's credit analysis when purchasing unrated or
lower- quality bonds.
While lower-quality bonds traditionally have been less sensitive to
interest rate changes than higher-quality investments, as with all bonds,
the prices of lower-quality bonds will be affected by interest rate
changes. Economic changes may affect lower-quality securities differently
than other securities. Lower-quality municipal bonds may be more sensitive
to adverse economic changes (including recession) in specific regions or
localities or among specific types of issuers. During an economic downturn
or a prolonged period of rising interest rates, issuers of lower-quality
debt may have problems servicing their debt, meeting projected revenue
goals, or obtaining additional financing. Periods of economic uncertainty
and interest rate changes may cause market price volatility for
lower-quality bonds and corresponding volatility in the Fund's share
price.
During periods when, in FMR's opinion, a temporary defensive posture in the
market is appropriate, the Fund may invest without limitation in cash or in
obligations whose interest payments may be federally taxable. Taxable
obligations include, but are not limited to, certificates of deposit,
commercial paper, obligations issued by the U.S. government or any of its
agencies or instrumentalities, and repurchase agreements.
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. Since the Fund's
objective is to provide a high current yield, the Fund will purchase
municipals with an emphasis on income. FMR may vary the Fund's average
maturity depending on anticipated market conditions. Generally, the average
maturity will be shortened when interest rates are expected to rise and
lengthened when rates are expected to decline.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND . 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 will maintain a dollar-weighted average maturity of 10 years or
less.
The Fund will invest in municipal obligations which, in the judgment of
FMR, are high quality or at least upper-medium quality. The Fund's
standards for high quality and upper-medium quality obligations are
essentially the same as those described by Moody's in rating municipal
obligations within its three highest ratings of Aaa, Aa, and A and as those
described by S&P in rating such obligations within its three highest
ratings of AAA, AA and A. As a non-fundamental policy, the Fund will not
purchase a security rated by Moody's or S&P unless it has received at
least an A rating from either rating service.
The Fund may invest up to 20% of its total assets in municipal obligations
which are unrated by Moody's or S&P if, in the judgment of FMR, such
municipal obligations meet the standards of quality as set forth above.
Unrated bonds are not necessarily of lower quality and may have higher
yields than rated bonds, but the market for rated bonds is usually broader.
The Fund may invest up to 25% of its total assets in a single issuer's
securities.
The Fund currently does not intend to invest in taxable obligations;
however, consistent with that portion of its investment objective concerned
with the preservation of capital, from time to time the Fund may invest a
portion (normally not to exceed 20%) of its net assets on a temporary basis
in fixed-income obligations whose interest is subject to federal income
tax. These taxable obligations may include repurchase agreements. The Fund
does not currently intend to invest in AMT bonds.
INVESTMENT LIMITATIONS
Each Fund has adopted the following investment limitations designed to
reduce investment risk. The policies and limitations discussed below, and
in the Appendix beginning on page , are considered at the time of purchase.
With the exception of each Fund's borrowing policy, the sale of portfolio
securities is not required in the event of a subsequent change in
circumstances.
DIVERSIFICATION: These limitations do not apply to U.S. government
securities and are fundamental unless otherwise noted .
(bullet) Strategic Opportunities may not purchase a security if, as a
result, more than 5% of its total assets would be invested in the
securities of any issuer;
(bullet) As a non-fundamental policy, generally to meet federal tax
requirements at the close of each quarter, Emerging Markets Income may not
(1) with respect to 50% of its total assets, purchase a security if more
than 5% of its total assets would be invested in the securities of a single
issuer; and (2) invest more than 25% of its total assets in securities of a
single issuer.
(bullet) With respect to 75% of its total assets, each other Fund may not
purchase a security if, as a result, more than 5% of its total assets would
be invested in the securities of any issuer.
(bullet) Each Fund (except Emerging Markets Income) may not
purchase a security if, as a result, it would hold more than 10% of the
outstanding voting securities of any issuer (except that Equity Portfolio
Income, High Yield, and Government Investment, each may invest up to 25% of
its total assets without regard to this limitation).
(bullet) Limited Term Tax-Exempt 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.
(bullet) Each other Fund ( may not purchase the securities of any
issuer 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. Limited Term Bond may, however, invest
more than 25% of its total assets in obligations of banks, although it has
no current intention of so doing.
BORROWING: The following limitations are fundamental.
(bullet) Each fund may borrow money for temporary or emergency purposes,
in an amount not exceeding 33 1/3% of the value of its total assets;
(bullet) Strategic Opportunities, Limited Term Bond, and Limited Term
Tax-Exempt may not purchase any security while borrowings representing more
than 5% of its total assets are outstanding.
(bullet) Government Investment and High Income Municipal may not purchase
any security while borrowings representing more than 5% of its net assets
are outstanding.
The following limitations are non-fundamental.
(bullet) Each other Fund may not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.
(bullet) Each Fund may borrow money from banks or from other funds advised
by FMR, or by engaging in reverse repurchase agreements.
LENDING: Percentage limitations are fundamental.
(bullet) High Income Municipal and Limited Term Tax-Exempt do not
currently intend to engage in repurchase agreements or make loans (but this
limitation does not apply to purchases of debt securities).
(bullet) Each other F und (A) may lend securities to a
broker-dealer or institution when the loan is fully collateralized; and (B)
may lend money to a mutual fund advised by FMR or an affiliate. Each Fund
will limit loans in the aggregate to 33 1/3% of its total assets.
Each Fund has received permission from the SEC to lend money to and borrow
money from other funds advised by FMR or its affiliates . High Income
Municipal and Limited Term Tax-Exempt will participate only as borrowers.
If a Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. To this extent, purchasing
securities when borrowings are outstanding may involve an element of
leverage.
As a non-fundamental policy, each Fund may not purchase a security, if as a
result, more than 15% ( Emerging Markets Income and High Yield) or
10% (all others) of its net assets would be invested in illiquid
investments.
HOW TO BUY SHARES
Shares of each Fund are offered continuously to investors who engage an
investment professional for investment advice and may be purchased at the
net asset value per share (NAV) next determined after the transfer agent
receives your order to purchase. Securities dealers and banks (investment
professionals), with which Distributors has Agreements, receive as
compensation from Distributors a concession equal to 3% of your purchase.
S hares are offered at NAV without an initial sales charge and
may be subject to a CDSC upon redemption. For more information on how the
CDSC is calculated, see "How to Sell Shares," page .
You can open an account with a minimum initial investment of $2,500
by completing and returning an account application. You can make
additional investments of $250 or more. Purchase amounts of
more than $250,000 will not be accepted for Class B shares of
the Funds. For tax-deferred retirement plans, including IRA accounts, there
is a $500 minimum initial investment and a $100 subsequent investment
minimum. For accounts established under the Fidelity Advisor Systematic
Investment Program or the Fidelity Advisor Systematic Exchange Program,
there is a $1,000 initial and $100 monthly subsequent investment minimum
requirement. FOR FURTHER INFORMATION ON OPENING AN ACCOUNT, PLEASE CONSULT
YOUR INVESTMENT PROFESSIONAL OR REFER TO THE CLASS B ACCOUNT APPLICATION.
It is the responsibility of your investment professional to transmit your
order to purchase shares to Fidelity Investments Institutional
Operations Company (FIIOC or Transfer Agent ) before 4:00 p.m.
Eastern time in order for you to receive that day's Class B share
price. The Transfer Agent must receive payment within five business days
after an order is placed; otherwise, the purchase order may be canceled and
you could be held liable for resulting fees and/or losses. Certificates
are not available for Class B shares.
All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. Each Fund reserves the right to limit the number of your
checks processed at one time. If your check does not clear, the Fund may
cancel your purchase and you could be held liable for any fees and/or
losses incurred. When you purchase directly by check, the Fund can hold the
proceeds of redemptions until the Transfer Agent is reasonably satisfied
that the purchase payment has been collected (which can take up to seven
calendar days). You may avoid a delay in receiving redemption proceeds by
purchasing shares with a certified check. S hares of the
fixed-income funds purchased through investment professionals utilizing an
automated order placement and settlement system that guarantees payment for
orders on a specified date, begin to earn income dividends on that date.
Direct purchases and all other orders begin to earn dividends on the
business day after the Fund receives payment.
Each Fund and Distributors reserve the right to suspend the offering of
shares for a period of time and to reject any order for the purchase of
shares, including certain purchases by exchange (see "How to
Exchange,'' page 15 ).
MINIMUM ACCOUNT BALANCE. You must maintain an account balance of
$1 , 000 in Class B shares of a Fund . If your account falls
below $1 , 000 due to redemption of Class B shares, the
Transfer Agent may close it at the NAV next determined on the day your
account is closed and mail you the proceeds at the address shown on the
Transfer Agent's records. The Transfer Agent will give you 30 days' notice
that your account will be closed unless you make an investment to increase
your account balance to the $1,000 minimum. The minimum account balance
does not apply to IRA accounts.
INVESTOR SERVICES
You may initiate many transactions by telephone. Note that the Transfer
Agent will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the
identity of the caller. The Transfer Agent will request personalized
security codes or other information, and may also record calls. You should
verify the accuracy of your confirmation statements immediately after you
receive them. If you do not want the ability to redeem and exchange by
telephone, call the Transfer Agent for instructions.
QUANTITY DISCOUNTS. Your purchases and/or existing balances of Class B
shares may be included for purposes of qualifying for a Class A front-end
sales charge reduction in the following programs. Reduced front-end
sales charges are applicable to purchases of Class A shares in amounts of
$50,000 or more ($1,000,000 or more for Fidelity Advisor Short Fixed-Income
Fund or Fidelity Advisor Short-Intermediate Tax-Exempt Fund).
COMBINED PURCHASES. When you invest in Class A shares of a Fund for several
accounts at the same time, you may combine these investments into a single
transaction to qualify for a quantity discount, if purchased through one
investment professional and if the total is at least $50,000 ($1,000,000
for Fidelity Advisor Short Fixed-Income Fund or Fidelity Advisor
Short-Intermediate Tax-Exempt Fund).
RIGHTS OF ACCUMULATION. Your "Rights of Accumulation" permit reduced
front-end sales charges on any future purchases of Class A shares. You may
add the value of currently held Class A and Class B shares of Fidelity
Advisor Funds, and the value of currently held 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, determined at the
current day's NAV at the close of business, 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 qualify for reduced front-end sales charges on
purchases of Class A shares in amounts of at least $50,000 ($1,000,000 for
Fidelity Advisor Short Fixed Income Fund and Fidelity Advisor
Short-Intermediate Tax-Exempt Fund) made within a 13-month period by filing
a non-binding Letter of Intent (the Letter). You may include, as an
accumulation credit toward the completion of the Letter, purchases of Class
A and Class B shares of Fidelity Advisor Funds, and the value of Initial
Class shares and Class B shares of Daily Money Fund; U.S. Treasury
Portfolio and shares of Daily Money Fund: Money Market Portfolio and Daily
Tax Exempt Money Fund ACQUIRED BY EXCHANGE FROM ANY FIDELITY ADVISOR FUND.
FOR MORE INFORMATION ON THE TERMS OF QUANTITY DISCOUNTS, PLEASE CONSULT
YOUR INVESTMENT PROFESSIONAL.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class B shares of a Fidelity Advisor Fund with the
Systematic Investment Program by completing the appropriate section of the
account application and attaching a voided personal check. Investments may
be made monthly by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time. There is a $1,000 minimum initial investment requirement for the
Systematic Investment Program. S hares will be purchased at the
NAV next determined following receipt of the investment by the
Transfer Agent. You may cancel the Systematic Investment Program at any
time without payment of a cancellation fee. You will receive a confirmation
from the Transfer Agent for every transaction, and a debit entry will
appear on your bank statement.
SHAREHOLDER COMMUNICATIONS
The Transfer Agent or your investment professional will send you a
confirmation after every transaction that affects your share balance or
account registration. In addition, a consolidated statement will be
provided at least quarterly. At least twice a year each shareholder will
receive the Fund's financial statements, with a summary of its portfolio
composition and performance. To reduce expenses, only one copy of most
shareholder reports (such as a Fund's Annual Report) will be mailed to each
shareholder address. Please write to the Transfer Agent or contact your
investment professional if you need to have additional reports sent each
time.
Each Fund pays for these shareholder communications, but not for
special services that are required by a few shareholders, such as a request
for a historical transcript of an account. You may be required to pay a fee
for such special services. If you are purchasing shares of a Fund through a
program of administrative services offered by an investment professional,
you should read the additional materials pertaining to that program in
conjunction with this prospectus. Certain features of each Fund,
such as the minimum initial or subsequent investment, may be modified in
these programs, and administrative charges may be imposed for the services
rendered.
HOW TO EXCHANGE
An exchange is the redemption of Class B shares of one Fund and the
purchase of Class B shares of another Fund, each at the next determined
NAV. A CDSC WILL NOT APPLY TO CLASS B SHARES REDEEMED FOR EXCHANGE.
The applicable CDSC for Class B shares purchased by exchange will be
based on the date of acquisition and cost of the Class B shares
initially purchased. The exchange privilege is a convenient way to buy
and sell Class B shares of the Fidelity Advisor Funds and
of Daily Money Fund: U.S. Treasury Portfolio , provided such funds
are registered in your state.
To protect each Fund's performance and shareholders, FMR discourages
frequent trading in response to short-term market fluctuations. Each
Fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's opinion, the Fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise be affected adversely. Your exchanges may be
restricted or refused if a Fund receives or anticipates simultaneous orders
affecting significant portions of a Fund's assets. In particular, a pattern
of exchanges that coincides with a "market timing" strategy may be
disruptive to a Fund. Exchange restrictions may be imposed at any time. The
Funds may modify or terminate the exchange privilege. The exchange limit
may be modified for certain institutional retirement plans.
Exchange instructions may be given by you in writing or by telephone
directly to the Transfer Agent or through your investment professional.
If you choose to exchange by writing, you must send a letter of instruction
with your signature guaranteed either directly to the Transfer Agent or to
your investment professional, accompanied by a stock power form with your
signature guaranteed. FOR MORE INFORMATION ON ENTERING AN EXCHANGE
TRANSACTION, PLEASE CONSULT YOUR INVESTMENT PROFESSIONAL.
Before you make an exchange:
1. Read the prospectus of the Fund into which you want to exchange.
2. Class B shares may be exchanged only into Class B shares of another
Fidelity Advisor Fund or Daily Money Fund: U.S. Treasury Portfolio, seven
calendar days after purchase at NAV.
3. You may exchange only between accounts that are registered in the same
name, address, and taxpayer identification number.
4. You may make four exchanges out of each Fund per calendar year. If you
exceed this limit, your future purchases of (including exchanges into)
Fidelity Advisor Funds may be permanently refused. For purposes of the four
exchange limit, accounts under common ownership or control, including
accounts having the same taxpayer identification number, will be
aggregated. Systematic exchanges are not subject to this four exchange
limit (see following section).
5. TAXES: The exchange of Class B shares is considered a sale and may be
taxable. The Transfer Agent will send you or your investment professional a
confirmation of each exchange transaction.
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. You can exchange a specific
dollar amount of Class B shares from a Fund into Class B shares of another
Fidelity Advisor Fund or D aily Money Fund: U.S. Treasury Portfolio
on a periodic basis under the following conditions:
1. The account from which the exchanges are to be processed must have a
minimum balance of $10,000.
2. The account into which the exchanges are to be processed must be an
existing account with a minimum balance of $1,000.
3. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount that can be exchanged
systematically into a Fund is $100.
4. Systematic exchanges will be processed at the NAV determined on the
transaction date.
HOW TO SELL SHARES
You may sell (redeem) all or a portion of your shares on any day the New
York Stock Exchange (NYSE) is open at the NAV next determined after the
Transfer Agent receives your request to sell, less any applicable
CDSC (see below). Orders to sell may be placed by you in writing or by
telephone or through your investment professional. If you choose to sell
shares by written instruction, you must send a letter of instruction with
your signature guaranteed either directly to the Transfer Agent or to your
investment professional, accompanied by a stock power form with your
signature guaranteed. Orders to sell received by the Transfer Agent
before 4:00 p.m. Eastern time will receive that day's Class B
share price. For orders to sell placed through your investment
professional, it is the investment professional's responsibility to
transmit such orders to the Transfer Agent by 4:00 p.m. Eastern time for
you to receive that day's Class B share price.
Once your shares are redeemed, a Fund normally will send the proceeds on
the next business day to the address of record. If making immediate payment
could adversely affect the Fund, the Fund may take up to seven days to pay
you. A Fund may withhold redemption proceeds until it is reasonably
satisfied that it has collected investments that were made by check (which
may take up to seven calendar days).
When the NYSE is closed (or when trading is restricted) for any reason
other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action, a
Fund may suspend redemption or postpone payment dates for more than seven
days. The Transfer Agent requires additional documentation to redeem
shares registered in the name of a corporation, agent or fiduciary or a
surviving joint owner. Call 1-800- 526 - 0084 for specific
requirements.
REDEMPTION REQUESTS BY TELEPHONE.
TO RECEIVE A CHECK. You may sell shares of a Fund having a value of
$100,000 or less from your account by calling the Transfer Agent.
Redemption proceeds must be sent to the address of record listed on the
account, and a change of address must not have occurred within the
preceding 3 0 days.
TO RECEIVE A WIRE. You may sell shares of a Fund and have the proceeds
wired to a pre-designated bank account. Wires will generally be sent the
next business day following the redemption of shares from your account.
Telephone redemptions cannot be processed for Fidelity Advisor Fund
prototype retirement accounts where State Street Bank and Trust Company is
the custodian.
REDEMPTION REQUESTS IN WRITING. For your protection, if you sell shares of
a Fund having a value of more than $100,000, if you are sending the
proceeds of a redemption of any amount to an address other than the address
of record listed on the account, if you have requested a change of
address within the preceding 3 0 days, or if you wish to have the
proceeds wired to a non-predesignated bank account, you must send a letter
of instruction signed by all registered owners with signature(s) guaranteed
to the Transfer Agent. A signature guarantee is a widely recognized way to
protect you by guaranteeing the signature on your request; it may not be
provided by a notary public. Signature guarantee(s) will be accepted from
banks, brokers, dealers, municipal securities dealers, municipal securities
brokers, government securities dealers, government securities brokers,
credit unions (if authorized under state law), national securities
exchanges, registered securities associations, clearing agencies and
savings associations.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class B
shares of a Fund you may reinvest an amount equal to all or a portion of
the redemption proceeds in Class B shares of the Fund or in Class B
shares 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 will be reimbursed to
you by reinvesting that amount in Class B shares. You must reinstate your
Class B 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 the Class B shares will continue as if the Class B shares
had not been redeemed.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedule:
CONTINGENT DEFERRED
FROM DATE OF PURCHASE SALES CHARGE
Less than 1 year 4%
1 year to less than 2 years 3%
2 year s 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* 0%
* UP TO 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.
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. Up to 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 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.)
CONTINGENT DEFERRED SALES CHARGE WAIVERS. The CDSC may be waived (I) in
cases of disability or death, provided that the redemption is made within
one year following the death or initial determination of disability, or
(II) in connection with a total or partial redemption made in connection
with required distributions made after age 70 1/2 from
retirement plans or accounts.
FOR MORE INFORMATION ABOUT THE CDSC, INCLUDING THE CONVERSION FEATURE AND
THE PERMITTED CIRCUMSTANCES FOR CDSC WAIVERS, CONTACT YOUR INVESTMENT
PROFESSIONAL.
DISTRIBUTION OPTIONS
When you fill out your account application, you can choose from four
Distribution Options:
1. REINVESTMENT OPTION. Dividends and capital gain distributions will be
automatically reinvested in additional Class B shares of a Fund. If you do
not indicate a choice on your account application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Capital gain distributions will be automatically
reinvested, but a check will be sent for each dividend distribution.
3. CASH OPTION. A check will be sent for each dividend and capital gain
distribution.
4. DIRECTED DIVIDENDS(Registered trademark) PROGRAM. Dividends and capital
gain distributions will be automatically invested in Class B shares of
another identically registered Fidelity Advisor Fund.
You may change your Distribution Option at any time by notifying the
Transfer Agent in writing. Distribution checks for fixed-income funds will
be mailed no later than seven days after the last day of the month. On the
day a Fund goes ex-dividend, the amount of the distribution is deducted
from its share price. Reinvestment of distributions will be made at that
day's NAV. If you select option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
distribution checks will be reinvested in your account at the current NAV
and your election may be converted to the Reinvestment Option. CLASS B
S HARES ACQUIRED THROUGH DISTRIBUTIONS WILL NOT BE SUBJECT TO A CDSC.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Funds distribute substantially all of their net
investment income and capital gains, if any, to shareholders each year
pursuant to the following schedule. Each Fund may pay capital gains in
December. In addition, Equity Portfolio Income, Limited Term Bond and
Limited Term Tax-Exempt may pay capital gains in January as well. Emerging
Markets Income also may pay capital gains in February.
Emerging Markets Income, High Yield, Limited Term Bond, Government
Investment, High Income Municipal, and Limited Term Tax-Exempt
declare dividends daily and pay monthly . Equity Portfolio
Income declare s dividends in March, June, September, and December
and pays the following month.
CAPITAL GAINS. You may realize a gain or loss when you sell (redeem) or
exchange shares. For most types of accounts, a Fund will report the
proceeds of your redemptions to you and the IRS annually. However, because
the tax treatment also depends on your purchase price and your personal tax
position, YOU SHOULD KEEP YOUR REGULAR ACCOUNT STATEMENTS TO USE IN
DETERMINING YOUR TAX.
"BUYING A DIVIDEND." On the record date for a distribution from a Fund, the
Fund's share price is reduced by the amount of the distribution. If you buy
shares just before the record date (buying a dividend), you will pay the
full price for the shares, and then receive a portion of the price back as
a taxable distribution.
FEDERAL TAXES. Distributions from each Fund's income and short-term capital
gains are taxed as dividends, and long-term capital gain distributions are
taxed as long-term capital gains. Gains on the sale of tax-free bonds
results in a taxable distribution. Short-term capital gains and a portion
of the gain on bonds purchased at a discount are taxed as dividends.
Distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares, except that distributions declared
in December and paid in January are taxable as if paid on December 31.
Each Fund will send you a tax statement by January 31 showing the tax
status of the distributions you received in the past year. A copy will be
filed with the Internal Revenue Service (IRS).
High Income Municipal and Limited Term Tax-Exempt may each invest in
municipal obligations whose interest is subject to the federal alternative
minimum tax for individuals (AMT bonds) . T o the extent that
the Funds invest in AMT bonds, individuals who are subject to the AMT will
be required to report a portion of the Fund's dividends as a
"tax-preference item" in determining their federal tax. Federally tax-free
interest earned by the Funds is federally tax-free when distributed as
income dividends. During the most recent fiscal year ended, 100% of the
income dividends for High Income Municipal and Limited Term Tax-Exempt were
free from federal tax. If the Funds earn taxable income from any of their
investments, it will be distributed as a taxable dividend. Some of the
Funds may be eligible for the dividends-received deduction for
corporations.
EFFECT OF FOREIGN TAXES. A Fund may pay withholding or other taxes to
foreign governments during the year. These taxes would reduce the Fund's
dividends, but would be 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 the Fund. Your tax statement will
generally show the amount of foreign tax for which a credit or deduction
will be available.
STATE AND LOCAL TAXES. Mutual fund dividends from U.S. government
securities generally are free from state and local income taxes. However,
particular states may limit this benefit, and some types of securities,
such as repurchase agreements and some agency backed securities, may not
qualify for the benefit. Ginnie mae securities and other mortgage-backed
securities are notable exceptions in most states. Some states may impose
intangible property taxes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the federal tax consequences generally affecting the Funds and their
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal tax, shareholders may be subject to
state or local taxes on their investments. Investors should consult their
tax advisors for details and up-to-date information on the tax laws in
their state to determine whether a fund is suitable to their particular tax
situation.
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.
FEES
MANAGEMENT AND OTHER SERVICES. For managing its investments and business
affairs, each Fund pays a monthly fee to FMR.
Each Fund (with the exception of Equity Portfolio Income, see below) pays a
monthly fee to FMR based on a basic fee rate, which is the sum of two
components:
1. A group fee rate based on the monthly average net assets of all of the
mutual funds advised by FMR. This rate for Equity Funds cannot rise above
.52% and it drops (to as low as a marginal rate of .31%*) as total assets
in all of these funds rise. The effective Equity Fund group fee rate for
September 1993, October 1993 and November 1993 was .3262%, .3254% and
.3250%, respectively. The group fee rate for Fixed-Income Funds cannot rise
above .37% and it drops (to as low as a marginal rate of .15%*) as total
assets in all of these funds rise. The effective Fixed-Income group fee
rate for October 1993 and November 1993 was .1631% and .1627%,
respectively.
2. An individual fund fee rate, which varies for each Fund.
* FMR VOLUNTARILY AGREED TO ADOPT REVISED GROUP FEE RATE SCHEDULES WHICH
PROVIDE FOR A MARGINAL RATE AS LOW AS .285% (EQUITY FUNDS) AND .1325%
(FIXED-INCOME FUNDS) WHEN AVERAGE GROUP NET ASSETS EXCEED $336 BILLION.
(THE MANAGEMENT CONTRACT FOR EMERGING MARKETS INCOME AND HIGH YIELD
CONTAIN THE REVISED GROUP FEE RATE SCHEDULE.) A NEW MANAGEMENT CONTRACT
WITH A REVISED GROUP FEE RATE SCHEDULE WILL BE PRESENTED FOR APPROVAL AT
EACH FUND'S NEXT SHAREHOLDER MEETING.
One-twelfth of the annual basic fee rate is applied to each Fund's
net assets averaged over the most recent month, giving a dollar amount
which is the management fee for that month.
Equity Portfolio Income pays FMR a monthly management fee at an annual rate
of .50% of its average net assets. The following are the individual fund
fee rates and total management fees for each Fund's most recent fiscal year
end.
TOTAL
MANAGEMENT FEE
INDIVIDUAL (AS A PERCENT OF AVERAGE
FUND FEE RATE NET ASSETS)
(AS A PERCENTAGE OF BEFORE REIMBURSEMENTS
AVERAGE NET ASSETS) IF ANY
INTERNATIONAL FUND:
Emerging Markets Income 0.55% 0.71%*
EQUITY FUNDS:
Strategic Opportunities 0.30% 0.54%
Equity Portfolio Income NA 0.50%
FIXED-INCOME FUNDS:
High Yield 0.45% 0.51%
Limited Term Bond 0.25% 0.42%
Government Investment 0.30% 0.46%
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal 0.25% 0.42%
Limited Term Tax-Exempt 0.25% 0.42%
*PROJECTION FOR FIRST YEAR OF OPERATIONS. TOTAL MANAGEMENT FEES ARE HIGHER
THAN THOSE CHARGED BY MOST 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.
In addition to the basic fee, the management fee for Strategic
Opportunities varies based on performance. The performance adjustment is
added to or subtracted from the management fee and is calculated monthly.
It is based on a comparison of the Fund's performance to that of an index,
over the most recent 36-month period. The difference is converted into a
dollar amount that is added to or subtracted from the management fee. This
adjustment rewards FMR when the Fund outperforms the index and reduces
FMR's fee when the Fund underperforms the index. The maximum annualized
performance index adjustment rate for Strategic Opportunities is +/-.20%.
Strategic Opportunities compares itself to the S&P 500. See "The
Trusts and the Fidelity Organization" on page 20 for information
regarding performance calculations for Strategic Opportunities.
FMR may, from time to time, agree to reimburse a Fund for expenses
(excluding interest, taxes, brokerage commissions, and extraordinary
expenses) above a specified percentage of average net assets. FMR retains
the ability to be repaid by a Fund for these expense reimbursements in the
amount that expenses fall below the limit prior to the end of the fiscal
year. Fee reimbursements by FMR will increase a Fund's yield and total
return, and repayment by a Fund will lower its yield and total return. FMR
has voluntarily agreed to reimburse expenses of the Class B shares of
Emerging Markets Income, Government Investment , (effective July 1,
1994) Limited Term Bond, and Limited Term Tax-Exempt and to the
extent that total expenses exceed 2.25%, 1.70%, 1.65%, and 1.65%,
respectively, of average net assets of Class B shares .
FMR has entered into sub-advisory agreements on behalf of certain Funds.
Sub-advisors provide research and investment advice and research services
with respect to issuers based outside the U.S. and FMR may grant
sub-advisers investment management authority to buy and sell securities if
FMR believes it would be beneficial to a Fund.
Strategic Opportunities, Equity Portfolio Income, Emerging Markets Income
and High Yield each have entered into sub-advisory agreements with Fidelity
Management & Research (U.K.) Inc. (FMR U.K.) , in London,
England, and Fidelity Management & Research ( FMR Far East)
Inc. (FMR Far East) in Tokyo, Japan. FMR U.K. focuses primarily on
issuers based in Europe, and FMR Far East focuses primarily on
issuers based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, not the Fund, pay s FMR U.K. and FMR Far East fees
equal to 110% and 105%, respectively, of each sub-advisor's costs incurred
in connection with its sub-advisory agreement.
In addition, FMR on behalf of Emerging Markets Income has entered
into a sub-advisory agreement with Fidelity International Investment
Advisors (FIIA) , in Pembroke, Bermuda, and Fidelity Investments Japan
Limited (FIJ), in Tokyo, Japan. FIJ and FIIA are both Bermuda-based
subsidiaries of Fidelity International Limited (FIL). FIIA, in turn,
has entered into a sub-advisory agreement with its wholly owned subsidiary
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.) ,
in Kent, England . Currently, FIIAL U.K. focuses on issuers based in
countries other than the United States , including countries in
Europe, Asia, and the Pacific Basin. Under the sub-advisory agreement, FMR
pays FIIA 30% of its monthly management fee with respect to the average
market value of investments held by the Fund for which FIJ and
FIIA , respectively have provided FMR with investment advice.
FIIA, in turn, pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs
incurred in connection with providing investment advice and research
service s. For providing investment management services, the sub-advisers
are compensated as follows: (a) FMR pays FMR (U.K.), FMR Far East, FIJ and
FIIA 50% of its monthly management fee with respect to Emerging Markets
Income's average net assets managed by the sub-advisers on a discretionary
basis; and (b) FIIA pays FIIAL U.K.'s costs incurred in connection with
providing investment management services.
FIIOC , ZR5, P.O. Box 1182, Boston, MA 02103-1182, an affiliate of
FMR, provides transfer and dividend paying services for Class B shares of
each Fund. FIIOC is paid transfer agent fees based on the type,
size and number of accounts in Class B shares of a Fund , and the
number of transactions made by Class B shareholders. The
Transfer Agent has a sub-arrangement with State Street Bank and Trust
Company (State Street), P.O. Box 8331, Boston, Massachusetts 02266-8302 for
certain transfer, dividend paying and shareholder services.
The fees for pricing and bookkeeping services are based on a Fund's average
net assets, but must fall within a range of $45,000 to $750,000 per year.
Fidelity Service Co. (Service), 82 Devonshire Street, Boston, Massachusetts
02109, an affiliate of FMR, calculates each Fund's Class B daily
share price, and maintains its general accounting records (with the
exception of High Income Municipal and Limited Term Tax-Exempt, see below).
For those Funds which can engage in securities lending, Service also
administers its securities lending program. For the most recent fiscal
year, each Fund's fees for pricing and bookkeeping services (including
related out-of-pocket expenses) amounted to: $145,494 (Strategic
Opportunities); $113,026 (Equity Portfolio Income); $121,204 (High Yield);
$81,106 (Limited Term Bond); and $46,457 (Government Investment).
For High Income Municipal and Limited Term Tax-Exempt, United Missouri
Bank, N.A. (United Missouri), 1010 Grand Avenue, Kansas City, Missouri
64106, acts as the custodian, transfer agent and pricing and bookkeeping
agent for Class B shares . United Missouri has a sub-arrangement with
the Transfer Agent for transfer agent services and a sub-arrangement with
Service for pricing and bookkeeping services. For the most recent fiscal
year ended, fees paid to Service (including related out-of-pocket expenses)
amounted to $157,559 (High Income Municipal) and $45,724 (Limited Term
Tax-Exempt). All of the fees are paid to the Transfer Agent and Service by
United Missouri, which is reimbursed by the Funds for such payments.
DISTRIBUTION AND SERVICE PLANS . The Board of Trustees of each Trust
has adopted a Distribution and Service Plan (the Plan s ) on behalf of
each f und's Class B shares pursuant to Rule 12b-1 under the 1940 Act
(the Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is intended
primarily to result in the sale of shares of a fund except pursuant to a
plan adopted by the fund under the Rule. The Boards of Trustees have
adopted the Plan s to allow Class B shares of each Fund and FMR to
incur certain expenses that might be considered to constitute direct or
indirect payment by Class B shares of distribution expenses.
Under each Plan, Class B shares are authorized to pay Distributors a
monthly distribution fee as compensation for its services and expenses in
connection with the distribution of Class B shares of the Fund . The
Class B shares of each Fund pay Distributors a distribution fee at an
annual rate of .75% of the average net assets of Class B shares
of that Fund determined as of the close of business on each day
throughout the month. In addition, pursuant to each Plan, investment
professionals are compensated at an annual rate of .25% of the average net
assets of that Fund's Class B shares for providing ongoing shareholder
support services to investors in Class B shares.
Each Plan also provides that, through Distributors, FMR may make
payments from its management fee or other resources to investment
professionals in connection with the distribution of Class B shares.
Class B shares of each Fund bear the fees paid pursuant to their Plan.
Such fees are not paid by individual accounts, and will comply with the
restrictions imposed by the NASD rule regarding asset based sales charges.
Distribution fees and shareholder service fees will reduce the net
investment income and total return of a Fund's Class B shares.
Distributors will, at its expense, provide promotional incentives
such as sales contests and luxury trips to investment professionals
who support the sale of shares of the Funds . In some instances,
these incentives will be offered only to certain types of investment
professionals, such as bank-affiliated or non-bank affiliated
broker-dealers, or to investment professionals whose representatives
provide services in connection with the sale or expected sale of
significant amounts of shares.
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 fully defined, in Distributors' opinion it
should not prohibit banks from being paid for shareholder servicing and
recordkeeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or a Fund were prevented from
continuing these arrangements, it is expected that the Board would make
other arrangements for these services and that shareholders would not
suffer adverse financial consequences. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
VALUATION
A Fund's shares are valued at NAV. NAV for Class B shares of each
Fund is determined by adding Class B's pro rata share of the
value of all security holdings and other assets of the Fund, deducting
Class B's pro rata share of the liabilities of the Fund,
deducting the liabilities allocated to Class B (when appropriate), and
then dividing the result by the number of Class B shares of the Fund
outstanding.
NAV normally is calculated as of the close of business of the NYSE
(normally 4:00 p.m. Eastern time). The Funds are open for business and NAV
is calculated each day the NYSE is open for trading. Fund securities and
other assets are valued primarily on the basis of market quotations
furnished by pricing services, or if quotations are not available, by a
method that the Board of Trustees believes accurately reflects fair value.
Foreign securities are valued based on quotations from the primary market
in which they are traded and are converted from the local currency into
U.S. dollars using current exchange rates.
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of total
return. All performance information is historical and is not intended to
indicate future performance. Share price and total return fluctuate in
response to market conditions and other factors, and the value of a Fund's
shares when sold may be worth more or less than their original cost.
Excluding a sales charge from a performance calculation produces a higher
total return figure. 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. When an average annual return covers a period of less than one
year, the calculation assumes that performance will remain constant for the
rest of the year. Since this may or may not occur, the average annual
returns should be viewed as a hypothetical rather than actual performance
figure. Average annual and cumulative total returns usually will include
the effect of paying the applicable sales charge.
The Funds also may quote performance in terms of yield. 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. High
Income Municipal Fund and Limited Term Tax-Exempt Fund may quote a
TAX-EQUIVALENT YIELD , which shows the taxable yield an investor
would have to earn before taxes to equal the Fund's tax-free yield.
A tax-equivalent yield is calculated by dividing a Fund's yield by the
result of one minus a stated federal or state tax rate. Because yield
calculations differ from other accounting methods, the quoted yield may not
equal the income actually paid to shareholders. This difference may be
significant for funds whose investments are denominated in foreign
currencies. In calculating yield, the Funds 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.
For additional performance information, please contact your investment
professional or Distributors for a free Annual Report and SAI.
PORTFOLIO TRANSACTIONS
FMR uses various brokerage firms to carry out each Fund's equity security
transactions Fixed-income securities are generally traded in the
over-the-counter market through broker-dealers. A broker-dealer is a
securities firm or bank which makes a market for securities by offering to
buy at one price and sell at a slightly higher price. The difference is
known as a spread. Foreign securities are normally traded in foreign
countries since the best available market for foreign securities is often
on foreign markets. In transactions on foreign stock exchanges, brokers'
commissions are generally fixed and are often higher than in the U.S.,
where commissions are negotiated. Since FMR, directly or through affiliated
sub-advisers, places a large number of transactions, including those of
Fidelity's other funds, the Funds pay lower commissions than those paid by
individual investors, and broker-dealers are willing to work with the Funds
on a more favorable spread.
The Funds have authorized FMR to allocate transactions to some
broker-dealers who help distribute the Fund's shares or the shares of
Fidelity's other funds to the extent permitted by law, and on an agency
basis to Fidelity Brokerage Services, Inc. (FBSI) and Fidelity Brokerage
Services Ltd. (FBSL), affiliates of FMR. FMR will make such allocations if
commissions are comparable to those charged by non-affiliated qualified
broker-dealers for similar services.
FMR may also allocate brokerage transactions to a Fund's custodian, acting
as a broker-dealer, or other broker-dealers, so long as transaction quality
and commission rates are comparable to those of other broker-dealers, where
the broker-dealer will allocate a portion of the commissions paid toward
payment of a Fund's expenses. These expenses currently include transfer
agent fees and custodian fees.
Higher commissions may be paid to those firms that provide research,
valuation and other services to the extent permitted by law. FMR also is
authorized to allocate brokerage transactions to FBSI in order to secure
from FBSI research services produced by third party, independent entities.
FMR may use this research information in managing each Fund's assets, as
well as assets of other clients.
When consistent with its investment objective, each fund may engage in
short-term trading. Also, a security may be sold and another of comparable
quality simultaneously purchased to take advantage of what FMR believes to
be a temporary disparity in the normal yield relationship of the two
securities.
The frequency of portfolio transactions - the turnover rate -
will vary from year to year depending on market conditions. Each Fund's
turnover rate for the most recent fiscal year ended was: 183% (Strategic
Opportunities) ; 120% (Equity Portfolio Income); 79% (High Yield);
59% (Limited Term Bond); 333% (Government Investment); 27% (High Income
Municipal); and 46% Limited Term Tax-Exempt. The annualized portfolio
turnover rate of Emerging Markets Income is not expected to
exceed 200% for its first fiscal period ended December 31, 1994.
Because a high portfolio turnover rate increases transaction costs
and may increase taxable capital gains, FMR carefully weighs the
anticipated benefits of short-term investing against these consequences.
THE TRUSTS AND THE FIDELITY ORGANIZATION
Each Trust is an open-end management investment company. Each Trust
was established by a separate Declaration of Trust as a Massachusetts
business trust as follows: April 24, 1986, ( Fidelity Advisor Series
II ) ; May 17, 1982, ( Fidelity Advisor Series III ) ; May
6, 1983, ( Fidelity Advisor Series IV ) ; April 24, 1986,
( Fidelity Advisor Series V ) ; June 1, 1983, ( Fidelity
Advisor Series VI ) ; and September 23, 1983, ( Fidelity Advisor
Series VIII ) . Each Trust has its own Board of Trustees that
supervises Fund activities and reviews the Funds ' contractual
arrangements with companies that provide the Funds with services. As
Massachusetts business trusts, the Trusts are not required to hold
annual shareholder meetings, although special meetings may be called for a
class of shares, a Fund, or a Trust as a whole for purposes such as
electing or removing Trustees, changing fundamental investment policies or
limitations, or approving a management contract or plan of distribution. As
a shareholder, you receive one vote for each share and fractional votes for
fractional shares of the Fund you own. For shareholders of Equity Portfolio
Income, the number of votes to which you are entitled is based on 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. There is a remote possibility that one Fund might become
liable for any misstatement in the prospectus about another Fund. Each
class of shares is 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
shares of other Class A or Class B 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. Transfer agent and shareholder services for Class A shares of
Fidelity Advisor Strategic Opportunities, Fidelity Advisor Equity Portfolio
Income, Fidelity Advisor Emerging Markets Income, Fidelity Advisor High
Yield, Fidelity Advisor Limited Term Bond and Fidelity Advisor
Government Investment are performed by State Street Bank and Trust Company;
and for Class A shares of Fidelity Advisor High Income Municipal and
Fidelity Advisor Limited Term Tax-Exempt through a sub-contractual
arrangement. For e ach Fund's respective fiscal year ended, total
operating expenses as a percentage of average net assets for Class A
shares were as follows: 1.57% for Fidelity Advisor Strategic Opportunities;
1.77% for Fidelity Advisor Equity Portfolio Income; 1.11% for Fidelity
Advisor High Yield; 1.23% for Fidelity Advisor Limited Term Bond;
.6 8 % for Fidelity Advisor Government Investment; .92% for High
Income Municipal; and .90% , after reimbursement, for Fidelity
Advisor Limited Term Tax- Exempt. Class A shares of Fidelity Advisor
Emerging Markets Income ha ve an estimated total operating expense of
1.50% for the first year.
Under the Class A Distribution and Service Plans, the Class A shares
of Fidelity Advisor Strategic Opportunities, Fidelity Advisor Equity
Portfolio Income and Fidelity Advisor Emerging Markets Income each
pay a nnually a distribution fee of .65% of average net assets;
Fidelity Advisor High Yield, Fidelity Advisor Government Investment,
Fidelity Advisor High Income Municipal, Fidelity Advisor Limited Term Bond
Fund and Fidelity Advisor Limited Term Tax-Exempt Fund each pay annually
a distribution fee of .25% of average net assets . Up to the
full amount of the distribution fee paid by Class A of each Fund to
Distributors may be reallowed to investment professionals based upon the
level of marketing and distribuiton 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.
INSTITUTIONAL SHARES. Fidelity Advisor Equity Portfolio Income, Fidelity
Advisor Limited Term Bond Fund and Fidelity Advisor Limited Term Tax-Exempt
Fund each offers shares to institutional and retail investors. Shares
offered to institutional investors (Institutional 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
shares are $100,000 and $2,500, respectively. The minimum account balance
is $40,000. Institutional shares of one Fund may be exchanged for
Institutional shares of another Fidelity Advisor Fund. Transfer agent and
shareholder services for Institutional shares are performed by FIIOC. For
the fiscal year ended November 30, 1993, total operating expenses for
Institutional shares as a percent of average net assets were as follows:
.79% for Fidelity Advisor Equity Portfolio Income, .64% for Fidelity
Advisor Limited Term Bond and .65% for Fidelity Advisor Limited Term
Tax-Exempt. Institutional shares have Distribution and Service Plans that
do 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 shares. Institutional 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 shares.
Strategic Opportunities offers a class of shares with a maximum 4.75%
front-end sales charge to current holders of such shares (Initial Shares).
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. An investor in Initial
Shares also may qualify for a reduction of the sales charge under the
Rights of Accumulation or Letter of Intent programs. Sales charges on
Initial Shares are waived for certain groups of investors. Transfer agent
and shareholer services for Initial Shares are performed by Service. For
the fiscal year ended September 30, 1993, total operating expenses as a
percentage of net asset value for Initial Shares were .89%.
Strategic Opportunities offers three classes of shares, Initial Shares,
Class A shares and Class B shares. Class B shares are offered through this
prospectus. Initial Shares and Class A shares are described above and
offered through separate prospectuses. Investment performance will be
measured separately for Initial Shares, Class A shares and Class B 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.
Fidelity Investments is one of the largest investment management
organizations in the U.S. and has its principal business address at 82
Devonshire Street, Boston, MA 02109. It includes a number of different
companies that provide a variety of financial services and products. The
Trusts employ various Fidelity companies to perform certain activities
required to operate the Funds.
Fidelity Management & Research Company is the original Fidelity company
founded in 1946. It provides a number of mutual funds and other clients
with investment research and portfolio management services. It maintains a
large staff of experienced investment personnel and a full complement of
related support facilities. As of April 30 , 1994, FMR advised funds
having approximately 1 6 million shareholder accounts with a total
value of more than $225 billion. Fidelity Distributors Corp. distributes
shares for the Fidelity funds.
FMR Corp. is the parent company for the Fidelity companies. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the Trust), Johnson family members, and various trusts for the
benefit of Johnson family members form a controlling group with respect to
FMR Corp.
Peter J. Allegrini is manager of Advisor High Income Municipal, which he
has managed since February 1992. Mr. Allegrini also manages Spartan
Connecticut Municipal High Yield, Michigan Tax-Free High Yield and Ohio
Tax-Free High Yield. Mr. Allegrini joined Fidelity in 1982.
Robert K. Citrone is manager of Advisor Emerging Markets Income. He also
manages Fidelity New Markets Income F und, 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. 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.
John (Jack) F. Haley Jr. is vice president and manager of Advisor Limited
Term Tax-Exempt, which he has managed since September 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.
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.
APPENDIX
The following paragraphs provide a brief description of securities in which
the Funds may invest and transactions they may make . T he
Funds are not limited by this discussion , however, and may purchase
other types of securities and enter into other types of transactions if
they are consistent with the Fund's investment objective and
policies.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and sold on a
when-issued or delayed-delivery basis, with payment and delivery taking
place at a future date. The market value of securities purchased in this
way may change before the delivery date which could increase fluctuations
in a Fund's yield. Ordinarily, a Fund will not earn interest on securities
purchased until they are delivered.
EQUITY SECURITIES include common stocks, preferred stocks, convertible
securities, and warrants. While FMR believes that these types of
investments in emerging markets present the possibility for significant
capital appreciation over the long term, they also entail a high degree of
risk. The prices of emerging market equities can fluctuate dramatically in
response to company, market, economic, or political news.
FOREIGN CURRENCIES. The value of investments and the value of dividends and
interest earned may be significantly affected by changes in currency
exchange rates. Some foreign currency values may be volatile, and there is
the possibility of governmental controls on currency exchange or
governmental intervention in currency markets, which could adversely affect
a Fund. Although FMR may attempt to manage currency exchange rate risks,
there is no assurance that FMR will do so at an appropriate time or that
FMR will be able to predict exchange rates accurately. For example, if FMR
increases a Fund's exposure to a foreign currency, and that currency's
value subsequently falls, FMR's currency management may result in increased
losses to the Fund. Similarly, if FMR hedges the Fund's exposure to a
foreign currency, and that currency's value rises, the Fund will lose the
opportunity to participate in the currency's appreciation.
CURRENCY MANAGEMENT. The relative performance of foreign currencies is an
important factor in a Fund's performance. FMR may manage a Fund's exposure
to various currencies to take advantage of different yield, risk, and
return characteristics that different currencies can provide for United
States investors.
To manage exposure to currency fluctuations, a Fund may enter into currency
exchange contracts (agreements to exchange one currency for another at a
future date) or currency swap agreements, buy and sell options and futures
contracts relating to foreign currencies, and purchase securities indexed
to foreign currencies. A Fund will use currency exchange contracts in the
normal course of business to lock in an exchange rate in connection with
purchase and sales of securities denominated in foreign currencies. Other
currency management strategies allow FMR to hedge portfolio securities, to
shift investment exposure from one currency to another, or to attempt to
profit from anticipated declines in the value of a foreign currency
relative to the anticipated declines in the value of a foreign currency
relative to the U.S. dollar. There is no limitation on the amount of a
Fund's assets that may be committed to currency strategies.
FOREIGN INVESTMENTS involve additional risks. Foreign securities and
securities denominated in or indexed to foreign currencies may be affected
by the strength of foreign currencies relative to the U.S. dollar, or by
political or economic developments in foreign countries. Foreign companies
may not be subject to accounting standards or governmental supervision
comparable to U.S. companies, and there may be less public information
about their operations. 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. FMR considers these factors in making investments for the
Funds.
A Fund may enter into currency exchange contracts (agreements to exchange
one currency for another at a future date) to manage currency risks and to
facilitate transactions in foreign securities. Although currency forward
contracts can be used to protect the Fund from adverse exchange rate
changes, they involve a risk of loss if FMR fails to predict foreign
currency values correctly.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of each Fund's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price.
INDEXED SECURITIES. Indexed securities values are linked to currencies,
interest rates, commodities, indices, or other financial indicators. Most
indexed securities are short to intermediate term fixed-income securities
whose values at maturity or interest rates rise or fall according to the
change in one or more specified underlying instruments. Indexed securities
may be positively or negatively indexed (i.e., their value may increase or
decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument
or to one or more options on the underlying instrument. Indexed securities
may be more volatile than the underlying instrument itself.
INTERFUND BORROWING PROGRAM. Interfund loans and borrowings normally will
extend overnight, but can have a maximum duration of seven days. A Fund
will lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Each Fund will not
lend more than 5% (Equity Funds) or 7.5% (Fixed-Income Funds) of its assets
to other funds, and will not borrow through the program if, after doing so,
total outstanding borrowings would exceed 15% of total assets. 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. Any
delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed by a
corporate, governmental or other borrower to another party. They may
represent amounts owed to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments involve the risk
of loss in case of default or insolvency of the borrower and may offer less
legal protection to a Fund in the event of fraud or misrepresentation. In
addition, loan participations involve a risk of insolvency of the lending
bank or other financial intermediary. Direct debt instruments may also
include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand.
LOWER-QUALITY DEBT SECURITIES are those rated Ba or lower by Moody's
or BB or lower by S&P that have poor protection against default in the
payment of principal and interest 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-rated debt securities may fluctuate more than those of
higher-rated debt securities, and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates. See "Debt Obligations" on page .
SOVEREIGN DEBT OBLIGATIONS are debt instruments issued or guaranteed by
foreign governments or their agencies, including debt of Latin American
nations or other developing countries. Sovereign debt may be in the form of
conventional securities or other types of debt instruments such as loans or
loan participations. Sovereign debt of developing countries may involve a
high degree of risk, and may be in default or present the risk of default.
Governmental entities responsible for repayment of the debt may be unable
or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as
economic factors.
MORTGAGE-BACKED SECURITIES are issued by government entities and
non-government entities such as banks, mortgage lenders, or other financial
institutions.
A mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as collateralized mortgage
obligations (CMOs), make payments of both principal and interest at a
variety of intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).
Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties. Other
types of mortgage-backed securities will likely be developed in the future,
and a Fund may invest in them if FMR determines they are consistent with a
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.
ASSET-BACKED SECURITIES represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend
on payment of the underlying loans by individuals, although the securities
may be supported by letters of credit or other credit enhancements. The
value of asset-backed securities may also depend on the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing the credit enhancement.
A Fund may purchase units of beneficial interest in pools of purchase
contracts, financing leases, and sales agreements entered into by
municipalities. These municipal obligations may be created when a
municipality enters into an installment purchase contract or lease with a
vendor and may be secured by the assets purchased or leased by the
municipality. However, except in very limited circumstances, there will be
no recourse against the vendor if the municipality stops making payments.
The market for tax-exempt asset-backed securities is still relatively new.
These obligations are likely to involve unscheduled prepayments of
principal.
OPTIONS AND FUTURES CONTRACTS are bought and sold to manage a Fund's
exposure to changing interest rates, security prices, and currency exchange
rates. Some options and futures strategies, including selling futures,
buying puts, and writing calls, tend to hedge a Fund's investment against
price fluctuations. Other strategies, including buying futures, writing
puts, and buying calls, tend to increase market exposure. Options and
futures may be combined with each other or with forward contracts in order
to adjust the risk and return characteristics of the overall strategy. A
Fund may invest in options and futures based on any type of security,
index, or currency, including options and futures traded on foreign
exchanges and options not traded on exchanges.
Options and futures can be volatile investments and involve certain risks.
If FMR applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower a Fund's return. A
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other investments, or if it could
not close out its positions because of an illiquid secondary market.
Options and futures do not pay interest, but may produce taxable capital
gains.
Each Fund will not hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In
addition each Fund will not buy futures or write puts whose underlying
value exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
REAL ESTATE BACKED SECURITIES. Real estate industry companies may include
among others: real estate investment trusts; brokers or real estate
developers; and companies with substantial real estate holdings, such as
paper and lumber producers and hotel and entertainment companies. Companies
engaged in the real estate industry may be subject to certain risks
including: declines in the value of real estate, risks related to general
and local conditions, overbuilding and increased competition, increases in
property taxes and operating expenses, and variations in rental income.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement, a
Fund buys a security at one price and simultaneously agrees to sell it back
at a higher price. A Fund may also make securities loans to broker-dealers
and institutional investors, including FBSI. In the event of the bankruptcy
of the other party to either a repurchase agreement or a securities loan, a
Fund could experience delays in recovering its cash or the securities it
lent. To the extent that, in the meantime, the value of the securities
purchased had decreased or the value of the securities lent had increased,
a Fund could experience a loss. In all cases, FMR must find the
creditworthiness of the other party to the transaction satisfactory.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also involve
greater risk of loss if the counterparty defaults. Some counterparties in
these transactions may be less creditworthy than those in U.S. markets.
RESTRICTED SECURITIES are securities which cannot be sold to the public
without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated
transactions or pursuant to an exemption from registration.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund
temporarily transfers possession of a portfolio instrument to another
party, such as a bank or broker-dealer, in return for cash. At the same
time, the Fund agrees to repurchase the instrument at an agreed-upon price
and time. A Fund expects that it will engage in reverse repurchase
agreements for temporary purposes such as to fund redemptions. Reverse
repurchase agreements may increase the risk of fluctuation in the market
value of a Fund's assets or in its yield.
SHORT SALES. If a Fund enters into short sales with respect to stocks
underlying its convertible security holdings, the transaction may help to
hedge against the effect of stock price declines, but may result in losses
if a convertible security's price does not track the price of its
underlying equity. Under normal conditions convertible securities hedged
with short sales are not currently expected to exceed 15% of a Fund's total
assets.
SWAP AGREEMENTS. As one way of managing its exposure to different types of
investments, a Fund may enter into interest rate swaps, currency swaps, and
other types of swap agreements such as caps, collars, and floors. In a
typical interest rate swap, one party agrees to make regular payments equal
to a floating interest rate times a "notional principal amount," in return
for payments equal to a fixed rate times the same amount, for a specified
period of time. If a swap agreement provides for payments in different
currencies, the parties might agree to exchange the notional principal
amount as well. Swaps may also depend on other prices or rates, such as the
value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of a Fund's investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on a Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. A Fund may also
suffer losses if it is unable to terminate outstanding swap agreements or
reduce its exposure through offsetting transactions.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal obligations, have interest rate adjustment formulas
that help to stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
WARRANTS entitle the holder to buy equity securities at a specific price
for a specific period of time. Warrants tend to be more volatile than their
underlying securities. 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.
ZERO COUPON BONDS do not make 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.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRS (Treasury Investment Growth Receipts), and TRS (Treasury
Receipts) are examples of derivative zeros. Government Investment Fund has
been advised that the staff of the Division of Investment Management of the
SEC does not consider these instruments U.S. government securities as
defined by the 1940 Act. Therefore, Government Investment Fund will not
treat these obligations as U.S. government securities for purposes of the
65% portfolio composition test mentioned on page 11 .
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. government or a government agency.
DEBT OBLIGATIONS. The table below provides a summary of ratings assigned
to debt holdings (not including money market instruments) in Funds which
have the ability to invest over 5% in lower-rated debt securities. These
figures are dollar-weighted averages of month-end portfolio holdings during
the thirteen months ended September 30, 1993 (Strategic Opportunities)
October 31, 1993 (High Yield and High Income Municipal,) and November 30,
1993 (Equity Portfolio Income), presented as a percentage of total
investments. These percentages are historical and are not necessarily
indicative of the quality of current or future portfolio holdings, which
may vary. As of December 31, 1993, Emerging Markets Income had no
investments below Baa/BBB.
The dollar-weighted average of debt securities not rated by either Moody's
or S&P amounted to .89% (Strategic Opportunities) .57% (Equity
Portfolio Income), 18.74% (High Yield), and 25.23% (High Income Municipal)
of total investments. This may include securities rated by other nationally
recognized rating organizations, as well as unrated securities. Unrated
securities are not necessarily lower-quality securities.
MOODY'S RATING & PERCENTAGE OF INVESTMENTS
MOODY'S STRATEGIC EQUITY HIGH HIGH
RATING OPPORTUNIT PORTFOLIO YIELD INCOME
IES INCOME MUNICIPA
L
Aaa/Aa/A 15.99 1.02% .02% 27.39
% %
Baa -- .77% -- 20.40
%
Ba .18% 1.25% 6.60% 8.10%
B .22% 1.27% 34.26 .63%
%
Caa 1.63% .06% 9.09% --
Ca/C -- -- 4.50% --
S&P RATING & PERCENTAGE OF INVESTMENTS
S&P STRATEGIC EQUITY HIGH HIGH
RATING OPPORTUNIT PORTFOLIO YIELD INCOME
IES INCOME MUNICIPAL
AAA/AA/ 15.99 1.03% .97% 29.05
A % %
BBB -- .84% 1.09% 18.73
%
BB -- .98% 6.94% 4.37%
B .80% 1.35% 33.28 1.75%
%
CCC -- .15% 7.62% .04%
CC/C -- -- 1.55% --
D .89% .03% 5.58% --
THE FOLLOWING DESCRIBES MUNICIPAL INSTRUMENTS:
MUNICIPAL SECURITIES include GENERAL OBLIGATION SECURITIES, which are
backed by the full taxing power of a municipality, and REVENUE SECURITIES,
which are backed by the revenues of a specific tax, project, or facility.
INDUSTRIAL REVENUE BONDS are a type of revenue bond backed by the credit
and security of a private issuer and may involve greater risk. PRIVATE
ACTIVITY MUNICIPAL SECURITIES, which may be subject to the federal
alternative minimum tax, include securities issued to finance housing
projects, student loans, and privately owned solid waste disposal
and water and sewage treatment facilities.
TAX AND REVENUE ANTICIPATION NOTES are issued by municipalities in
expectation of future tax or other revenues, and are payable from those
specific taxes or revenues. BOND ANTICIPATION NOTES normally provide
interim financing in advance of an issue of bonds or notes, the proceeds of
which are used to repay the anticipation notes. TAX-EXEMPT COMMERCIAL PAPER
is issued by municipalities to help finance short-term capital or operating
needs.
MUNICIPAL LEASE OBLIGATIONS are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities.
These obligations typically are not fully backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If
funds are not appropriated for the following year's lease payments, the
lease may terminate, with the possibility of significant loss to a Fund.
CERTIFICATES OF PARTICIPATION in municipal lease obligations or installment
sales contracts entitle the holder to a proportionate interest in the
lease-purchase payments made.
RESOURCE RECOVERY BONDS are a type of revenue bond issued to build
facilities such as solid waste incinerators or waste-to-energy plants.
Typically, a private corporation will be involved, at least during the
construction phase, and the revenue stream will be secured by fees or rents
paid by municipalities for use of the facilities. The viability of a
resource recovery project, environmental protection regulations, and
project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
A DEMAND FEATURE is a put that entitles the security holder to repayment of
the principal amount of the underlying security, upon notice at any time or
at specified intervals. A STANDBY COMMITMENT is a put that entitles the
security holder to same-day settlement at amortized cost plus accrued
interest.
Issuers or financial intermediaries who provide demand features or standby
commitments often support their ability to buy securities on demand by
obtaining LETTERS OF CREDIT (LOCS) or other guarantees from domestic or
foreign banks. LOCs also may be used as credit supports for other types of
municipal instruments. FMR may rely upon its evaluation of a bank's credit
in determining whether to purchase an instrument supported by an LOC. 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.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
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 the 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.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'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 C 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 STANDARD & POOR'S CORPORATION'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 rated 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.
The ratings from AA to D may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAIs, in connection with
the offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the Fund or Distributors. This Prospectus and the related
SAIs do not constitute an offer by a Fund or by Distributors to sell or to
buy shares of a Fund to any person to whom it is unlawful to make such
offer.
FIDELITY ADVISOR STRATEGIC
OPPORTUNITIES FUND - INITIAL SHARES
82 Devonshire Street
Boston, Massachusetts 02109
A FUND OF
FIDELITY ADVISOR SERIES VIII
PROSPECTUS
THE FUND page 2
SHAREHOLDER SERVICES page 1 7
June 30, 1994
Fidelity Advisor Strategic Opportunities Fund (the
" Fund " ) seeks capital appreciation by investing primarily in
securities of companies believed by Fidelity Management & Research
Company (FMR) to involve a "special situation."
TABLE OF CONTENTS
Summary of Fund Expenses
Summary
Financial Highlights
How the Fund Works
Matching the Fund to Your
Investment Needs
Limiting Investment Risks
Portfolio Transactions
Performance
Distributions and Taxes
The Fund and the Fidelity
Organization
Management and Service Fees
How to Buy Additional Shares
Investment Requirements to
Remember
Shareholder Services
How to Redeem Shares
Appendix
The Fund is comprised of three classes of shares, Initial Shares
(formerly, Special Situations: Initial Class), Class A (formerly Special
Situations: Advisor Class) and Class B. Initial Shares are available only
to current shareholders of Initial Shares. Class A and Class B shares are
offered to new investors through separate prospectuses.
Please read this Prospectus before investing. It is designed to provide
you with information and to help you decide if the Fund's goals match your
own. Retain this document for future reference.
A Statement of Additional Information (dated June 30, 1994) for the Fund
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference. This free Statement and the Annual Report
for the fiscal year ended September 30, 1993 are available upon request
from Fidelity Distributors Corporation (Distributors) , 82 Devonshire
Street, Boston, MA 02109.
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 DISTRIBUTORS CORPORATION
Nationwide 1-800-544-8888
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.
22.THE FUND
23.SUMMARY OF FUND EXPENSES
The expenses summary format below was developed for use by all mutual
funds to help you make your investment decisions. Of course, you should
consider this expense information along with other important information,
including the Fund's investment objective and its past performance.
For information regarding expenses of Class A and Class B Shares,
see " The Fund and the Fidelity Organization ," on page
.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases
(as a percentage of the offering price) 4.75%
Sales Load on Reinvested Di stribution s None
Deferred Sales Load Imposed on Redemptions None
Redemption Fee None
Administrative Fee None
Shareholder Transaction Expenses represent charges paid when you purchase,
redeem or exchange Initial S hares of the Fund. See "How to Buy
Additional Shares," beginning on page , and "Exchange Privilege" on page .
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .54%
Other Expenses .35%
TOTAL OPERATING EXPENSES .89%
Annual Fund operating expenses are based on the Fund's historical expenses.
Management fees are paid by the Fund to FMR for managing its investments
and business affairs and will vary based on performance. The Initial
Shares incur other expenses for maintaining shareholder records,
furnishing shareholder statements and reports and other services. The
Initial Shares operating expenses include custodial, legal and accounting
fees, charges to register Initial Shares of the Fund with federal and state
regulatory authorities and other miscellaneous expenses. The Initial Shares
operating expenses for the fiscal year ended September 30, 1993 were .89%
of average net assets. Management fees and other expenses already have
been reflected in the Fund's Initial S hare 's share
price and are not charged directly to individual shareholder accounts.
Please refer to the section "Management and Service Fees" on page .
EXAMPLE
1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses, including the maximum 4.75% sales
charge, on a $1,000 investment in Initial Shares assuming (1) a 5%
annual return and (2) redemption at the end of each time period: $56 $75
$94 $152
The above hypothetical example illustrates the expenses, including the
maximum 4.75% sales charge, associated with a $1,000 investment in
Initial Shares over periods of one, three, five and ten years, based on
the expenses in the table and an assumed annual return of 5%. THE RETURN OF
5% AND EXPENSES SHOULD NOT BE CONSIDERED INDICATIONS OF ACTUAL OR EXPECTED
INITIAL SHARE PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY VARY.
24.SUMMARY
INVESTMENT OBJECTIVE. The Fund's investment objective is to seek capital
appreciation by investing primarily in securities of companies believed by
FMR to involve a "special situation.'' The Fund also may invest in
companies not involving a special situation whose securities are
believed by FMR to be undervalued. The Fund may purchase common stocks,
securities convertible into common stocks and debt securities. The Fund may
not always achieve its investment objective.
INVESTMENT POLICIES. At least 65% of the Fund's assets normally will be
invested in companies involving a special situation. A 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. Typically, these securities will pay little, if any, income,
which will be entirely incidental to the objective of capital growth. The
Fund expects to be fully invested under most market conditions, and may
make substantial temporary investments in high quality debt securities for
defensive purposes. The Fund may purchase foreign securities and may buy
and sell stock index futures contracts, options and options on futures with
respect to a portion of its assets.
INVESTMENT ADVISER AND GENERAL DISTRIBUTOR. FMR, 82 Devonshire Street,
Boston, MA 02109, is the investment adviser to the Fund. FMR, one of the
largest investment management organizations in the U nited
S tates , serves as investment adviser to investment companies
that had aggregate net assets of more than $2 25 billion and
approximately 1 6 million shareholder accounts as of April 30,
199 4 . Distributors is the general distributor for shares of the
Fund.
INVESTING IN THE FUND. N ew investors may not purchase Initial
Shares . Current shareholders may make additional investments in the
I nitial S hares of the Fund of $250 or more. Initial
Shares may be purchased at the net asset value next determined after
your order to purchase is received plus a maximum 4.75% sales charge (as a
percentage of the offering price). See "How to Buy Additional Shares,''
page .
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS. Dividends from the Fund's net
investment income and capital gain distributions on the Fund's securities
transactions are distributed annually. Dividends and capital gain
distributions are reinvested automatically in additional Initial
S hares at net asset value (without a sales charge) unless you elect
otherwise. You also may elect to reinvest the dividend and capital gain
distributions into another Fidelity fund.
REDEMPTION OF INVESTMENT. You may redeem all or any part of the value of
your account by mail, Fidelity Money Line or by exchange as described under
"How to Redeem Shares,'' page . The price at which your order will be
effected is the net asset value next determined after your order to redeem
is received.
RISK FACTORS. The value of the Fund's securities will fluctuate in response
to stock market developments and interest rate movements. Securities of
companies involved in a special situation may have speculative
characteristics. In addition, investing in securities of foreign companies
may involve currency and other risks not associated with domestic
investments. The Fund may enter into repurchase agreements and lend its
portfolio securities which may involve credit risks. The Fund also may
invest in lower-quality high-yielding debt securities which may present
certain credit risks, and it may also invest in futures and options .
S ee " Appendix " on page . Investors should review the
investment objective and policies of the Fund carefully and consider their
ability to assume any risk involved in purchasing Initial S hares of
the Fund.
25.FINANCIAL HIGHLIGHTS
The table that follows (with the exception of the unaudited information)
is included in the Initial Shares' Annual Report and has been audited by
Coopers & Lybrand, independent accountants. Their report on the
financial statements and financial highlights is included in the Annual
Report. The financial statements and financial highlights are incorporated
by reference into the Fund's Statement of Additional Information.
December 31,
Six Month s 1983,
Ended (Commencement
March 31, of Operations) to
1994 Years Ended September 30, September 30,
(Unaudited) 1993 1992(dagger)(dagger) 1991 1990 1989 1988 1987 1986
1985 1984
SELECTED PER-SHARE DATA
Net asset value,
beginning of period $ 22.72 $ 19.72 $ 21.55 $ 17.37 $ 19.77 $
15.65 $ 19.13 $ 16.71 $ 12.70 $ 11.05 $ 10.01
Income from Investment
Operations
Net investment income (.17) .45 .73 .77 .80 .64 .48 .53
.36 .35 .16
Net realized and
unrealized
gain (loss) on
investments (.68) 4.46 .58 4.26 (2.49) 4.08 (1.80) 2.95
5.05 1.56 .88
Total from investment
operations (.85) 4.91 1.31 5.03 (1.69) 4.72 (1.32) 3.48
5.41 1.91 1.04
Less Distributions
From net investment
income (.51) (.70) (.72) (.85) (.71) (.60) (.25) (.09)
(.24) (.06) --
From net realized gain on
investments (1.71) (1.21) (2.42) - -- - (1.91)
(.97) (1.16) (.20) --
Total Distributions (2.22) (1.91) (3.14) (.85) (.71) (.60)
(2.16) (1.06) (1.40) (.26) --
Net asset value, end
of period $ 19.65 $ 22.72 $ 19.72 $ 21.55 $ 17.37 $ 19.77 $ 15.65
$ 19.13 $ 16.71 $ 12.70 $ 11.05
TOTAL RETURN (dagger) (4.33)% 26.98% 7.89% 30.01% (8.96)%
31.19% (4.63)% 21.87% 46.10% 17.64% 10.39%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $ 18,964 $ 20,707 $ 17,933 $ 19,193 $ 15,988 $
19,780 $19,221 $27,809 $31,991 $ 13,602 $ 8,078
Ratio of expenses to average
net assets 1.13%* .89%(h diamond) .87% 1.00% 1.03% .64%#
1.49% 1.30% 1.50% 1.50% 1.50%
Ratio of investment income
- net to average net
assets 2.25%* 2.74% 3.78% 4.12% 4.21% 4.08% 3.31% 2.88%
2.40% 2.87% 2.03%
Portfolio turnover rate 241% 183% 211% 223% 114% 89% 160%
255% 225% 214% 284%
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED .
(dagger)(dagger) AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF
EQUALIZATION ACCOUNTING.
# INCLUDES REIMBURSEMENT OF $.08 PER SHARE FROM FIDELITY SERVICE COMPANY
FOR ADJUSTMENTS TO PRIOR PERIODS' FEES. IF THIS REIMBURSEMENT HAD NOT
EXISTED THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.04%.
(h diamond) INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FMR FOR
ADJUSTMENTS TO PRIOR PERIODS' FEES. IF THIS REIMBURSEMENT HAD NOT EXISTED
THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.05%.
* ANNUALIZED
26.HOW THE FUND WORKS
27.INVESTMENT OBJECTIVE
Fidelity Advisor Strategic Opportunities Fund's investment objective
is to seek capital appreciation by investing primarily in securities of
companies believed by FMR to involve a "special situation.'' As used in
this Prospectus, 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. The Fund may not always
achieve its objective, but FMR will follow the investment style described
in the following paragraphs.
THE FUND'S INVESTMENT
OBJECTIVE, POLICIES, AND
LIMITATIONS, EXCEPT AS NOTED,
ARE FUNDAMENTAL AND MAY BE
CHANGED ONLY BY VOTE OF A
MAJORITY OF THE OUTSTANDING
SHARES OF THE FUND.
28.INVESTMENT POLICIES, RISKS, AND LIMITATIONS
A special situation may involve one or more of the following
characteristics:
(bullet) a technological advance or discovery, the offering of a new or
unique product or service, or changes in consumer demand or consumption
forecasts.
THE FUND NORMALLY WILL INVEST
AT LEAST 65% OF ITS ASSETS IN
COMPANIES INVOLVING A
SPECIAL SITUATION.
(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.
(bullet) new or changed management or material changes in management
policies or corporate structure.
(bullet) significant economic or political occurrences abroad, including
changes in foreign or domestic import and tax laws or other regulations.
(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. As a non-fundamental policy, the Fund normally will invest at
least 65% of its total assets in companies involving a special
situation.
FMR intends to invest primarily in common stocks and securities that are
convertible into common stocks; however, i t also may invest in debt
securities of all types and quality if FMR believes that investing in these
securities will result in capital appreciation. As a non-fundamental
investment policy, the Fund may invest in lower rated, high-yielding debt
securities ( sometimes referred to as "junk bonds''), although it
intends to limit its investments in these securities to 35% of its assets.
The Fund also may invest in unrated securities. Unrated securities are
not necessarily of lower quality than rated securities, but they may not
be attractive to as many buyers. The Fund may invest up to 30% of its
assets in foreign securities of all types and may enter into foreign
currency exchange contracts for the purpose of managing exchange rate
risks. The Fund may purchase indexed securities, illiquid instruments,
loans and other direct debt instruments, options and futures contracts,
repurchase agreements, and securities l oans, restricted
securities, swap agreements , warrants and zero coupon bonds. These
practices are described in the Appendix on page . Further information about
the Fund's investment policies can be found in its Statement of Additional
Information.
THE FUND EXPECTS TO BE FULLY
INVESTED UNDER MOST MARKET
CONDITIONS.
FMR normally invests the Fund'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.
29.MATCHING THE FUND TO YOUR INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced investment plan; the
Fund stresses capital appreciation and does not emphasize current income.
It is also important to point out that the Fund makes most sense for you if
you can afford to ride out changes in the stock market, as it invests
primarily in common stocks and securities convertible into common stock.
There are greater risks involved in investing in securities of smaller
companies rather than companies operating according to established patterns
and having longer operating histories. Additionally, larger
well-established companies experiencing a special situation may involve, to
a certain extent, breaks with past experience, which also may pose risks.
The Fund's portfolio securities may be ones in which other investors have
not shown significant interest or confidence and may be regarded as
speculative.
AN INVESTMENT IN THE FUND
MAY BE CONSIDERED MORE
SPECULATIVE THAN AN
INVESTMENT IN OTHER FUNDS
WHICH SEEK CAPITAL
APPRECIATION.
30.LIMITING INVESTMENT RISKS
The Fund has adopted the following investment limitations designed to
reduce investment risk:
WHILE AN INVESTMENT IN THE
FUND IS NOT WITHOUT RISK, FMR
FOLLOWS CERTAIN POLICIES IN
MANAGING THE FUND'S PORTFOLIO
WHICH MAY HELP TO REDUCE
RISK.
1. The Fund may not purchase a security if, as a result: (a) more than 5%
of its total assets would be invested in the securities of any issuer; or
(b) it would hold more than 10% of the outstanding voting securities of any
issuer.
2. The Fund may not purchase the securities of any issuer if, as a result,
more than 25% of the Fund's total assets would be invested in securities of
companies having their principal business activities in the same industry.
3. The Fund (a) may borrow money for temporary or emergency purposes in an
amount not exceeding 33 1/3% of the value of its total assets from a bank
or mutual fund advised by FMR or an affiliate; (b) may engage in reverse
repurchase agreements; and (c) may not purchase any security while
borrowings representing 5% or more of its total assets are outstanding.
4. The Fund (a) may lend securities to a broker-dealer or institution when
the loan is fully collateralized, and (b) lend money to other funds advised
by FMR or an affiliate. The Fund will limit all loans in the aggregate to
33 1/3% of its total assets.
Limitations 1 and 2 do not apply to U.S. government securities. The Fund's
investment objective, limitations 1 and 2 and the percentage limitations on
borrowings and loans in limitations 3 and 4 are fundamental policies and
may be changed only by vote of a majority of the Fund's outstanding shares.
Non-fundamental policies may be changed without shareholder approval. In
addition, these limitations and the policies discussed in "How the Fund
Works'' on page , are considered at the time of purchase. With the
exception of the percentage limitations on borrowing, the sale of portfolio
securities is not required in the event of a subsequent change in
circumstances.
The Fund may borrow money from and lend money to other mutual funds advised
by FMR, or its affiliates, subject to certain restrictions (see the
Appendix on page ). If the Fund borrows money, its share price may be
subject to greater fluctuation until the borrowing is paid off. To this
extent, purchasing securities when borrowings are outstanding may involve
an element of leverage.
31.PORTFOLIO TRANSACTIONS
FMR uses various brokerage firms to carry out the Fund's portfolio
transactions. Since FMR places a large number of transactions, including
those of Fidelity's other funds, the Fund pays commissions lower than those
paid by individual investors. Also, the Fund incurs lower costs than those
incurred by individuals when purchasing debt securities.
FMR CHOOSES BROKER-DEALERS
BY JUDGING PROFESSIONAL
ABILITY AND QUALITY OF SERVICE.
The Fund has authorized FMR to allocate transactions to some broker-dealers
who help distribute the Fund's shares or shares of Fidelity's other funds
to the extent permitted by law, and on an agency basis to an affiliate,
Fidelity Brokerage Services Inc. (FBSI). FMR will also allocate brokerage
transactions to Fidelity Portfolio Services, Ltd., a wholly-owned
subsidiary of Fidelity International Limited (FIL). FMR may also allocate
brokerage transactions to the fund's custodian, acting as a broker-dealer,
or to other broker-dealers, so long as transaction quality and commission
rates are comparable to those of other broker-dealers, where the
broker-dealers will allocate a portion of the commissions paid toward
payment of the fund expenses. These expenses currently include transfer
agent and custodian fees.
Higher commissions may be paid to those firms that provide research
services to the extent permitted by law. FMR also is authorized to allocate
brokerage transactions to FBSI in order to secure from FBSI research
services produced by third party, independent entities. FMR may use this
research information in managing the Fund's assets, as well as assets of
other clients.
The frequency of portfolio transactions - the Fund's turnover
rate - will vary from year to year depending on market conditions.
The Fund's turnover rate for fiscal 1993 was 241 %. Because a higher
turnover rate increases brokerage costs and may increase taxable
capital gains, FMR carefully weighs the anticipated benefits of short-term
investment s against these consequences.
32.PERFORMANCE
The Fund's performance may be quoted in advertising in terms of total
return. All performance information is historical and is not intended to
indicate future performance. Share price and total return fluctuate in
response to market and other factors, and the value of the Fund's shares
when redeemed may be worth more or less than original cost. For additional
performance information, please call 1-800-544-8888 for a free annual
report .
TOTAL RETURN shows the overall dollar or percentage change in value
including changes in share price and assuming all the Fund's dividends and
capital gain distributions are reinvested. A CUMULATIVE TOTAL RETURN
reflects the Fund's performance over a stated period of time. An AVERAGE
ANNUAL TOTAL RETURN reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the Fund's
performance had been constant over the entire period. Average annual
returns tend to smooth out variations in the Fund's return and are not the
same as actual year-by-year results. Average annual and cumulative total
returns usually will include the effect of paying the maximum sales charge.
Excluding the sales charge from a total return calculation produces a
higher total return figure. To illustrate the components of overall
performance, the Fund may separate its cumulative and average annual
returns into income results and capital gain or loss. The Fund may quote
its total returns on a before-tax or after-tax basis.
Other illustrations of performance may show moving averages over
specified periods.
The following chart compares each class's year-by-year total returns
to the record of the Standard & Poor's 500 Composite Stock Price Index
(S&P 500), a widely recognized, unmanaged index of common stock prices.
Figures for the S&P 500 include the change in value of the S&P 500
and assume reinvestment of all dividends paid by the S&P 500 stocks.
Tax consequences are not included in the illustration, nor are brokerage or
other fees calculated in the S&P 500 figures.
33.COMPARE THE PERFORMANCE OF EACH CLASS OF STRATEGIC OPPORTUNITIES
TO THE RECORD OF THE S&P 500.
YEARS ENDED INITIAL SHARES CLASS A CLASS B S&P 500
SEPTEMBER 30 TOTAL RETURN TOTAL RETURN TOTAL RETURN TOTAL RETURN
1984 * 5.15 5.15 6.39 4.52
1985 12.05 12.05 13.64 14.39
1986 39.16 39.16 42.10 31.51
1987 16.08 15.66 17.43 43.27
1988 -9.16 -9.50 -8.24 -12.54
1989 24.96 24.25 26.45 32.97
1990 -13.29 -13.79 -13.02 -9.23
1991 23.83 23.36 25.51 31.17
1992 2.77 2.17 3.61 11.05
1993 20.95 20.33 22.33 13.00
* From fund commencement date, December 31, 1983 through September 30,
1984.
Total returns for Initial Shares and Class A Shares include the effect
of the maximum 4.75% front-end sales charge. Total returns for Class B
Shares include the effect of the maximum contingent deferred sales charge
applicable at the end of the stated period. The initial offering of Class A
shares was August 20, 1986. On January 1, 1987, Class A imposed a .65%
12b-1 fee, which is not reflected in returns prior to that date. The
initial offering of Class B shares, which will carry a 1.00% 12b-1 fee
(inclusive of a .25% shareholder service fee) is expected on or about June
30, 1994. Class B total returns calculated for periods prior to that date,
reflect the effects of Class A's .65% 12b-1 fee and of the applicalbe
maximum contingent deferred sales charge. Actual Class B total returns,
would have been lower due to higher 12b-1 fees.
When considering the Fund's performance you should bear in mind these
additional factors:
(bullet) The Fund's emphasis is on stocks, so performance is related
strongly to stock market performance, including short-term market swings.
(bullet) Stock prices fluctuated widely over the periods shown.
34.DISTRIBUTIONS AND TAXES
The Fund distributes substantially all of its net investment income and
capital gains to shareholders each year, normally in December.
YOU SHOULD KEEP ALL
STATEMENTS YOU RECEIVE TO
ASSIST IN YOUR PERSONAL
RECORDKEEPING.
FEDERAL TAXES. Distributions from the Fund's income and short-term capital
gains are taxed as dividends, and long-term capital gain distributions are
taxed as long-term capital gains. A portion of the Fund's dividends may
qualify for the dividends received deduction for corporations. The Fund's
distributions are taxable when they are declared, whether you take them in
cash or reinvest them in additional Initial S hares, except that
distributions declared in December and paid in January are taxable as if
paid on December 31. The Fund will send you a tax statement by January 31
showing the tax status of the distributions you received in the past year,
and will file a copy with the Internal Revenue Service (IRS).
CAPITAL GAINS. You may realize a capital gain or loss when you redeem
(sell) or exchange Initial S hares. For most types of accounts, the
Fund will report the proceeds of your redemptions to you and the IRS
annually. However, because the tax treatment also depends on your purchase
price and your personal tax position, you also should keep your regular
account statements to use in determining your tax.
"BUYING A DIVIDEND." On the record date for a distribution, the Fund's
Initial Share value is reduced by the amount of the distribution. If
you buy Initial S hares just before the record date ("buying a
dividend"), you will pay the full price for the shares, and then receive a
portion of the price back as a taxable distribution.
OTHER TAX INFORMATION. In addition to federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your
area.
When you sign your account application, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the Fund to
withhold 31% of your taxable distributions and redemptions.
35.THE FUND AND THE FIDELITY ORGANIZATION
The Fund is a series of Fidelity Advisor Series VIII (the Trust), an
open-end, management investment company organized as a Massachusetts
business trust on September 23, 1983. As a Massachusetts business trust,
the Trust is not required to hold annual shareholder meetings,
although special meetings may be called for a specific class , the
Fund or the Trust as a whole for purposes such as electing or
removing Trustees, changing fundamental investment policies or limitations
or approving a management contract or plan of distribution. As a
shareholder you receive one vote for each share you own and fractional
votes for each fractional share you own. Initial shareholders ,
Class A shareholders and Class B shareholders vote separately on
those matters which pertain only to Initial Shares , Class A
Shares or Class B Shares, respectively. There is a possibility that
claims asserted against Class A shares or Class B
s hares may subject Initial Shares to certain liabilities.
Performance calculations will be made separately for Initial Shares ,
Class A shares and Class B s hares.
THE TRUST'S BOARD OF TRUSTEES
SUPERVISES FUND ACTIVITIES
AND REVIEWS CONTRACTUAL
ARRANGEMENTS WITH
COMPANIES THAT PROVIDE THE
FUND WITH SERVICES.
CLASS A shares are offered to retail investors who engage an investment
professional for investment advice, with a maximum 4.75% sales
charge . 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 the Fund or in
combination with purchases of shares of certain 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 are waived for certain groups of investors. In addition, Class A
investors may participate in various investment programs.
Class A shares of the Fund may be exchanged for Class A shares of other
Fidelity Advisor Funds. Transfer agent and shareholder services for Class A
shares are performed by State Street Bank and Trust Company. For the fiscal
year ended September 30, 1993, total operating expenses for the Class A
shares was 1.57% of average net assets.
Under the Class A Distribution and Service Plan, the Class A shares pay
an annual distribution fee at the rate of .65% of the average
daily net assets of Class A . Up to the full amount of the
distribution fee paid by Class A to Distributors may be reallowed to
investment professionals based upon the level of marketing and distribution
services provided.
CLASS B shares are offered to retail investors who engage an investment
professional for investment advice, with a contingent deferred sales
charge. Class B shares are subject to a n annual distribution fee
at the rate of .75% of the average daily net assets of Class B ,
a n annual service fee at the rate of .25% of the average daily
net assets of Class B, 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 five year s , Class B shares
automatically convert to Class A shares. The initial and subsequent
investment minimums for Class B are identical to those for Class A.
Class B shares may be exchanged only for Class B shares of certain other
Fidelity Advisor Funds, as well as for Class B shares of Daily Money Fund:
U.S. Treasury Portfolio. Transfer agent and shareholder services for Class
B shares are performed by Fidelity Investments Institutional Operations
Company (FIIOC) . For the current fiscal year, total operating expenses
for Class B shares are estimated to be 1.92 %.
I nvestment professionals may receive different levels of
compensation with respect to one particular class of shares over another
class of shares of the Fund.
Fidelity Investments is one of America's largest investment management
organizations and has its principal business address at 82 Devonshire
Street, Boston, MA 02109. It includes a number of different companies that
provide a variety of financial services and products. The Fund employs
various Fidelity companies to perform certain activities required to
operate the Fund.
FMR is the original Fidelity company, founded in 1946. It provides a number
of mutual funds and other clients with investment research and portfolio
management services. It maintains a large staff of experienced investment
personnel and a full complement of related support facilities. Distributors
distributes shares for the Fidelity funds. FMR Corp. is the parent company
for the Fidelity companies. Through ownership of voting common stock,
Edward C. Johnson 3d, (President and a Trustee of the Trust), Johnson
family members, and various trusts for the benefit of the Johnson family
form a controlling group with respect to FMR Corp.
AS OF APRIL 30, 199 4 , FMR
ADVISED FUNDS HAVING MORE
THAN 16 MILLION SHAREHOLDER
ACCOUNTS WITH A TOTAL VALUE OF
MORE THAN $ 225 BILLION.
Daniel R. Frank is portfolio manager and vice president of Fidelity
Strategic Opportunities Fund which he has managed since December 1983.
Previously, he was assistant to Peter Lynch on Fidelity Magellan Fund. Mr.
Frank joined Fidelity in 1979.
36.MANAGEMENT AND SERVICE FEES
The Fund, pursuant to its management contract, pays FMR a monthly fee for
managing its investments and business affairs made up of a basic fee and a
performance adjustment. The annual basic fee rate is the sum of two
components:
1. A group fee rate based on the monthly average net assets of all the
mutual funds advised by FMR. This rate cannot rise above .52%, and drops
(to as low as a marginal rate of . 31%*) as total assets in all these
funds rise. The effective group fee rate for September 1993 was
.3262%.
2. An individual fund fee rate, which varies.
* FMR voluntarily agreed to adopt revised group fee rate schedules which
provide for a marginal rate as low as .285% when average group net assets
exceed $336 billion. A new management contract with a revised group fee
rate schedule will be presented for approval at the next shareholder
meeting.
One-twelfth of the annual basic fee rate is applied to the Fund's net
assets averaged over the most recent month, giving a dollar amount which is
the basic fee for that month.
The performance adjustment, also calculated monthly, is based on a
comparison of the Fund's performance to that of the S&P 500 over the
most recent 36-month period. The difference is converted into a
dollar amount that is added to or subtracted from the basic fee. This
adjustment rewards FMR when the Fund outperforms the S&P 500 and
reduces FMR's fee when the Fund underperforms the S&P 500. The maximum
annualized performance adjustment rate is + or - .20%. The Fund
is comprised of three classes of shares: Initial 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.
For the fiscal period ended September 30, 1993, FMR's management fee was
0.54% of the Fund's average net assets.
FMR has entered into sub-advisory agreements with 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. FMR has entered into sub-advisory agreements on behalf of the Fund.
Sub-advisors provide research and investment advice and research services
with respect to issuers based outside the United States and FMR may grant
sub-advisors investment management authority to buy and sell securities if
FMR believes it would be beneficial to the Fund. FMR U.K. focuses
primarily on issuer s based in Europe, and FMR Far East
focuses primarily on issuers based in Asia and the Pacific Basin.
Under the sub-advisory agreements, FMR, not the Fund, pays FMR U.K. and FMR
Far East fees equal to 110% and 105%, respectively, of each sub-adviser's
costs incurred in connection with its sub-advisory agreement.
FMR may, from time to time, agree to reimburse the Fund for expenses above
a specified percentage of average net assets. FMR retains the ability to be
repaid by the Fund for those expense reimbursements in the amount that
expenses fall below the limit prior to the end of the fiscal year. Fee
reimbursements by FMR will increase the Fund's total return, and
reimbursement by the Fund will lower its total return.
Initial Shares of the Fund pay Service, an affiliate of FMR,
transfer agent fees based on the type, size and number of accounts in the
Initial Shares of the Fund, and the number of monetary transactions
made by shareholders. For the 1993 fiscal year, the transfer agent
fees for Initial Shares amounted to $38,794.
FIDELITY SERVICE CO. (SERVICE)
ACTS AS THE TRANSFER AND
DIVIDEND-PAYING AGENT FOR
INITIAL SHARES AND MAINTAINS
ITS SHAREHOLDER RECORDS FOR
INITIAL SHARES .
Initial Shares of t he Fund also pays Service to calculate its daily
Initial S hare price, to maintain its general accounting records, and
to administer its securities lending program. The fees for pricing and
bookkeeping services are based on the Fund's average net assets, but must
fall within a range of $45,000 to $750,000 per year. The fees for
securities lending services are based on the number and duration of
individual securities loans. For fiscal 1993, the fees for pricing and
bookkeeping and securities lending services for Initial Shares
(including related out-of-pocket expenses) amounted to $145,494.
The Fund's total operating expenses for the fiscal year ended September 30,
1993 were .89% of average net assets.
37.HOW TO BUY ADDITIONAL SHARES
<TABLE>
<CAPTION>
<S> <C>
METHOD Additional (minimum) Investment
BY MAIL - $250
Please make your check payable to the name of
the Fund, with your account number on the check,
and mail to: the address printed on your account
statement.
AT AN INVESTOR Visit the Investor Center nearest you to make
CENTER - investments by check.
FOR ALL OPTIONS BELOW, PLEASE CALL 1-800-544-7777.
BY EXCHANGE - $250
from your account with an identical registration in
certain of Fidelity's other funds.
BY WIRE - $250
Federal funds should be wired to: Bankers Trust
Company, Bank Routing No. 021001033, Account
No. 00163053, together with the name of the Fund,
your account number and name(s). Call
1-800-544-6666 for additional information.
BY FIDELITY MONEY $250
LINE - You must have received prior notification by mail
from Service that your Fidelity Money Line is
active. The maximum transaction amount is
$50,000.
</TABLE>
38.SHARE PRICE
The price of one Initial S hare (the offering price) is its net asset
value per share (NAV) plus a sales charge, which is a variable percentage
of the offering price depending upon the amount of the purchase. The table
below shows total sales charges.
SALES CHARGES AS % OF
AMOUNT OF PURCHASE OFFERING NET
IN SINGLE TRANSACTION PRICE AMOUNT
INVESTED
Less than $50,000 4.75% 4.99%
$50,000 to less than $100,000 4.50% 4.71%
$100,000 to less than $250,000 3.50% 3.63%
$250,000 to less than $500,000 2.50% 2.56%
$500,000 to less than $1,000,000 2.00% 2.04%
$1,000,000 or more None None
CALCULATING NAV. Service calculates the NAV of Initial Shares which
is computed by adding the Initial Shares pro rata share of the value
of all security holdings and other assets of the Fund, deducting the
Initial Shares pro rata share of the liabilities of the Fund,
deducting the Initial Shares liabilities, and dividing the result by
the number of Initial S hares of the Fund outstanding. NAV is
calculated at the close of trading, which coincides with the close of
business of the New York Stock Exchange (NYSE) (normally 4:00 p.m. Eastern
time). The Fund is open for business each day the NYSE is open for trading.
Portfolio securities and other assets are valued on the basis of market
quotations or, if quotations are not available, by a method that the Board
of Trustees believes accurately reflects fair value. Foreign securities are
valued based on 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.
Reduced sales charges are applicable to purchases of $50,000 or more of
Initial Shares. To obtain the reduction of the sales charge, Service
must be notified at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable sales charge.
In addition you may qualify for a reduction of the sales charge under the
Rights of Accumulation or Letter of Intent if your total investment in
Initial Shares amounts to at least $50,000. Please see the sales
charge schedule above to determine the sales charge for investments
totaling more than $50,000. Please refer to the Application or to the
Fund's Statement of Additional Information for details about each of these
investment programs.
SALES CHARGE WAIVERS. Sales charges do not apply to Initial S hares
of the Fund purchased: (1) by registered representatives, bank trust
officers and other employees (and their immediate families) of investment
professionals having agreements with Fidelity Distributors Corporation; (2)
by a current or former Trustee or officer of a Fidelity fund or a current
or retired officer, director or regular employee of FMR Corp. or its direct
or indirect subsidiaries (a "Fidelity Trustee or employee"), the spouse of
a Fidelity Trustee or employee, a Fidelity Trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for
the sole benefit of the minor child of a Fidelity Trustee or employee; (3)
by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more; (4) by 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) by trust institutions investing on their own behalf or
on behalf of their clients; (6) in accounts as to which a bank or
broker-dealer charges an investment management fee, provided the bank or
broker-dealer has an agreement with Fidelity Distributors Corporation; (7)
as part of an employee benefit plan (including 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 having
more than 200 eligible employees or a minimum of $3,000,000 in plan assets
invested in Fidelity mutual funds, or as part of an employee benefit plan
maintained by a U.S. employer that is a member of a parent-subsidiary group
of corporations (within the meaning of Section 1563(a)(1) of the Internal
Revenue Code, with "50%" substituted for "80%") any member of which
maintains 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, and the assets of which are held in a bona fide trust for the
exclusive benefit of employees participating therein; (8) by any state,
county, or city, or any governmental instrumentality, department, authority
or agency; (9) with redemption proceeds from other mutual fund complexes on
which the investor has paid a front-end sales charge only; and (10) 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 $3,000,000 in assets invested in
Fidelity mutual funds.
YOU MAY BE ELIGIBLE FOR A
SALES CHARGE REDUCTION IF
YOUR PURCHASE MEETS CERTAIN
CONDITIONS.
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 fully defined, in Distributors' opinion it
should not prohibit banks from being paid for shareholder servicing and
recordkeeping. If, because of changes in law or regulation, or because of
new interpretations of existing law, a bank or the Fund were prevented from
continuing these arrangements, it is expected that the Trust's Board would
make other arrangements for these services and that shareholders would not
suffer adverse financial consequences. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
39.INVESTMENT REQUIREMENTS TO REMEMBER
Your purchase will be processed at the next offering price based on the
next NAV calculated after your order is received and accepted. All your
purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash will be accepted. If you make a purchase with more than one
check, each check must have a value of at least $50, and the minimum
investment requirement shown on the chart still applies. The Fund reserves
the right to limit the number of checks processed at one time. If your
check does not clear, your purchase will be canceled and you could be
liable for any losses or fees incurred. When you purchase by check or via
Fidelity Money Line, the Fund may hold payment on redemptions until it is
reasonably satisfied that the investment is collected (which can take up to
seven days).
BEFORE YOU BUY ADDITIONAL
SHARES, PLEASE READ THE
FOLLOWING INFORMATION TO
MAKE SURE YOUR INVESTMENT IS
ACCEPTED AND CREDITED
PROPERLY.
To avoid this collection period, you can wire federal funds from your bank,
which may charge you a fee. "Wiring federal funds'' means that your bank
sends money to the Fund's bank through the Federal Reserve System. You may
initiate many transactions by telephone. Note that Fidelity will not be
responsible for any losses resulting from unauthorized transactions if it
follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
The Fund reserves the right to suspend the offering of shares for a period
of time. The Fund also reserves the right to reject any specific purchase
orders, including certain purchases by exchange (see the "Exchange
Privilege," page ). Purchase orders may be refused if, in FMR's opinion,
they are of a size that would disrupt management of the Fund.
40.SHAREHOLDER SERVICES
41.CHOOSING A DISTRIBUTION OPTION.
A. The SHARE OPTION reinvests your income dividends and capital gain
distributions in additional Initial S hares.
WHEN YOU FILL OUT YOUR
ACCOUNT APPLICATION, YOU CAN
CHOOSE FROM FOUR DIFFERENT
DISTRIBUTION OPTIONS.
B. The INCOME-EARNED OPTION reinvests your capital gain distributions and
pays your income dividends in cash.
C. With the CASH OPTION, you receive income dividends and capital gain
distributions in cash.
D. You may choose the DIRECTED DIVIDENDS OPTION to have income dividends
and capital gain distributions automatically invested into another
Fidelity fund. Note that distributions can only be directed to an
existing account with an identical registration as your account in the
Fund. The 4.75% load will not apply to Initial S hares of the Fund
purchased through the Directed Dividends Option if the originating
Fidelity fund has an equal or higher sales load. Certain
restrictions apply. Call or write Fidelity to learn more or to change your
distribution option.
You may change your distribution option at anytime. If no distribution
option is selected when you open an account, you automatically will be
assigned the Share Option. On the day the Fund goes ex-dividend, the amount
of the distribution is deducted from its share price. Reinvestment of
distributions will be made at that day's NAV. Cash distribution checks will
be mailed within seven days or longer for a December ex-dividend
date .
42.EXCHANGE PRIVILEGE
The exchange privilege is a convenient way to buy shares in certain of
Fidelity's other funds that are registered in your state. To protect the
Fund's performance and shareholders, Fidelity discourages frequent trading
in response to short-term market fluctuations. You may make four exchanges
out of the Fund per calendar year; if you exceed this limit, your future
purchases of (including exchanges into) Fidelity funds may be permanently
refused. To make an exchange, follow the procedures indicated in the "How
to Buy Additional Shares of the Fund" and "How to Redeem Shares'' charts.
Before you make an exchange from this Fund please note the following:
YOU MAY EXCHANGE BETWEEN
FIDELITY FUNDS AS YOUR NEEDS
CHANGE.
(bullet) You will not have to pay any sales charge on the shares of
another Fidelity fund you acquire by exchange of Initial Shares of
this Fund.
(bullet) Call Fidelity for information and a free prospectus for the fund
into which you want to exchange.
(bullet) You may only exchange between accounts that are registered
in the same name, address, and taxpayer identification number as your
existing Fidelity accounts.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to the plan exchange limits and
Department of Labor regulations.
(bullet) TAXES: Ea ch exchange actually represents the sale of
shares of one fund and the purchase of shares in another, which may produce
a gain or loss for tax purposes. Service will send written confirmation for
each exchange transaction.
FIDELITY'S INVESTOR CENTERS
CAN PROVIDE INFORMATION AND
A PROSPECTUS FOR ANY OF
FIDELITY'S OTHER FUNDS
REGISTERED IN YOUR STATE.
(bullet) RESTRICTIONS: Although the exchange privilege is an important
benefit, Fund performance and shareholders can be hurt by excessive
trading. To protect the interests of shareholders, the Fund reserves the
right to temporarily or permanently terminate the exchange privilege for
any person who makes more than four exchanges out of the Fund per calendar
year. Accounts under common ownership or control, including accounts having
the same taxpayer identification number, will be aggregated for the purpose
of the four exchange limit. In addition, the Fund 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. Your exchanges may be restricted or
refused if the 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 the Fund. Although the Fund will attempt to give you prior
notice whenever it is reasonably able to do so, it may impose these
restrictions at any time. The Fund reserves the right to terminate or
modify the exchange privilege in the future. Other funds may have different
exchange restrictions and may impose administrative fees of up to $7.50 and
redemption fees of up to 1.50% on exchanges. Check each fund's prospectus
for details.
43.FIDELITY TELEPHONE CONNECTION
Use your touch-tone phone for quick, confidential access to frequently
requested information. Call 1-800-544-8544 for Fidelity mutual fund quotes
and 1-800-544-7544 for account balances and last transaction information.
See the back of your quarterly statement for a complete list of Fidelity's
telephone numbers.
44.FIDELITY MONEY LINE (registered trademark)
You can use Fidelity Money Line to move money between your bank account and
your account with one phone call. Allow two to three business days after
the call for the transfer to take place; for money recently invested, allow
normal check-clearing time (up to seven days) before redemption proceeds
are sent to your bank.
FIDELITY MONEY LINE LETS YOU
AUTHORIZE ELECTRONIC TRANSFERS
OF MONEY TO BUY OR SELL INITIAL
S HARES OF THE FUND.
FIDELITY AUTOMATIC ACCOUNT BUILDER offers a simple way to maintain a
regular investment program. You may arrange automatic transfers (minimum
$250) from your bank account to your Fund account on a periodic basis.
Service will send you written confirmation for every transaction, and a
debit entry will appear on your bank statement.
YOU MAY CHANGE THE AMOUNT
OF YOUR INVESTMENT, SKIP AN
INVESTMENT, OR STOP
AUTOMATIC ACCOUNT BUILDER
BY CALLING FIDELITY
(1-800-544-6666) THREE
BUSINESS DAYS PRIOR TO YOUR
NEXT SCHEDULED INVESTMENT
DATE.
45.STATEMENTS AND REPORTS
Service will send you a statement after every transaction (except a
reinvestment of dividends or capital gains) that affects your Initial
S hare balance or your account registration. In addition, an account
statement will be mailed to you quarterly. To reduce expenses, only one
copy of most Fund reports (such as the Fund's Annual Report) may be mailed
to your household. Please call Fidelity if you need any additional reports
sent each time. The Fund does not issue share certificates.
The Fund pays for shareholder services but not for special services, such
as a request for a historical transcript of an account. You may be required
to pay a fee for these special services.
If you are purchasing Initial S hares of the Fund through a program
of services offered by a securities dealer or financial institution, you
should read the additional materials pertaining to that program in
conjunction with this Prospectus. Certain features of the Fund, such as
subsequent investments, may be modified in these programs, and
administrative charges may be imposed for the services rendered.
AT LEAST TWICE A YEAR YOU WILL
RECEIVE THE FUND'S FINANCIAL
STATEMENTS WITH A SUMMARY OF
ITS INVESTMENTS AND
PERFORMANCE.
46.HOW TO REDEEM SHARES
You may redeem all or a portion of your Initial S hares on any
business day. Your Initial S hares will be redeemed at the next NAV
calculated after the Fund has received and accepted your redemption
request. Provided that your account registration has not changed within the
last 3 0 days, you may redeem Initial S hares of the Fund worth
$100,000 or less by calling 1-800-544-7777. For your protection, if you
redeem Initial S hares of the Fund having a value of more than
$100,000, if you are sending the proceeds of a redemption of any amount to
an address other than the address of record listed on the account, if you
have requested a change of address within the preceding 3 0 days
or if you wish to have the proceeds wired to a non-predesignated bank
account, you must send a letter of instruction signed by all registered
owners with signature(s) guaranteed to Service . A signature
guarantee is a widely recognized way to protect you by guaranteeing the
signature or your request; it may not be provided by a notary public.
Signature guarantee(s) will be accepted from banks, brokers, dealers,
municipal securities dealers, municipal securities brokers, government
securities dealers, government securities brokers, credit unions (if
authorized under state law), national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Redemption proceeds will be sent to the record address. Remember that the
Fund may hold payment until the Fund is reasonably satisfied that
investments which were made by check or via Fidelity Money Line have been
collected (which may take up to seven days).
47.REDEMPTION REQUIREMENTS TO REMEMBER
Remember that if you should redeem all of your Initial S hares, your
account will be closed and you will not be able to purchase Initial
Shares of the Fund. Once your Initial S hares are redeemed, you
normally will be sent the proceeds on the next business day, but if making
immediate payment could adversely affect the Fund, it may take up to seven
days to pay you. Fidelity Money Line redemptions generally will be credited
to your bank account on the second or third business day after your phone
call. When the NYSE is closed (or when trading is restricted) for any
reason other than its customary weekend or holiday closings, or under any
emergency circumstances as determined by the SEC to merit such action,
redemptions may be suspended or payment dates postponed.
TO ENSURE ACCEPTANCE OF YOUR
REDEMPTION REQUEST, PLEASE
FOLLOW THE PROCEDURES
DESCRIBED HERE AND ON THE
CHART ON PAGE .
If you are unable to execute your transactions by telephone (for example,
during times of unusual market activity) consider placing your order by
mail or by visiting one of the Fidelity Investor Centers. The value of
Initial S hares redeemed may be more or less than your cost,
depending on portfolio performance during the period you owned your shares.
If you want to keep your account open, please leave Initial S hares
with a value of $1,000 in it. If your account balance falls below $1,000
due to redemption, your account may be closed and the proceeds mailed to
you at the address on record. You will be given 30 days' notice that your
account will be closed unless you make an additional investment to increase
your account balance to the $1,000 minimum. Please note that your
Initial S hares will be redeemed at the NAV next determined on the
day your account is closed.
48.HOW TO REDEEM SHARES
49.BY MAIL -
TO: FIDELITY INVESTMENTS
P.O. BOX 878
BOSTON, MA 02103-0878
Send a "letter of instruction'' specifying the name of the Fund, the number
of Initial S hares to be sold, your name, your account number, and
the additional requirements listed below that apply to your particular
account.
50.TYPE OF REGISTRATION
Individual, Joint Tenant, Sole Proprietorship, Custodial (Uniform Gifts or
Transfers To Minors Act), General Partners.
51.REQUIREMENTS
Letter of instruction signed by all person(s) required to sign for the
account, exactly as it is registered, accompanied by signature
guarantee(s).
52.CORPORATIONS, ASSOCIATIONS:
Letter of instruction and a corporate resolution, signed by person(s)
required to sign for the account accompanied by signature guarantee(s).
53.TRUSTS:
Letter of instruction signed by the Trustee(s), with a signature guarantee.
(If the Trustee's name is not registered on your account, also provide a
copy of the Trust document, certified within the last 3 0 days.)
54.FOR ALL OPTIONS BELOW, PLEASE CALL 1-800-544-7777.
BY FIDELITY MONEY LINE - You must have received prior notification
by mail from Service that your Fidelity Money Line is active. The minimum
redemption amount is $2,500, and the maximum is $ 10 0,000. (Accounts
cannot be closed by this service.)
BY EXCHANGE - You must meet the minimum investment requirement of
the other fund. You can only exchange between accounts with identical
names, addresses and taxpayer identification numbers.
55.APPENDIX
The following paragraphs provide a brief description of securities in
which the fund may invest and transactions it may make. The fund is not
limited by this discussion, however, and may purchase other types of
securities and enter into other types of transactions if they are
consistent with the fund's investment objective and policies.
FOREIGN INVESTMENTS. Investment in foreign securities
involve s additional risks. Foreign securities and securities
denominated in or indexed to foreign currencies may be affected by the
strength of foreign currencies relative to the U.S. dollar, or by political
or economic developments in foreign countries. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to
U.S. companies, and there may be less public information about their
operations. F oreign markets may be less liquid or more volatile than
U.S. markets, and may offer less protection to investors . 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.
The Fund may enter into forward currency contracts (agreements to exchange
one currency for another at a future date) to manage currency risks and to
facilitate transactions in foreign securities. Although currency forward
contracts can be used to protect the Fund from adverse exchange rate
changes, they involve a risk of loss if FMR fails to predict foreign
currency values correctly.
REPURCHASE AGREEMENTS AND SECURITIES LOANS. In a repurchase agreement the
Fund buys a security and simultaneously agrees to sell it back at a higher
price. The Fund may also make securities loans to broker-dealers and
institutional investors, including FBSI. In the event of the bankruptcy
of the other party to either a repurchase agreement or a securities loan,
the Fund could experience delays in recovering its cash or the securities
it lent. To the extent that, in the meantime, the value of the securities
purchased had decreased, or the value of the securities lent had increased,
the Fund could experience a loss. In all cases, FMR must find the
creditworthiness of the other party to the transaction satisfactory.
OPTIONS AND FUTURES CONTRACTS. The Fund may buy and sell options and
futures contracts to manage its exposure to changing interest rates,
security prices, and currency exchange rates. Some options and futures
strategies, including selling futures, buying puts and writing calls, tend
to hedge the Fund's investments against price fluctuations. Other
strategies, including buying futures, writing puts and buying calls, tend
to increase market exposure. Options and futures may be combined with each
other or with forward contracts in order to adjust the risk and return
characteristics of the overall strategy. The Fund may invest in options and
futures based on any type of security, index, or currency, including
options and futures traded on foreign exchanges and options not traded on
exchanges.
Options and futures can be volatile investments and involve certain risks.
If FMR applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower the Fund's return.
The Fund could also experience losses if the prices of its options and
futures positions were poorly correlated with its other investments, or if
it could not close out its positions because of an illiquid secondary
market. Options and futures do not pay interest, but may produce taxable
capital gains.
The Fund will not hedge more than 25% of its total assets by selling
futures, writing calls, and buying puts under normal conditions. In
addition, the Fund will not buy futures or write puts whose underlying
value exceeds 25% of its total assets, and will not buy calls with a value
exceeding 5% of its total assets.
ILLIQUID INVESTMENTS. Under the supervision of the Board of Trustees, FMR
determines the liquidity of the Fund's investments. The absence of a
trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Fund to sell them promptly at an acceptable price.
INDEXED SECURITIES. The Fund may invest in indexed securities whose
value is linked to currencies, interest rates, commodities, indices, or
other financial indicators. Most indexed securities are short to
intermediate term debt securities whose value at maturity or interest rates
rise or fall according to the change in one or more specified underlying
instruments. Indexed securities may be positively or negatively indexed
(i.e., their value may increase or decrease if the underlying instrument
appreciates), and may have return characteristics similar to direct
investments in the underlying instrument or to one or more options on the
underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself.
SWAP AGREEMENTS. As one way of managing its exposure to different types
of investments, the Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars, and
floors. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate times a "notional principal
amount," in return for payments equal to a fixed rate times the same
amount, for a specified period of time. If a swap agreement provides for
payments in different currencies, the parties might agree to exchange the
notional principal amount as well. Swaps may also depend on other prices or
rates, such as the value of an index or mortgage prepayment rates.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks
assumed. As a result, swaps can be highly volatile and may have a
considerable impact on the Fund's performance. Swap agreements are subject
to risks related to the counterparty's ability to perform, and may decline
in value if the counterparty's creditworthiness deteriorates. The Fund may
also suffer losses if it is unable to terminate outstanding swap agreements
or reduce its exposure through offsetting transactions.
RESTRICTED SECURITIES. The Fund may purchase securities which cannot be
sold to the public without registration under the Securities Act of 1933
(restricted securities). Unless registered for sale, these securities can
only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
INTERFUND BORROWING PROGRAM. The Fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates. Interfund loans and borrowings normally will extend overnight,
but can have a maximum duration of seven days. The Fund will lend through
the program only when the returns are higher than those available at the
same time from other short-term investments (such as repurchase
agreements), and will borrow through the program only when the costs are
equal to or lower than the cost of bank loans. The Fund will not lend more
than 5% of its assets to other funds, and will not borrow through the
program if, after doing so, total outstanding borrowings would exceed 15%
of total assets. Loans may be called on one day's notice, and the Fund may
have to borrow from a bank at a higher interest rate if an interfund loan
is called or not renewed. Any delay in repayment to a lending fund could
result in a lost investment opportunity or additional borrowing costs.
ZERO COUPON BONDS. Zero coupon bonds do not make 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, the Fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. government, a government agency, or a
corporation in zero coupon form.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed by a
corporate, governmental or other borrower to another party. They may
represent amounts owed to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments involve the risk
of loss in case of default or insolvency of the borrower. Direct debt
instruments may offer less legal protection to the Fund in the event of
fraud or misrepresentation. In addition, loan participations involve a risk
of insolvency of the lending bank or other financial intermediary. Direct
debt instruments also may include standby financing commitments that
obligate the Fund to supply additional cash to the borrower on demand.
LOWER- RATED DEBT SECURITIES. The Fund may purchase lower-rated debt
securities (those rated Ba or lower by Moody's or BB or lower by S&P)
that have poor protection against default in the payment of principal and
interest, 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-rated
debt securities may fluctuate more than those of higher-rated debt
securities, and may decline significantly in periods of general
economic difficulty which may follow periods of rising interest rates.
DEBT OBLIGATIONS. The table below provides a summary of ratings assigned to
debt holdings (not including money market instruments) in the Fund's
portfolio. These figures are dollar-weighted averages of month-end
portfolio holdings during the thirteen months ended September 30, 1993,
presented as a percentage of total investments. These percentages are
historical and are not necessarily indicative of the quality of current or
future portfolio holdings, which may vary.
S&P MOODY'S
RATING AVERAGE RATING AVERAGE DESCRIPTION
INVESTMENT GRADE
AAA/AA/A 15.99% Aaa/Aa/A 15.99% Highest quality/ high quality
upper medium grade
BBB -- % Baa -- % Medium grade
LOWER QUALITY
BB -- % Ba .18% Moderately speculative
B .80% B .22% Speculative
CCC -- % Caa 1.63% Highly speculative
CC/C -- % Ca/C -- % Poor quality/lowest quality,
no interest
D .89% ___ In default, in arrears
The dollar-weighted average of debt securities not rated by either S&P
or Moody's amounted to .89%. This may include securities rated by other
nationally recognized rating organizations, as well as unrated securities.
Unrated securities are not necessarily lower-quality securities. Please
refer to the Fund's Statement of Additional Information for a more complete
discussion of these ratings.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND -INITIAL CLASS
A FUND OF FIDELITY ADVISOR SERIES VIII
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 1994
This Statement is not a prospectus but should be read in conjunction with
the current Fidelity Advisor Strategic Opportunities
Fund -Initial Class (the Fund) (formerly Fidelity Special Situations:
Initial Class) Prospectus (dated June 30 , 1994). Please
retain this document for future reference. The Fund's Annual Report for
the fiscal year ended September 30, 1993 a separate report supplied with
this Statement of Additional Information , is incorporated herein by
reference. Additional copies of either Prospectus, Statement of
Additional Information or Annual Report are available without charge
upon request from Fidelity Distributors Corporation, 82 Devonshire Street,
Boston, Massachusetts 02109.
NATIONWIDE 800- 544-8888
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions 12
Valuation of Portfolio Securities 13
Performance 14
Additional Purchase, Exchange and Redemption Information 18
Distributions and Taxes 20
FMR 21
Trustees and Officers 21
Management and Other Services 23
The Distributor 26
Description of the Trust 26
Financial Statements 27
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 (Distributors)
TRANSFER AGENT
Fidelity Service Company (Service)
CUSTODIAN
Brown Brothers Harriman & Co. (Brown Brothers)
SSF- PTB-6 94
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a Fund's assets which may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation shall be
determined immediately after and as a result of the acquisition of such
security or other asset. Accordingly, any subsequent change in values, net
assets or other circumstances will not be considered when determining
whether the investment complies with the Fund's investment policies and
limitations.
The Fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (1940 Act))
of the Fund. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued
or guaranteed by the government of the United States, its agencies, or
instrumentalities) if, as a result thereof, more than 5% of the Fund's
total assets (taken at current value) would be invested in the securities
of such issuer;
(2) purchase the securities of any issuer, if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held in the Fund's portfolio;
(3) issue senior securities (except to the extent that issuance of one or
more classes of shares of the Fund in accordance with an Order issued by
the Securities and Exchange Commission (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.
(i ii ) 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.
( i 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.)
(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 Trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For the Fund's limitations on futures and options transactions, see
"Limitations on Futures and Options Transac tions" beginning on page
9.
AFFILIATED BANK TRANSACTIONS. The 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, the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The Fund does not intend to direct or
administer the day-to-day operations of any company. The Fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the Fund's investment in the company.
The activities that the 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 the 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 the Fund is involved in
litigation. No guarantee can be made, however, that litigation against the
Fund will not be undertaken or liabilities incurred.
DELAYED-DELIVERY TRANSACTIONS. The Fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the Fund to purchase or sell specific securities at a
predetermined price and/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. The Fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the Fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the Fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the Fund's other investments. If the 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, the Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the Fund has sold a security on a
delayed-delivery basis, the Fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the Fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The 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.
INTERFUND BORROWING PROGRAM. The Fund has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowing normally will extend
overnight, but can have a maximum duration of seven days. The Fund will
lend through the program only when the returns are higher than those
available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. The Fund will not
lend more than 5% of its assets to other funds, and will not borrow through
the program if, after doing so, total outstanding borrowings would exceed
15% of total assets. Loans may be called on one day notice, and the Fund
may have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed. Any delay in repayment to a lending fund
could result in a lost investment opportunity or additional borrowing
costs.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of
securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be
difficult to enforce legal rights in foreign countries.
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.
The Fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject
to 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.
The Fund may invest in American Depositary Receipts and European
Depositary 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 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. The 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. The 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 the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The 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 the fund. The fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When the 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, the 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." The 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.
The fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if the 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. The 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.
The 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 the fund held investments denominated in
Deutschemarks, the 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 the 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 the 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. The 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 the fund's investment exposure to
changes in currency exchange rates, and could result in losses to the fund
if currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged the fund by selling
that currency in exchange for dollars, the fund would be unable to
participate in the currency's appreciation. If FMR hedges currency
exposure through proxy hedges, the 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 the fund's exposure to
a foreign currency, and that currency's value declines, the 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.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the f und's investments and, through reports from
FMR, the Board monitors investments in illiquid instruments. In
determining the liquidity of the f und'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 f und's rights and obligations relating to the investment).
Investments currently considered by the f und to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, over-the-counter options, and non-government
stripped fixed-rate mortgage-backed securities. Also, FMR may determine
some restricted securities, 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 the f und writes,
all or a portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and terms
of any agreement the f und 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, the 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 the Fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
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 the 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 the 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 the 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 the 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 the fund in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance, the
fund relies on FMR's research in an attempt to avoid situations where fraud
or misinterpretation 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, the 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 the 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 the 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.
The fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
The fund limits the amount of total assets that it will invest in any one
issuer or issuers within the same industry (see limitations 1 and 8). For
purposes of these limitations, the fund generally will treat the borrower
as the "issuer" of indebtedness held by the fund. In the case of loan
participations where a bank or other lending institution serves as
financial intermediary between the fund and the borower, 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 the fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980s brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession. In fact, from 1989 to 1991, the percentage
of lower-quality debt securities that defaulted rose significantly above
prior levels, although the default rate decreased in 1992 and 1993.
The market for lower-rated 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 the Fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by the 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.
The 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount of interest which is unrelated to the coupon
rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed-upon price, which
obligation is in effect secured by the value (at least equal to the amount
of the agreed upon resale price and marked to market daily) of the
underlying security. The Fund may enter into a repurchase agreement with
respect to any security in which it is authorized to invest. While it does
not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value
of the underlying securities, as well as delay and costs to the Fund in
connection with bankruptcy proceedings), it is the Fund's current policy to
limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory to FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
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, the Fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The 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 the Fund's
assets and may be viewed as a form of leverage.
SECURITIES LENDING. The 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 the 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 the Fund
may engage in loan transactions only under the following conditions: (1)
the Fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the Fund must be able to terminate
the loan at any time; (4) the Fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the Fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the Fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES "AGAINST THE BOX." If the Fund enters into a short sale
against the box, it will be required to set aside securities equivalent in
kind and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The Fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
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 the 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. The Fund is not
limited to any particular form of swap agreement if FMR determines it is
consistent with the 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 the Fund's investment exposure from one
type of investment to another. For example, if the Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of 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 the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. The 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.
The Fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the
Fund enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the
Fund is entitled to receive under the agreement. If the Fund enters into a
swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the Fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The 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.
WARRANTS. The 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. The Fund has filed a
notice of eligibility for exclusion from the definition of the term
" commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets, before engaging in any purchases or sales
of futures contracts or options on futures contracts. The Fund intends
to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the Fund can commit assets to initial margin
deposits and option premiums.
In addition to the above limitations, the Fund will not: (a) sell futures
contracts, purchase put options, or write call options if, as a result,
more than 25% of the Fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or write
put options if, as a result, the Fund's total obligations upon settlement
or exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by
the Fund would exceed 5% of the Fund's total assets. These limitations do
not apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate
features similar to options.
The above limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the 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 the 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 Stcoks (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 the Fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it
had purchased the underlying instrument directly. When the 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 the Fund's investment limitations. In
the event of the bankruptcy of an FCM that holds margin on behalf of the
Fund, the Fund may be entitled to return of margin owed to it only in
proportion to the amount received by the FCM's other customers, potentially
resulting in losses to the Fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The Fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the Fund will lose the entire premium it paid. If the Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The 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 the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract the Fund will be required to make margin payments to an FCM as
described above for futures contracts. The 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 the Fund has written, however, the
Fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the 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. The 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, the 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 the Fund's current or
anticipated investments exactly. The 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 the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the 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. The 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 the 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 the 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 the Fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the 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 the
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. The
Fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The 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
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the Fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the Fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the Fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The 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 the 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 the f und by FMR pursuant to authority contained in the
m anagement c ontract. 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 advis e r. In
selecting broker-dealers subject to applicable limitations of the federal
securities laws, FMR will consider 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
arrangements for payment of fund expenses . Commissions for foreign
investments traded on foreign exchanges will generally be higher than for
U.S. investments and may not be subject to negotiation.
The f und may execute portfolio transactions with broker-dealers who
provide research and execution services to the f und 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). The selection of
such broker-dealers generally is made by FMR (to the extent possible
consistent with execution considerations) in accordance with a ranking of
broker-dealers determined periodically by FMR's investment staff based upon
the quality of r esearch and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the f und may be useful to FMR in rendering investment
management services to the f und 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 f und. 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 commission s charged by other broker-dealers
in recognition of their research and execution services. In order to cause
the f und 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 f und 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 f und 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 of 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 the fund toward payment of the 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. P ursuant to such requirements , the
Board of Trustees has authorized FBSI to execute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
f und and review the commissions paid by the f und over
representative periods of time to determine if they are reasonable in
relation to the benefits to the f und.
For the fiscal years ended September 30, 1993 and 1992, the Fund's annual
portfolio turnover rate was 183%, and 211%, respectively.
For the fiscal years ended September 30, 1993, 1992, and 1991, the Fund
paid brokerage commissions of $1,068,788, $1,087,115, and $1,079,734,
respectively. During fiscal 1993, $872,596 or approximately 82% of
these commissions were paid to brokerage firms that provided
research services, although the providing of such services was not
necessarily a factor in the placement of all of this business with
such firms. The Fund pays both commissions and spreads in connection with
the placement of portfolio transactions; FBSI is paid on a commission
basis. During fiscal 1993, 1992, and 1991, the Fund paid brokerage
commissions of $103,206, $126,298, and $165,047, respectively, to FBSI.
During fiscal 1993 this amounted to approximately 9.7% of the
aggregate brokerage commissions paid by the Fund for transactions involving
21.7% of the aggregate dollar amount of transactions in which the Fund
paid brokerage commissions. The difference between percentage of
brokerage commissions paid to, and the percentage of the dollar amount of
transactions effected through FBSI is a result of the lower commission
rates charged by FBSI.
From time to time the Trustees will review whether the recapture for the
benefit of the f und of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally
permissible and advisable. The Fund seeks to recapture soliciting
deal er fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine, in the exercise of their
business judgment, whether it would be advisable for the Fund to seek such
recapture.
Although the Trustees and officers of the Fund are substantially
the same as those of other funds managed by FMR, investment decisions for
the Fund are made independently from those of other funds manage d 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
or 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 to each fund. In some cases this system could have a
detrimental effect on the price or value of the security as far as the Fund
is concerned. In other cases, however, the ability of the Fund to
participate in volume transactions will produce better executions and
prices for the Fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the Fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Most equity securities for
which the primary market is the U.S. 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 U.S. are valued using the official
closing price or the last sale price in the principal market where they are
traded. If the last sale price (on the local exchange) is unavailable, the
last evaluated quote or last bid price is normally used. Short-term
securities are valued either at amortized cost or at original cost plus
accrued interest, both of which approximate current value. Convertible
securities andfixed-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 twofold 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.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by the Fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as
well as corporate bonds, U.S. government securities, money market
instruments, and repurchase agreements, is substantially completed each day
at the close of the NYSE. The values of any such securities held by the
Fund are determined as of such time for the purpose of computing the Fund's
net asset value (NAV). Foreign security prices are furnished by
independent brokers or quotation services which express the value of
securities in their local currency. Service gathers all exchange rates
daily at the close of the NYSE using the last quoted price on the local
currency and then translates the value of foreign securities from their
local 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. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then the
security will be valued as determined in good faith by a committee
appointed by the Board of Trustees.
PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied in advertising is historical and is not intended to
indicate future returns. Share price 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.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the NAV over the 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 return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual return that would equal 100% growth on a
compounded basis in ten years. While average annual total returns are a
convenient means of comparing investment alternatives, investors should
realize that performance is not constant over time, but changes from year
to year, and that average annual returns represent averaged figures as
opposed to 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, and/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. An example of this type of
illustration is given on page 17. Total returns may be quoted with or
without taking the maximum sales charge into account. Total returns may be
quoted on a before-tax or after-tax basis. Excluding the sales charge from
a total return calculation produces a higher total return figure. Total
returns and other performance information may be quoted numerically or in a
table, graph or similar illustration.
The following chart shows total returns for Fidelity Advisor
Strategic Opportunities Fund - Initial Class for the periods
ended September 30, 1993.
Average Annual Total Returns** Cumulative Total Returns**
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Life of Fund* One Year Five Year Life of Fund*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
20.95% 15.17% 16.58% 26.98% 112.73% 369.11%
</TABLE>
* Life of Fund: December 31, 1983 (commencement of operations) to
September 30, 1993.
** Average Annual Total Returns include the effect of the Fund's maximum
4.75% sales charge. Cumulative total returns do not include effect of this
charge and would have been lower if it had been taken into account.
The following charts show total returns for Class A and Class B shares
for the periods ended September 30, 1993.
Fidelity Advisor Strategic Opportunities Fund - Class A**
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns** Cumulative Total Returns**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Life of Fund* One Year Five Year Life of Fund*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
20.33% 14.56% 16.18% 26.33% 107.18% 353.53%
</TABLE>
Fidelity Advisor Strategic Opportunities Fund - Class B***
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns** Cumulative Total Returns**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Life of Fund* One Year Five Year Life of Fund*
</TABLE>
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C>
22.33% 15.57% 16.18% 26.33% 107.18% 353.53%
</TABLE>
* Life of Fund: December 31, 1983 (Commencement of Operations) to
September 30, 1993
** Class A's average annual returns include the effect of the maximum
sales charge. Cumulative returns do not include the effect of this charge
and would have been lower if it had been taken into account. The total
return figures are adjusted to show what total return would have been for
the Class A shares had that been available since the Fund's commencement of
operations on December 31, 1983. The Fidelity Advisor Strategic
Opportunities Fund - Class A commenced operations on August 20, 1986. On
January 1, 1987, Class A imposed a .65% 12b-1 fee, which is not reflected
in returns prior to that date. Because it has higher expenses, total
returns for the Fidelity Advisor Strategic Opportunities - Class A will be
lower than for the Fidelity Advisor Strategic Opportunities Fund - Initial
Class (which is closed to new shareholders) at any given time.
*** Average annual total returns include the effect of the maximum
contingent deferred sales charge ("CDSC") applicable at the end of the
stated period. Cumulative total returns do not include the effect of the
CDSC and would have been lower if it had been taken into account. Initial
offering of Class B shares is expected on or about June 30, 1994, at which
time a 1.00% 12b-1 fee (inclusive of .25% shareholder service fee) wil be
imposed and is not reflected in returns prior to that date. Returns will
be lower when these fees are taken into account.
PERFORMANCE COMPARISONS. Performance may be compared to the performance
of other mutual funds in general, or to the performance of particular types
of mutual funds. The 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 dividends, but does not take sales charges or
redemption fees or tax consequences into consideration. Lipper may also
rank funds based on yield. In addition to mutual fund rankings,
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, performance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, Morningstar, Inc. may be quoted in 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.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial strategies.
For example, Fidelity's Asset Allocation Program materials may include:
computerized investment planning software; a workbook describing general
principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index
(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 Fund. Ibbotson calculates total returns in the same method as
the Fund. Performance comparisons may also be made to that of other
compilations or indices that may be developed and made available in the
future.
Performance may also be compared to that of the S&P 500, the Dow Jones
Industrial Average (the DOW or DJIA),the Dimensional Fund Advisors (DFA)
Small Company Fund, and the NASDAQ Composite Index (NASDAQ). The S&P
500 and the DOW are widely recognized, unmanaged indices of common stock
prices. The performance of the S&P 500 is based on changes in the
prices of stocks comprising the index and assumes the reinvestment of all
dividends paid on such stocks. Taxes, brokerage commissions and other fees
are disregarded in computing the level of the S&P 500 and the DJIA.
The DFA is a market-value-weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the AMEX and over-the-counter (OTC) with
the same or less capitalization as the upperbound of the NYSE ninth decile
stocks.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and
charitable giving. In addition, Fidelity may quote financial or business
publications or periodicals, including model portfolios or allocations, as
they relate to fund management, investment philosophy, and investment
techniques.
The Fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
The Fund may quote its performance in advertising and other types of
literature as compared to certificates of deposit (CDs), bank-issued money
market instruments, and money market mutual funds. Unlike CDs and money
market instruments, money market mutual funds and shares of the Fund are
not insured by the FDIC.
According to the Investment Company Institute, over the past ten years,
assets in equity mutual funds increased from $75.8 billion in 1983 to
approximately $659.3 billion at the end of 1993. As of December 31, 1993,
FMR managed approximately $125 billion in equity assets, as defined and
tracked by Lipper. From time to time the Fund may compare FMR's equity
assets under management with that of other investment advisers.
VOLATILITY. Various measures of volatility and benchmark correlation may
be quoted in advertising. In addition, the Fund may compare these measures
to those of other funds. Measures of volatility seek to compare the Fund's
historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOVING AVERAGES. Performance may be illustrated using moving averages. A
long-term moving average is the average of each week's adjusted closing NAV
for a specified period. A short-term moving average is the average of each
day's adjusted closing NAV for a specified period. Moving Average Activity
Indicators combine adjusted closing NAVs from the last business day of each
week with moving averages for a specified period to produce indicators
showing when an NAV has crossed, stayed above, or stayed below its moving
average. On September 24, 1993, the 13-week and 39-week long-term moving
averages were $21.71 and $20.65, respectively.
MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
percentage change in price movements over that period.
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 by the Fund and reflects all
elements of its return. Unless otherwise indicated, the Fund's adjusted
NAVs are not adjusted for sales charges, if any.
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 portfolio 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 had been purchased
at the same intervals. In evaluating such a plan, investors should
consider their ability to continue purchasing shares through periods of low
price levels.
The Fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
HISTORICAL FUND RESULTS. The following chart shows the income and
capital elements of the Fund's year-by-year total returns from December 31,
1983 (commencement of operations) through September 30, 1993. The chart
compares the Fund's return to the record of the S&P 500, NASDAQ, the
DJIA and the cost of living measured by the CPI over the same period. The
comparisons to the S&P 500 and the DJIA show how the Fund'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.
The Fund has the ability to invest in securities not included in either
index, and its investment portfolio may or may not be similar in
composition to the indices. The S&P 500 and DJIA are based on the
prices of unmanaged groups of stocks and, unlike the Fund's returns, their
returns do not include the effect of paying brokerage commissions and other
costs of investing.
During the period from December 31, 1983 (commencement of operations) to
September 30, 1993 a hypothetical investment of $10,000 in the Fund would
have grown to $44,683 after deduction of the Fund's 4.75% maximum sales
charge and assuming all distributions were reinvested. This was a period
of widely fluctuating stock prices, and should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the Fund today.
FIDELITY ASVISOR STRATEGIC OPPORTUNITIES FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Cost
Period $10,000 Income Capital Gain Total of
Ended Investment Distributions Distributions Value NASDAQ S&P DJIA Living**
500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/84* 10,515 0 0 10,515 8,971 10,432 9,950 10,365
9/30/85 12,085 66 219 12,369 10,062 11,948 11,490 10,691
9/30/86 15,900 394 1,777 18,072 12,587 15,741 15,859 10,879
9/30/87 18,203 565 3,256 22,025 15,947 22,580 24,007 11,352
9/30/88 14,892 808 5,305 21,005 13,916 19,789 20,252 11,826
9/30/89 18,812 2,043 6,702 27,557 16,975 26,319 26,782 12,340
9/30/90 16,528 2,670 5,888 25,087 12,366 23,886 25,348 13,100
9/30/91 20,506 4,804 7,305 32,615 18,912 31,333 32,299 13,544
9/30/92 18,765 5,621 10,803 35,189 20,936 34,798 36,071 13,949
9/30/93 21,619 7,994 15,069 44,683 27,379 39,326 40,364 14,324
</TABLE>
* From December 31, 1983 (commencement of operations) to September 30,
1984.
** From the month-end closest to the initial investment date.
EXPLANATORY NOTES: With an initial investment of $10,000 made on December
31, 1983, the net amount invested in Fund shares was $9,525, assuming the
current 4.75% maximum sales charge was deducted as if it had been in effect
at that time. The cost of the initial investment ($10,000) together with
the aggregate cost of reinvested dividends and capital gain distributions
for the period covered (that is, their cash value at the time they were
reinvested), amounted to $26,427. If distributions had not been
reinvested, the amount of distributions earned from the Fund over time
would have been smaller, and the cash payments for the period would have
come to $4,016 for income dividends and $7,489 for capital gain
distributions. Tax consequences have not been factored into the above
figures.
TRADITION OF PERFORMANCE. Fidelity's tradition of performance is achieved
through:
(bullet) MONEY MANAGEMENT: a proud tradition of money management
motivated by the expectation of excellence backed by solid analysis and
worldwide resources. Fidelity employs a bottom-up approach to security
selection based upon in-depth analysis of the fundamentals of that
investment opportunity.
(bullet) INNOVATION: constant attention to the changing needs of today's
investors and vigilance to the opportunities that arise from changing
global markets. Research is central to Fidelity's investment
decision-making process. Fidelity's greatest resource--over 200 skilled
investment professionals--is supported with the most sophisticated
technology available.
Fidelity provides:
(bullet) Global research resources: an opportunity to diversify
portfolios and share in the growth of markets outside the United States.
(bullet) In-house, proprietary bond-rating system, constantly updated,
which provides extremely sensitive credit analysis.
(bullet) Comprehensive chart room with over 1500 exhibits to provide
sophisticated charting of worldwide economic, financial, and technical
indicators, as well as to provide tracking of over 800 individual stocks
for portfolio managers.
(bullet) State-of-the-art trading desk, with access to over 200 brokerage
houses, providing real-time information to achieve the best executions and
optimize the value of each transaction.
Use of extensive on-line computer-based research services.
(bullet) SERVICE: Timely, accurate and complete reporting. Prompt and
expert attention when an investor or an investment professional needs it.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
The Fund is open for business and its NAV is calculated each day that the
NYSE is open for trading. The NYSE has designated the following holiday
closings for 1994: Presidents ' Day, Good Friday, Memorial
Day , Independence Day (observed), Labor Day, Thanksgiving
Day, and Christmas Day (observed). Although FMR expects the same holiday
schedule with the addition of New Year's Day to be observed in the future,
the NYSE may modify its holiday schedule at any time. On any day that the
NYSE closes early, or as permitted by the SEC, the right is reserved to
advance the time on that day by which purchase and redemption orders must
be received. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, the Fund's NAV may be affected on
days when investors do not have access to the Fund to purchase or redeem
shares. Certain Fidelity funds may follow different holiday closing
schedules.
If the Trustees determine that existing conditions make cash
payment s undesirable, redemption payments may be made in whole or in
part in securities or other property, valued for this purpose as they are
valued in computing the Fund's NAV. Shareholders receiving any such
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 (the Rule), the 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 administration fee,
redemption fee , or deferred sales charge ordinarily payable at the
time of exchange, or (ii) the Fund s uspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or by the SEC or
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the prospectus, the 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.
PURCHASE INFORMATION
As provided for in Rule 22d-1 under the 1940 Act, Distributors exercises
its right to waive the Fund's maximum 4.75% sales charge in connection with
the Fund's merger with or acquisition of any investment company or trust.
NET ASSET VALUE PURCHASES. Sales charges do not apply to shares
p urchased: (1) by registered representatives, bank trust officers
and other employees (and their immediate families) of investment
professionals having agreements with Distributors; (2) by a current or
former Trustee or officer of a Fidelity fund or a current or retired
officer, director or regular employee of FMR Corp. or its direct or
indirect subsidiaries (a "Fidelity Trustee or employee"), the spouse of a
Fidelity Trustee or employee, a Fidelity Trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for
the sole benefit of the minor child of a Fidelity Trustee or employee; (3)
by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more; (4) by 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) by trust institutions (including bank trust
departments) investing on their own behalf or on behalf of their
clients; (6) in accounts as to which a bank or broker-dealer charges an
asset-based management fee, provided the bank or broker-dealer has
a n a greement with Distributors; (7) as part of an employee
benefit plan having more than 200 eligible employees or a minimum of
$3,000,000 invested in Fidelity mutual funds; (8) by any state, county, or
city, or any governmental instrumentality, department, authority or agency;
(9) with redemption proceeds from other mutual fund complexes on which the
investor has paid a front-end sales charge only; and (10) 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 $3,000,000 in assets invested in Fidelity mutual
funds.
An investor may qualify for a reduction in the sales charge under the
following programs:
RIGHTS OF ACCUMULATION. Your " Rights of Accumulation" permit
reduced front-end sales charges on any future purchases after
you have reached a new breakpoint. You can add the value of your
existing Fidelity Advisor Fund Class A and Class B s hares held by
you, your spouse, and your children under age 21, determined at the
previous day's NAV at the close of business, to the amount of your new
purchase, valued at the current public offering price, to determine your
reduced front-end sales charge. You can also add shares of Daily
Money Fund and shares of Daily Tax-Exempt Money Fund, provided they were
acquired by exchange from any Fidelity Advisor Fund with a sales charge, to
the amount of your new purchase.
LETTER OF INTENT. If you anticipate purchasing $50,000 or more
within a 13-month period , you may obtain Class A shares at
the same reduced front-end sales charge as though the total quantity
were invested in one lump sum, by filing a non-binding Letter of Intent
(the Letter) within 90 days of the start of the purchases. Each investment
you make after signing the Letter will be entitled to the sales charge
applicable to the total investment indicated in the Letter. For example, a
$2,500 purchase toward a $50,000 Letter would receive the same reduced
sales charge as if the $50,000 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 or Class B
shares are purchased. Neither income dividends nor capital gain
distributions taken in additional 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 front-end sales charges
have been paid. You will earn income dividends and capital gain
distributions on escrowed shares. T he 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 further sales charge reduction, the 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 the total purchase.
If you do not complete your purchase under the Letter within the
13 - month period, your front-end sales charge will be adjusted
upward, corresponding to the amount actually purchased, and if after a
30-day written notice, you do not pay the increased front-end
sales charge, sufficient escrowed Class A shares will be
redeemed to pay such charge.
REDEMPTION INFORMATION
SYSTEMATIC WITHDRAWAL PLAN. If you would like to make arrangements for
systematic monthly or quarterly redemptions from your Fidelity account call
Service for further information. Since a sales charge is applied on new
shares you buy, it is to your disadvantage to buy shares while also making
systematic redemptions.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your check, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of the Fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the Fund's income is derived from qualifying dividends.
Because the Fund may 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 t hat qualify for the
deduction will generally be less than 100%. The Fund will notify corporate
shareholders annually of the percentage of Fund dividends which qualify for
the dividends received deduction. A portion of the 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. The Fund will send each
shareholder a notice in January describing the tax status of dividends and
capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains realized by the 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 the Fund, and such shares are held
less than six months and are sold at a loss, the portion of the loss equal
to the amount of the long-term capital gain distribution will be considered
a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from
s hort-term capital gains do not qualify for the
dividends - received deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the Fund does
not 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 FUND. The 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, the 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.
The 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 the Fund's gross income for each fiscal year. Gains from
some forward currency contracts, futures contracts, and options are
included in this 30% calculation, which may limit the Fund's investments in
such instruments.
If the 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.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of the Fund may be
subject to state and local taxes on distributions received from the Fund.
Investors should consult their tax advis e rs to determine whether the
Fund is suitable for their particular tax situation.
The Fund is treated as a separate entity from other funds of Fidelity
Advisor Series VIII for tax purposes.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company
organized in 1972. At present, the principal operating activities of FMR
Corp. are those conducted by three of its divisions as follows: Fidelity
Service Co. (Service), 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 certain institutional customers; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
Several affiliates of FMR also are engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research information
and may provide portfolio serrvices to FMR in connection with
certain funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR
Far East research and visit thousands of domestic and foreign companies
each year. FMR Texas Inc. (FMR Texas), a wholly owned subsidiary of FMR
formed in 1989, will supply portfolio management and research services in
connection with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Fund are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. All persons named as
Trustees and officers also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. Those Trustees who are
" interested persons" (as defined in the 1940 Act) by virtue of their
affiliation with either 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 serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and 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, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a 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).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of
FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
DANIEL R. FRANK, Vice President of the Fund (1986), and an employee of FMR.
Under a retirement program that became effective on November 1,
1989, Trustee s , 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
trustees fees and length of service. Currently Messrs. Robert L. Johnson,
William R. Spaulding, Bertram H. Witham and David L.Yunich participate in
this program.
As of May 31, 1994 , the Trustees and officers of the Fund owned in
the aggregate less than 1% of the outstanding shares of the Fund.
MANAGEMENT AND OTHER SERVICES
U nder its Management Contract with the Fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the Fund in accordance with its investment objective,
policies, and limitations. FMR also provides the f und with all
necessary office facilities and personnel for servicing the Fund's
investments, and compensates all officers of the Trust , all Trustees
who are "interested persons" of the Trust or of FMR, and all
personnel of the Trust or FMR performing services relating to
research, statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the Fund. These services include :
providing facilities for maintaining the Fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the Fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the Fund's records and the registration of the Fund's shares
under federal and state law; developing management and shareholder services
for the Fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
Service , the Fund pays all of its expenses, without
limitation, that are not assumed by those parties. The F und
pay s for typesetting, printin g and mailing of proxy
material to shareholders, legal expenses, and the fees of the custodian,
auditor, and non-interested Trustees. Although the F und's
management contract provides that the F und will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to shareholders, the Tru st has entered into a
revised transfer agent agreement with Service , pursuant to which
Service bears the cost of providing these services to
s hareholders. Other expenses paid by the Fund include
interest, taxes, brokerage commissions, the Fu nd's proportionate
share of insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal and state securities laws.
The Fund is also liable for such nonrecurring expenses as may arise,
including costs of any litigation to which the fund may be a party and any
obligation it may have to indemnify its officers and Trustees with
respect to litigation.
FMR is the Fund's manager pursuant to an Ma nagement Contract dated
November 29, 1990, which was approved by shareholders on September 19,
1990. For the services of FMR under the Contract, the Fund pays FMR a
monthly management fee composed of the sum of two elements: a basic fee and
a performance adjustment based on a comparison of the Fund's performance to
that of the S&P 500.
COMPUTING THE BASIC FEE. The Fund's basic fee rate is composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate is based on the monthly average net assets of all of the registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated schedule shown
below on the left. Also shown below , on the right, in the
effective annual fee rate schedule are the results of cumulatively applying
the annualized rates at varying asset levels. For example, the effective
annual fee rate at $216.7 billion of group net assets - their approximate
level for the month of September 30, 1993 - was .3262%, which is the
weighted average of the respective fee rates for each level of group net
assets up to that level.
GROUP FEE RATE SCHEDULE* EFFECTIVE ANNUAL FEE RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Group Effective
Group Annualized Net Annual
Assets Rate Assets Fee Rate
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ - 3 billion .520% $ 0.5 billion .5200%
0
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 175 .3325
21 - 24 .360 200 .3284
24 - 30 .350 225 .3253
30 - 36 .345 250 .3223
36 - 42 .340 275 .3198
42 - 48 .335 300 .3175
48 - 66 .325 325 .3153
66 - 84 .320 350 .3133
84 - 102 .315
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 - 336 .290
Over 336 .285
</TABLE>
* The rates shown for average group assets in excess of $138 billion
were adopted by FMR on a voluntary basis on January 1, 1992. Rates in
excess of $174 billion were adopted by FMR on November 1, 1993. Each was
adopted pending shareholder approval of a new management contract
reflecting the extended schedule. The extended schedule provides for lower
management fees as total assets under management increase.
The individual fund fee rate is .30%. Based on the average group net
assets of funds advised by FMR for September 1993, the annual basic fee
rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
.3262%. + .30% = .6262%
One twelfth of this annual basic fee rate is then applied to the Fund's
net assets averaged for the most current month, giving a
dollar amount , which is the fee for that month.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to an
upward or downward adjustment, depending upon whether, and to what extent,
the Fund's investment performance for the performance period exceeds, or is
exceeded by, the record of the S&P 500 over the same period. The
performance period consists of the recent month plus the previous 35
months. Each percentage point of difference (up to a maximum difference of
"10) is multiplied by a performance adjustment rate of .02%. The
maximum annualized adjustment rate is therefore ".20%. The Fund is
comprised of three classes of shares: Initial 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 of this rate is then applied to the 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.
The Fund's performance is calculated based on change in NAV. For the
purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the Fund are treated as if reinvested in
Fund shares at the NAV as of the record date for payment. The record of
the S&P 500 is based on change in value; this is adjusted for any cash
distributions from the companies whose securities comprise the S&P 500.
Because the adjustment to the basic fee is based on the Fund's performance
compared to the investment record of the S&P 500, the controlling
factor is not whether the Fund's performance is up or down per se, but
whether it is up or down more or less than the record of the S&P 500.
Moreover, the comparative investment performance of the Fund is based
solely on the relevant performance period without regard to the cumulative
performance over a longer or shorter period of time.
Because the Performance Adjustment rate is applied to the Fund's average
net assets for the entire performance period, the dollar amount of the
Performance Adjustment will depend upon the Fund's average net assets over
the extent of the performance period rather than current net assets.
Accordingly, application of the Performance Adjustment rate to average net
assets for the full performance period generally will result in a higher
dollar amount when the Fund's net assets are decreasing (and a lower dollar
amount when the Fund's net assets are increasing), than would occur if the
Performance Adjustment rate were applied to the current month's assets.
During the fiscal years ended September 30, 1993, 1992, and 1991, FMR
received $1,291,906, $1,087,250, and $1,240,019 respectively, for its
services as investment adviser to the Fund . These fees were
equivalent to .54%, .51%, and .60%, respectively, of the average net assets
of the Fund for each of those years . The fee for fiscal year 1993
includes the basic fee, an upward adjustment of $81,040 and an upward
adjustment to prior periods fees of $377,292 . The fees for fiscal
years 1993, 1992, and 1991 include both the basic fee and the performance
adjustment. The performance adjustments were downward adjustments of
$268,871, and $86,141, for fiscal years 1992 and 1991, respectively.
To comply with the California Code of Regulations, FMR will reimburse the
Fund if and to the extent that the Fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the Fund's expenses for purposes of this regulation, the
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.
FMR retains the ability to be repaid by the Fund for these expense
reimbursements in the amount that expenses fall below the limit prior to
the end of the fiscal year. Fee reimbursements by FMR will increase the
Fund's total return, and reimbursements by the Fund will lower its total
return.
SUB-ADVISERS. FMR has entered into sub-advisory agreements with
FMR U.K. and FMR Far East . P ursuant to the sub-advisory
agreements, FMR may receive investment advice and research services
outside the United States from the sub-advisers.
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, are wholly-owned subsidiaries
of FMR .
Under t he sub-advisory agreements FMR pays the fees of FMR
U.K. and FMR Far East . For providing non-discretionary investment
advice and research services, the sub-advisers are compensated as
follows:
FMR pays FMR U.K. and FMR Far East fee 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.
Fidelity Service Company is transfer, dividend disbursing and
shareholders' servicing agent for the Fund. Effective June 1, 1990,
pursuant to an amended agreement with Service, the Fund pays a per account
fee and a monetary transaction fee of $65 and $14, respectively or $60 and
$12, respectively, depending on the nature of the service provided. Fees
for certain institutional retirement plan accounts are based on the net
asset value of all such accounts in the Fund.
Under the revised contract, Service pays out-of-pocket expenses associated
with providing transfer agent services. In addition, Service bears the
expense of typesetting, printing and mailing Prospectuses, Statements of
Additional Information, reports, notices and statements to shareholders.
The transfer agent fees paid to Service by the Fund for fiscal years ended
September 30, 1993, 1992, and 1991, amounted to $38,794, $38,153, and
$38,961.
The Fund's agreement with Service provides that Service will perform the
calculations necessary to determine the Fund's NAV and dividends and
maintain the Fund's accounting records. Prior to July 1, 1991, the annual
fee for these pricing and bookkeeping services was based on two schedules,
one pertaining to the Fund's average net assets, and one pertaining to the
type and number of transactions made. The fee rates in effect as of July
1, 1991 are based on the 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 the Fund's securities lending program. Securities lending
fees are based on the number and duration of individual securities loans.
For the fiscal years ended September 30, 1993, 1992, and 1991, the fees
paid to Service for pricing and bookkeeping services (including
reimbursements for related out-of-pocket expenses) and for administering
the Fund's securities lending program were $145,494, $129,183, and
$134,423, respectively.
THE DISTRIBUTOR
The Fund has a General 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 is a
member of the National Association of Securities Dealers, Inc. The General
Distribution Agreement calls for Distributors to use all reasonable
efforts, consistent with its other business, to secure purchasers for
shares of the Fund, which are offered continuously. Promotional and
administrative expenses in connection with the offer and sale of shares are
paid by Distributors. Distributors also acts as general distributor for
other publicly offered Fidelity funds. The expenses of these operations
are borne by FMR or Distributors.
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, in Distributors'
opinion, it should not preclude a bank from being paid for shareholder
servicing and recordkeeping functions. Distributors intends to engage
banks only to perform such functions. However, changes in federal or state
statutes and regulations pertaining to the permissible activities of banks
and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a
bank were prohibited from so acting, the Trustees would consider what
actions, if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the operation of
the Fund might occur, including possible termination of any automatic
investment or redemption or other services then provided by the bank. It
is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The Fund may execute
portfolio transactions with and purchase securities issued by depository
institutions that receive payments from the Fund for other services. No
preference will be shown in the selection of investments for the
instruments of such depository institutions. 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.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor Strategic Opportunities Fund is a
series of Fidelity Advisor Series VIII (formerly Fidelity Special
Situations Fund), 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. Currently there are two funds in the Trust:
Fidelity Advisor Strategic Opportunities Fund and Fidelity Advisor Emerging
Markets Income Fund. The 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 f und, 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. The 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. The F und'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 th e Prospec tus. Shares are fully paid
and nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" on page 26. 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 term inated 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 June 10 , 1994, the following owned of record or
beneficially more than 5% of the outstanding shares of the Fund: Merrill
Lynch Price Fenner & Smith, Jacksonville, FL, owned 2 0 %; A.G.
Edwards & Sons, St. Louis, MO, owned 9 %; Smith Barney Shearson,
New York, NY, owned 8 %; Cigna Securities, Inc., Hartford, CT, owned
8 %.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water St., Boston,
Massachusetts, is custodian of the assets of the Fund. 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 the Fund. The 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. Coopers and Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the Trust 's independent accountant.
The auditor examines financial statements for the Trust and provides
other audit, tax, and related services.
FINANCIAL STATEMENTS
Initial Shares' financial statements and financial highlights for
the fiscal year ended September 30, 1993 are included in its Annual Report,
which is a separate report supplied with this Statement of Additional
Information. Initial Shares' financial statements and financial highlights
are incorporated herein by reference.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUN D: CLASS A
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND: CLASS B
A FUND OF FIDELITY ADVISOR SERIES VIII
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30 , 1994
This Statement is not a prospectus but should be read in conjunction with
the current Fidelity Advisor Strategic Opportunities Fund (the Fund)
Prospectus es (dated June 30 , 1994) . The Fund
offers its shares to retail investors. Retail investors are offered Class
A and Class B shares. Please retain this document for future
reference. The Annual Report for Class A for the fiscal year ended
September 30, 1993, a separate report supplied with this Statement of
Additional Information, is incorporated herein by reference. Additional
copies of either Prospectus, Statement of Additional Information
or Annual Report are available without charge upon request from
Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts 02109, or from your investment professional.
NATIONWIDE 800-840-6333
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions 12
Valuation of Portfolio Securities 13
Performance 14
Additional Purchase, Exchange and Redemption Information 18
Distributions and Taxes 21
FMR 22
Trustees and Officers 22
Management and Other Services 24
The Distributor 27
Distribution and Service Plan 27
Description of the Trust 28
Financial Statements 29
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 (Distributors)
TRANSFER AGENT FOR CLASS A
State Street Bank and Trust Company (State Street or Transfer Agent)
TRANSFER AGENT FOR CLASS B
Fidelity Investments Institutional Operations Company (FIIOC or Transfer
Agent)
CUSTODIAN
Brown Brothers Harriman & Co. (Brown Brothers)
ASO-PTB - 6 94
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Fund's assets which may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation shall be
determined immediately after and as a result of the acquisition of such
security or other asset. Accordingly, any subsequent change in values, net
assets or other circumstances will not be considered when determining
whether the investment complies with the Fund's investment policies and
limitations.
The Fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (1940 Act))
of the Fund. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued
or guaranteed by the government of the United States, its agencies, or
instrumentalities) if, as a result thereof, more than 5% of the Fund's
total assets (taken at current value) would be invested in the securities
of such issuer;
(2) purchase the securities of any issuer, if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held in the Fund's portfolio;
(3) issue senior securities (except to the extent that issuance of one or
more classes of shares of the Fund in accordance with an Order issued by
the Securities and Exchange Commission (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.
(i ii ) 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.
( i 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.)
(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.
For the Fund's limitations on futures and options transactions, see
"Limitations on Futures and Options Transactions" beginning on page 9.
AFFILIATED BANK TRANSACTIONS. The 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, the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial institutions.
THE FUND'S RIGHTS AS A SHAREHOLDER. The Fund does not intend to direct or
administer the day-to-day operations of any company. The Fund, however,
may exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the Fund's investment in the company.
The activities that the 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 the 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 the Fund is involved in
litigation. No guarantee can be made, however, that litigation against the
Fund will not be undertaken or liabilities incurred.
DELAYED-DELIVERY TRANSACTIONS. The Fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the Fund to purchase or sell specific securities at a
predetermined price and/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. The Fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the Fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the Fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the Fund's other investments. If the 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, the Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the Fund has sold a security on a
delayed-delivery basis, the Fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the Fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The 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.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of
securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substan tial delays. It may also be
diffi cult to enforce legal rights in foreign countries.
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.
The Fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject
to 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.
The 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 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. The 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. The 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 the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The 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 the fund. The fund may also use swap
agreements, indexed securities, and options and futures contracts relating
to foreign currencies for the same purposes.
When the 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, the 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." The 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.
The fund may also use forward contracts to hedge against a
decline in the value of existing investments denominated in foreign
currency. For example, if the 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. The 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.
The 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 the fund held investments denominated in
Deutschemarks, the 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 the 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 the 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. The 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 the fund's investment
exposure to changes in currency exchange rates, and could result in losses
to the fund if currencies do not perform as FMR anticipates. For example,
if a currency's value rose at a time when FMR had hedged the fund by
selling that currency in exchange for dollars, the fund would be unable to
participate in the currency's appreciation. If FMR hedges currency
exposure through proxy hedges, the 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 the fund's exposure to
a foreign currency, and that currency's value declines, the 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.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the Fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the 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 the Fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities . Also, FMR may determine some
restricted securities, 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 the Fund writes, all or a
portion of the value of the underlying instrument may be illiquid depending
on the assets held to cover the option and the nature and terms of any
agreement the Fund may have to close out the option before
expiration .
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the 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, the
Fund might obtain a less favorable price than prevailed when it decided to
seek registration of the security.
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 the 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 the 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 the 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 the 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 the fund in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance, the
fund relies on FMR's researach in an attempt to avoid situations where
fraud or misinterpretation 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, the 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 the 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 the 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.
The fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
The fund limits the amount of total assets that it will invest in any one
issuer or issuers within the same industry (see limitations 1 and 8). For
purposes of these limitations, the fund generally will treat the borrower
as the "issuer" of indebtedness held by the fund. In the case of loan
participations where a bank or other lending institution serves as
financial intermediary between the fund and the borower, 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 isuer of indebtedness may restrict the fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
LOWER-QUALITY DEBT SECURITIES. The Fund may purchase lower-rated debt
securities (those rated Ba or lower by Moody's Investors Service, Inc., or
BB by Standard & Poor's Corporation), which have poor protection with
respect to the payment of interest and repayment of principal .
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-rated debt securities may fluctuate more
than those of higher-rated 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 debt 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 the Fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by the 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.
The 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.
REPURCHASE AGREEMENTS. In a repurchase agreement , the Fund
purchases a security and simultaneously commits to resell that security to
the seller at an agreed-upon price on an agreed-upon date within a number
of days from the date of purchase. The resale price reflects the purchase
price plus an agreed-upon incremental amount of interest which is unrelated
to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed-upon
price, which obligation is in effect secured by the value (at least equal
to the amount of the agreed upon resale price and marked to market daily)
of the underlying security. The Fund may enter into a repurchase agreement
with respect to any security in which it is authorized to invest. While it
does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in the market value
of the underlying securities, as well as delay and costs to the Fund in
connection with bankruptcy proceedings), it is the Fund's current policy to
limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory to FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
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, the Fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The 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 the Fund's
assets and may be viewed as a form of leverage.
SECURITIES LENDING. The 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 the 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 the Fund
may engage in loan transactions only under the following conditions: (1)
the Fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the Fund must be able to terminate
the loan at any time; (4) the Fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the Fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the Fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES "AGAINST THE BOX." If the Fund enters into a short sale
against the box, it will be required to set aside securities equivalent in
kind and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The Fund will incur
transaction costs, including interest expense, in connection with opening,
maintaining, and closing short sales against the box.
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 the 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. The Fund is not
limited to any particular form of swap agreement if FMR determines it is
consistent with the 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 the Fund's investment exposure from one
type of investment to another. For example, if the Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of 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 the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. The 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.
The Fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the
Fund enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the
Fund is entitled to receive under the agreement. If the Fund enters into a
swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the Fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The 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.
WARRANTS. The 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. The Fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets, before engaging in any purchases or sales of futures
contracts or options on futures contracts. The Fund intends to
comply with Rule 4.5 of the regulations 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, the Fund will not: (a) sell futures
contracts, purchase put options, or write call options if, as a result,
more than 25% of the Fund's total assets would be hedged with futures and
options under normal conditions; (b) purchase futures contracts or write
put options if, as a result, the Fund's total obligations upon settlement
or exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by
the Fund would exceed 5% of the Fund's total assets. These limitations do
not apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate
features similar to options.
The above limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the 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 the 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 the Fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it
had purchased the underlying instrument directly. When the 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 the Fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the Fund, the Fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the Fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The Fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the Fund will lose the entire premium it paid. If the Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The 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 the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract the Fund will be required to make margin payments to an FCM as
described above for futures contracts. The 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 the Fund has written, however, the
Fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the 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. The 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, the 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 the Fund's current or
anticipated investments exactly. The 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 the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the 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. The 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 the 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 the 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 the Fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the 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 the
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. The
Fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The 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
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the Fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the Fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the Fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The 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 the 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 the f und by FMR pursuant to authority contained in the
m anagement c ontract. 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 advis e r. In
selecting broker-dealers subject to applicable limitations of the federal
securities laws, FMR will consider 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
arrangements for payment of fund expenses . Commissions for foreign
investments traded on foreign exchanges will generally be higher than for
U.S. investments and may not be subject to negotiation.
The f und may execute portfolio transactions with broker-dealers who
provide research and execution services to the f und 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). The selection of
such broker-dealers generally is made by FMR (to the extent possible
consistent with execution considerations) in accordance with a ranking of
broker-dealers determined periodically by FMR's investment staff based upon
the quality of r esearch and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the f und may be useful to FMR in rendering investment
management services to the f und 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 f und. 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 commission s charged by other broker-dealers
in recognition of their research and execution services. In order to cause
the f und 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 f und 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 f und 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 of 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 the fund toward payment of the 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. P ursuant to such requirements , the
Board of Trustees has authorized FBSI to execute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
f und and review the commissions paid by the f und over
representative periods of time to determine if they are reasonable in
relation to the benefits to the f und.
For the fiscal years ended September 30, 1993 and 1992, the Fund's annual
portfolio turnover rate was 183%, and 211%, respectively.
For the fiscal years ended September 30, 1993, 1992, and 1991, the Fund
paid brokerage commissions of $1,068,788, $1,087,115, and $1,079,734,
respectively. During fiscal 1993, $872,596 or approximately 82% of
these commissions were paid to brokerage firms that provided
research services, although the providing of such services was not
necessarily a factor in the placement of all of this business with
such firms. The Fund pays both commissions and spreads in connection with
the placement of portfolio transactions; FBSI is paid on a commission
basis. During fiscal 1993, 1992, and 1991, the Fund paid brokerage
commissions of $103,206, $126,298, and $165,047, respectively, to FBSI.
During fiscal 1993 this amounted to approximately 9.7% of the
aggregate brokerage commissions paid by the Fund for transactions involving
21.7% of the aggregate dollar amount of transactions in which the Fund
paid brokerage commissions. The difference between percentage of
brokerage commissions paid to, and the percentage of the dollar amount of
transactions effected through FBSI is a result of the lower commission
rates charged by FBSI.
From time to time the Trustees will review whether the recapture for the
benefit of the f und of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally
permissible and advisable. The Fund seeks to recapture soliciting
deal er fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine, in the exercise of their
business judgment, whether it would be advisable for the Fund to seek such
recapture.
Although the Trustees and officers of the Fund are substantially
the same as those of other funds managed by FMR, investment decisions for
the Fund are made independently from those of other funds manage d 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
or 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 to each fund. In some cases this system could have a
detrimental effect on the price or value of the security as far as the Fund
is concerned. In other cases, however, the ability of the Fund to
participate in volume transactions will produce better executions and
prices for the Fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the Fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Most equity securities for
which the primary market is the U.S. 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 U.S. are valued using the official
closing price or the last sale price in the principal market where they are
traded. If the last sale price (on local exchange) is unavailable, the last
evaluated quote or last bid price is normally used. Short-term securities
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
twofold 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.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by the Fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as
well as corporate bonds, U.S. government securities, money market
instruments, and repurchase agreements, is substantially completed each day
at the close of the NYSE. The values of any such securities held by the
Fund are determined as of such time for the purpose of computing the Fund's
net asset value (NAV) . Foreign security prices are furnished by
independent brokers or quotation services which express the value of
securities in their local currency. Service gathers all exchange rates
daily at the close of the NYSE using the last quoted price on the local
currency and then translates the value of foreign securities from their
local 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. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then the
security will be valued as determined in good faith by a committee
appointed by the Board of Trustees.
PERFORMANCE
The Class A and Class B shares may quote its performance in various ways.
All performance information supplied in advertising is historical and is
not intended to indicate future returns. Share price 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.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the NAV over the 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 return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual return that would equal 100% growth on a
compounded basis in ten years. While average annual total returns are a
convenient means of comparing investment alternatives, investors should
realize that performance is not constant over time, but changes from year
to year, and that average annual returns represent averaged figures as
opposed to 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, and/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. An example of this type of
illustration is given on page 17. Total returns may be quoted with or
without taking the maximum sales charge into account. Total returns may be
quoted on a before-tax or after-tax basis. Excluding the sales charge from
a total return calculation produces a higher total return figure. Total
returns and other performance information may be quoted numerically or in a
table, graph or similar illustration.
The following chart shows total returns for Class A shares for the
periods ended September 30, 1993.
Fidelity Advisor Strategic Opportunities Fund - Class A**
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns** Cumulative Total Returns**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Life of Fund* One Year Five Year Life of Fund*
</TABLE>
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C>
20.33% 14.56% 16.18% 26.33% 107.18% 353.53%
</TABLE>
Fidelity Advisor Strategic Opportunities Fund - Class B***
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns** Cumulative Total Returns**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Life of Fund* One Year Five Year Life of Fund*
</TABLE>
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C>
22.33% 15.57% 16.18% 26.33% 107.18% 353.53%
</TABLE>
* Life of Fund: December 31, 1983 (Commencement of Operations) to
September 30, 1993
** Class A's average annual returns include the effect of the maximum
sales charge. Cumulative returns do not include the effect of this charge
and would have been lower if it had been taken into account. The total
return figures are adjusted to show what total return would have been for
the Class A shares had that been available since the Fund's commencement of
operations on December 31, 1983. The Fidelity Advisor Strategic
Opportunities Fund - Class A commenced operations on August 20, 1986. On
January 1, 1987, Class A imposed a .65% 12b-1 fee, which is not reflected
in returns prior to that date. Because it has higher expenses, total
returns for the Fidelity Advisor Strategic Opportunities - Class A will be
lower than for the Fidelity Advisor Strategic Opportunities Fund - Initial
Class (which is closed to new shareholders) at any given time.
*** Average annual total returns include the effect of the maximum
contingent deferred sales charge ("CDSC") applicable at the end of the
stated period. Cumulative total returns do not include the effect of the
CDSC and would have been lower if it had been taken into account. Initial
offering of Class B shares is expected on or about June 30, 1994, at which
time a 1.00% 12b-1 fee (inclusive of .25% shareholder service fee) will be
imposed and is not reflected in returns prior to that date. Returns will
be lower when these fees are taken into account.
The following chart shows total returns for Fidelity Advisor
Strategic Opportunities Fund - Initial Class for the periods
ended September 30, 1993.
Average Annual Total Returns** Cumulative Total Returns**
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Year Five Year Life of Fund* One Year Five Year Life of Fund*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
20.95% 15.17% 16.58% 26.98% 112.73% 369.11%
</TABLE>
* Life of Fund: December 31, 1983 (commencement of operations) to
September 30, 1993.
** Average Annual Total Returns include the effect of the Fund's maximum
4.75% sales charge. Cumulative total returns do not include effect of this
charge and would have been lower if it had been taken into account.
PERFORMANCE COMPARISONS. Performance may be compared to the performance of
other mutual funds in general, or to the performance of particular types of
mutual funds. The 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 dividends, but does not take sales charges or
redemption fees or tax consequences into consideration. Lipper may also
rank funds based on yield. In addition to mutual fund rankings,
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, performance may also be compared to other mutual funds
tracked by financial or business publications and periodicals. For
example, Morningstar, Inc. may be quoted 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.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's Asset Allocation Program materials may include:
computerized investment planning software; a workbook describing general
principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index
(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 Fund. Ibbotson calculates total returns in the same method as
the Fund. Performance comparisons may also be made to that of other
compilations or indices that may be developed and made available in the
future.
Performance may also be compared to that of the S&P 500, the Dow Jones
Industrial Average (the DOW or DJIA),the Dimensional Fund Advisors (DFA)
Small Company Fund, and the NASDAQ Composite Index (NASDAQ). The S&P
500 and the DOW are widely recognized, unmanaged indices of common stock
prices. The performance of the S&P 500 is based on changes in the
prices of stocks comprising the index and assumes the reinvestment of all
dividends paid on such stocks. Taxes, brokerage commissions and other fees
are disregarded in computing the level of the S&P 500 and the DJIA.
The DFA is a market-value-weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange (AMEX) and
over-the-counter (OTC) with the same or less capitalization as the
upperbound of the NYSE ninth decile stocks.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and
charitable giving. In addition, Fidelity may quote financial or business
publications or periodicals, including model portfolios or allocations, as
they relate to fund management, investment philosophy, and investment
techniques.
The Fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
The Fund may be quoted in advertising and other types of literature as
compared to certificates of deposit (CDs), bank-issued money market
instruments, and money market mutual funds. Unlike CDs and money market
instruments, money market mutual funds and shares of the Fund are not
insured by the FDIC.
According to the Investment Company Institute, over the past ten years,
assets in equity mutual funds increased from $75.8 billion in 1983 to
approximately $659.3 billion at the end of 1993. As of December 31, 1993,
FMR managed approximately $125 billion in equity assets, as defined and
tracked by Lipper. From time to time the Fund may compare FMR's equity
assets under management with that of other investment advisers.
VOLATILITY. Various measures of volatility and benchmark correlation may
be quoted in advertising. In addition, the Fund may compare these measures
to those of other funds. Measures of volatility seek to compare 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.
MOVING AVERAGES. Performance may be illustrated using moving averages. A
long-term moving average is the average of each week's adjusted closing NAV
for a specified period. A short-term moving average is the average of each
day's adjusted closing NAV for a specified period. Moving Average Activity
Indicators combine adjusted closing NAVs from the last business day of each
week with moving averages for a specified period to produce indicators
showing when an NAV has crossed, stayed above, or stayed below its moving
average. On September 24, 1993, the Class A 13-week and 39-week long-term
moving averages were $21.71 and $20.65, respectively.
MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
percentage change in price movements over that period.
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 by the Fund and reflects all
elements of its return. Unless otherwise indicated, the Fund's adjusted
NAVs are not adjusted for sales charges, if any.
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 portfolio 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 a fixed numbers of shares had been purchased
at the same intervals. In evaluating such a plan, investors should
consider their ability to continue purchasing shares through periods of low
price levels.
Class A and Class B shares 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.
HISTORICAL FUND RESULTS. The following chart shows the income and
capital elements of Class A's year-by-year total returns from December 31,
1983 (commencement of operations) through September 30, 1993. The chart
compares the Fund's return to the record of the S&P 500, NASDAQ, the
DJIA and the cost of living measured by the CPI over the same period. The
comparisons to the S&P 500 and the DJIA show how the Class A'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.
Class A 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. The S&P 500 and DJIA are based on the
prices of unmanaged groups of stocks and, unlike the Class A's returns,
their returns do not include the effect of paying brokerage commissions and
other costs of investing.
During the period from December 31, 1983 (commencement of operations)
to September 30, 1993 a hypothetical investment of $10,000 in Class A would
have grown to $43,199 after deduction of the Fund's 4.75% maximum front-end
sales charge and assuming all distributions were reinvested. This was
a period of widely fluctuating stock prices, and should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the Fund today.
<TABLE>
<CAPTION>
<S> <C>
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Cost
Period $10,000 Income Capital Gain Total of
Ended Investment Distributions Distributions Value NASDAQ S&P DJIA Living**
500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/84* $10,515 $ 0 $ 0 $10,515 $ 8,971 $10,432 $ 9,950 $10,365
9/30/85 12,085 66 219 12,369 10,062 11,948 11,490 10,691
9/30/86 15,900 394 1,777 18,072 12,587 15,741 15,859 10,879
9/30/87 18,137 563 3,245 21,944 15,947 22,580 24,007 11,352
9/30/88 14,778 790 5,283 20,851 13,916 19,789 20,252 11,826
9/30/89 18,603 1,946 6,650 27,199 16,975 26,319 26,782 12,340
9/30/90 16,376 2,387 5,854 24,617 12,366 23,886 25,348 13,100
9/30/91 20,344 4,264 7,273 31,881 18,912 31,333 32,299 13,544
9/30/92 18,584 4,930 10,682 34,196 20,936 34,798 36,071 13,949
9/30/93 21,429 6,891 14,879 43,199 27,379 39,326 40,364 14,324
</TABLE>
* From Commencement of Operations, December 31, 1983 to September 30,
1984.
** From the month-end closest to the initial investment date.
EXPLANATORY NOTES: With an initial investment of $10,000 made on December
31, 1983, the net amount invested in Class A shares was $9,525, assuming
the current 4.75% maximu m front-end sales charge was ded ucted as if
it had been in effect at that time. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (that is, their cash
value at the time they were reinvested), amounted to $35,472. If
distributions had not been reinvested, the amount of distributions earned
from Class A over time would have been smaller, and the cash
payments for the period would have come to $3,502 for income dividends and
$7,489 for capital gain distributions. Class B shares are expected to be
available on or about June 30, 1994. Tax consequences have not been
factored into the above figures.
TRADITION OF PERFORMANCE. Fidelity's tradition of performance is achieved
through:
(bullet) MONEY MANAGEMENT: a proud tradition of money management
motivated by the expectation of excellence backed by solid analysis and
worldwide resources. Fidelity employs a bottom-up approach to security
selection based upon in-depth analysis of the fundamentals of that
investment opportunity.
(bullet) INNOVATION: constant attention to the changing needs of today's
investors and vigilance to the opportunities that arise from changing
global markets. Research is central to Fidelity's investment
decision-making process. Fidelity's greatest resource--over 200 skilled
investment professionals--is supported with the most sophisticated
technology available.
Fidelity provides:
(bullet) Global research resources: an opportunity to diversify
portfolios and share in the growth of markets outside the United States.
(bullet) In-house, proprietary bond-rating system, constantly updated,
which provides extremely sensitive credit analysis.
(bullet) Comprehensive chart room with over 1500 exhibits to provide
sophisticated charting of worldwide economic, financial, and technical
indicators, as well as to provide tracking of over 800 individual stocks
for portfolio managers.
(bullet) State-of-the-art trading desk, with access to over 200 brokerage
houses, providing real-time information to achieve the best executions and
optimize the value of each transaction.
(bullet) Use of extensive on-line computer-based research services.
(bullet) SERVICE: Timely, accurate and complete reporting. Prompt and
expert attention when an investor or an investment professional needs it.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
The Fund is open for business and the NAV of each class is
calculated each day that the NYSE is open for trading. The NYSE has
designated the following holiday closings for 1994: Presidents' Day, Good
Friday, Memorial Day, Independence Day (observed) , Labor Day,
Thanksgiving Day, and Christmas Day (observed). Although FMR expects the
same holiday schedule, with the addition of New Year's Day, to be observed
in the future, the NYSE may modify its holiday schedule at any time. On
any day that the NYSE closes early, or as permitted by the SEC, the right
is reserved to advance the time on that day by which purchase and
redemption orders must be received. To the extent that portfolio
securities are traded in other markets on days t he NYSE is closed,
each class' NAV may be affected on days when investors do not have
access to each class to purchase or redeem shares. Certain Fidelity
funds may follow different holiday closing schedules.
If the Trustees determine that existing conditions make cash
payment s undesirable, redemption payments may be made in whole or in
part in securities or other property, valued for this purpose as they are
valued in computing the NAV of each class. Sh areholders receiving
any such 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 (the Rule), the 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 administration fee,
redemption fee , or deferred sales charge ordinarily payable at the
time of exchange, or (ii) the Fund s uspends 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 pr ospectus, the 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 F und
would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
PURCHASE INFORMATION
As provided for in Rule 22d-1 under the 1940 Act, Distributors exercises
its right to waive the Class A's maximum 4.75% sales charge in
connection with the Fund's merger with or acquisition of any investment
company or trust.
CLASS A NET ASSET VALUE PURCHASES. S ales charges do not
apply to shares purchased: (1) by registered representatives, bank trust
officers and other employees (and their immediate families) of investment
professionals having agreements with D istributors; (2) by a current
or former Trustee or officer of a Fidelity fund or a current or retired
officer, director or regular employee of FMR Corp. or its direct or
indirect subsidiaries (a "Fidelity Trustee or employee"), the spouse of a
Fidelity Trustee or employee, a Fidelity Trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for
the sole benefit of the minor child of a Fidelity Trustee or employee; (3)
by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more; (4) by 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) by trust institutions (including bank trust
departments) investing on their own behalf of their clients ; (6) in
accounts as to which a bank or broker-dealer charges an asset-based
management fee, provided the bank or broker-dealer has an agreement with
Distributors; (7) as part of an employee benefit plan (including
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. e mployer having more than 200 eligible
employees , or a minimum of $ 1 ,000,000 i nvested in
Fidelity Advisor mutual funds, a nd the assets of which are
held in a bona fide trust for the exclusive benefit of employees
participating therein; (8) in a Fidelity or a Fidelity Advisor IRA account
purchase d with the proceeds of a distribution from an employee
benefit plan h aving more than 200 eligible employees, or $1,000,000
invested in Fidelity Advisor mutual funds; (9) 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 o r a minimum of $1,000,000 invested in Fidelity Advisor
mutual funds; (10) by any state, county, or city, or any governmental
instrumentality, department, authority or agency; or ( 11) with
redemption proceeds from other mutual fund complexes on which the investor
has paid a front-end sales charge only.
A sales load waiver form must accompany these transactions.
CLASS B WAIVERS. The contingent deferred sales charge (CDSC) on Class
B may be waived in the case of disability or death provided that the
redemption is made within one year following the death or initial
determination of disability, or in connection with a total or partial
redemption made in connection with certain distributions from retirement
plan accounts.
Distributors compensates securities dealers and banks having agreements
with Distributors (investment professionals), who sell Class A and Class
B shares according to the schedule in each pr ospectus.
Distributors compensates investment professionals with a fee of .25% on
purchases of $1 million or more, except for purchases made through a bank
or bank affiliated broker-dealer that qualify for a Class A Sales Charge
Waiver described in the prospectus. All assets on which the .25% fee is
paid must remain within the Fidelity Advisor Funds (including shares
exchanged into Daily Money Fund and Daily Tax-Exempt Money Fund) for a
period of one uninterrupted year or the investment professional will be
required to refund this fee to Distributors. Purchases by insurance
company separate accounts will qualify for the .25% fee only if an
insurance company's client relationship underlying the separate account
exceeds $1 million. It is the responsibility of the insurance company to
maintain records of purchases by any such client relationship.
Distributors may request records evidencing any fees payable through this
program.
QUANTITY DISCOUNTS. Reduced sales charges are applicable to purchases
of Class A shares of the Fund in amounts of $50,000 or more of the Fund
alone or in combination with purchases of Class A and Class B shares of
certain other Fidelity Advisor Funds made at any one time (including Daily
Money Fund and Daily Tax-Exempt Money Fund shares acquired by exchange from
any Fidelity Advisor Fund with a sales charge). To obtain the reduction of
the front-end sales charge, 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.
In addition to investing at one time in any combination of funds in an
amount entitling you to a reduced front-end sales charge, you may qualify
for a reduction in the front-end sales charge under the following
programs:
COMBINED PURCHASES. When you invest in Class A shares for several
accounts at the same time, you may combine these investments into a single
transaction if purchased through one investment professional, and if the
total is at least $50,000. The following may qualify for this privilege:
an individual, or "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 single fiduciary account or for a
single or a parent-subsidiary group of "employee benefit plans" (as defined
in Section 3(3) of ERISA); and tax-exempt organizations under Section
501(c)(3) of the Internal Revenue Code.
RIGHTS OF ACCUMULATION. Your "Rights of Accumulation" permit reduced
front-end sales charges on any future purchases after you have reached a
new breakpoint in the Class A sales charge schedule (see the Class A
prospectus for the front-end sales charge schedule). You can add the value
of existing Fidelity Advisor Fund Class A and Class B shares, held by you,
your spouse, and your children under age 21 determined at the previous
day's NAV at the close of business, to the amount of your new purchase
valued at the current offering price to determine your reduced front-end
sales charge. You can also add shares of Daily Money Fund and shares of
Daily Tax-Exempt Money Fund, provided they were acquired for by exchange
from any Fidelity Advisor Fund with a sales charge, to the amount of your
new purchase.
LETTER OF INTENT. If you anticipate purchasing $50,000 or more of
Class A shares of the Fund alone or in combination with Class A and Class B
shares of other Fidelity Advisor Funds within a 13-month period, you may
obtain Class A shares at the same reduced front-end sales charge as though
the total quantity were invested in one lump sum, by filing a nonbinding
Letter of Intent (the Letter) within 90 days of the start of the purchases.
Each 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 toward a $50,000 Letter would
receive the same reduced front-end sales charge as if the $50,000 had been
invested at one time. To ensure that the reduced front-end sales charge
will be received on future purchases, you or your Transfer Agent that the
Letter is in effect each time Class A or Class B shares are purchased.
Neither income dividends nor capital gain distributions taken in additional
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 front-end 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 further front-end sales charge reduction, the 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 the total purchase.
If you do not complete your purchase under the Letter within the
13-month period, your front-end sales charge will be adjusted upward,
corresponding to the amount actually purchased, and if after 30 days'
written notice, you do not pay the increased front-end sales charge,
sufficient escrowed Class A shares will be redeemed to pay such charge.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A or Class B shares of the Fund or other Fidelity
Advisor Funds with the Systematic Investment Program by completing the
appropriate section of the account application and attaching a voided
personal check with your bank's magnetic ink coding number across the
front. If your bank account is jointly owned, be sure that all owners
sign. Investments may be made by automatically deducting $100 or more from
your bank checking account. You may change the amount of your monthly
purchase at any time. There is a $1,000 minimum initial investment
requirement for Systematic Investment Program.
Your account will be drafted on or about the first business day of
every month. Class A or Class B shares will be purchased at the offering
price next determined following receipt of the order by the Transfer Agent.
You may cancel your participation in the Systematic Investment Program at
any time without payment of a cancellation fee. You will receive a
confirmation from the Transfer Agent for every transaction, and a debit
entry will appear on your bank statement.
EXCHANGE INFORMATION
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM. With the Systematic
Exchange Program, you can exchange a specific dollar amount of Class A or
Class B shares into the same class of other Fidelity Advisor Funds on a
monthly, quarterly or semiannual basis.
1. The account from which the exchanges are to be processed must have a
minimum value of $10,000 before you may elect to begin exchanging
systematically. The account into which the exchanges are to be processed
must be an existing account with a minimum balance of $1,000.
2. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount to be exchanged systematically
is $100.
3. Systematic Exchanges will be processed at the NAV determined on the
transaction date, except that Systematic Exchanges into a Fidelity Advisor
Fund from any eligible money market fund will be processed at the offering
price next determined on the transaction date, unless the shares were
acquired by exchange from another Fidelity Advisor Fund.
REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A
or Class B shares you may reinvest an amount equal to all or a portion of
the redemption proceeds in the same class of Fund or any of the other
Fidelity Advisor Funds, at the NAV next determined after receipt of your
investment order, provided that such reinvestment is made within 30 days of
redemption. No charge currently is made for reinvestment in Class A or
Class B shares of the Fund. 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 the Fund.
FIDELITY SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A shares
worth $10,000 or more, you can have monthly, quarterly or semiannual checks
sent from your account to you, to a person named by you, or to your bank
checking account. You may obtain information about the Systematic
Withdrawal Program by contacting your investment professional. Your
Systematic Withdrawal Plan payments are drawn from front-end share
redemptions. If Systematic Withdrawal Program redemptions exceed income
dividends earned on your shares, your account eventually may be exhausted.
Since a front-end sales charge is applied on new shares you buy, it is to
your disadvantage to buy Class A shares while also making systematic
redemptions.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your check s , 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 the Fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the Fund's income is derived from qualifying dividends.
Because the Fund may 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%. The Fund will
notify corporate shareholders annually of the percentage of Fund dividends
which qualify for the dividends received deduction. A portion of the
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. The Fund will
send each shareholder a notice in January describing the tax status of
dividends and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the
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 the Fund, and such shares
are held six months or less and are sold at a loss, the portion of
the loss equal to the amount of the long-term capital gain distribution
will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the fund does
not 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 FUND. The 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, the 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.
The 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 the Fund's gross income for each fiscal year. Gains from
some forward currency contracts, futures contracts, and options are
included in this 30% calculation, which may limit the Fund's investments in
such instruments.
If the 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.
The Fund is treated as a separate entity from the other funds of
Fidelity Advisor Series VIII for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a Fund may be subject to
state and local taxes on distributions received from the Fund. Investors
should consult their tax advisors to determine whether the Fund is suitable
f o r their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company
organized in 1972. At present, the principal operating activities of FMR
Corp. are those conducted by three of its divisions as follows: Fidelity
Service Co. (Service), 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 certain institutional customers; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
Several affiliates of FMR also are engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly
owned subsidiaries of FMR formed in 1986, supply investment research and
may supply portfolio management services to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Fund are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. All persons named as
Trustees and officers also serve in similar capacities for other
funds advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. Those Trustees who are
" interested persons" (as defined in the 1940 Act) by virtue of their
affiliation with either 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 serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and 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, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a 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).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of
FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
DANIEL R. FRANK, Vice President of the Fund (1986), and an employee of FMR.
Under a retirement program that became effective on November 1,
1989, Trustee s , 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
trustees fees and length of service. Currently Messrs. Robert L. Johnson,
William R. Spaulding, Bertram H. Witham and David L.Yunich participate in
this program.
As of May 31, 1994 , the Trustees and officers of the Fund owned in
the aggregate less than 1% of the outstanding shares of the Fund.
MANAGEMENT CONTRACT AND OTHER SERVICES
The Fund employs FMR to furnish investment advisory and other services.
Under its Management Contract with the Fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the Fund in accordance with its investment objective,
policies, and limitations. FMR also provides the Fund with all necessary
office facilities and personnel for servicing the Fund's investments, and
compensates all officers of the Trust, all Trustees who are "interested
persons" of the Trust or of FMR, and all personnel of the Trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the Fund. These services include :
providing facilities for maintaining the Fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the Fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the Fund's records and the registration of the Fund's shares
under federal and state law; developing management and shareholder services
for the Fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
Service and State Street for Class A shares and FIIOC for Class B
shares , the Fund pays all of its expenses, without limitation, that are
not assumed by those parties. The Fund pays for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Other expenses paid by
the Fund include interest, taxes, brokerage commissions, the Fund's
proportionate share of insurance premiums and Investment Company Institute
dues, and the costs of registering shares under federal and state
securities laws. The Fund is also liable for such nonrecurring expenses as
may arise, including costs of any litigation to which the Fund may be a
party , and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
FMR is the Fund's manager pursuant to a Management Contract dated November
29, 1990, which was approved by shareholders on September 19, 1990. For
the services of FMR under the Contract, the Fund pays FMR a monthly
management fee composed of the sum of two elements: a basic fee and a
performance adjustment based on a comparison of the Fund's performance to
that of the S&P 500.
COMPUTING THE BASIC FEE. The Fund's basic fee rate is composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate is based on the monthly average net assets of all of the registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated schedule shown
below on the left. On the right the effective fee rate schedules are
the results of cumulatively applying the annualized rates at varying asset
levels. For example, the effective annual f ee rate at $216.7
billion of average group net assets - their approximate level for September
30, 1993 was .3262%, which is the weighted average of the respective fee
rates for each level of group net assets up to that level.
GROUP FEE RATE SCHEDULE* EFFECTIVE ANNUAL FEE RATES
Average Group Effective
Group Annualized Net Annual
Assets Rate Assets Fee Rate
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0 - $ 3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 175 .3325
21 - 24 .360 200 .3284
24 - 30 .350 225 .3253
30 - 36 .345 250 .3223
36 - 42 .340 375 .3198
42 - 48 .335 300 .3175
48 - 66 .325 325 .3153
66 - 84 .320 350 .3133
84 - 102 .315
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 336 .295
282 - 336 .290
Over 336 .285
</TABLE>
*The rates shown for average group assets in excess of $138 billion were
adopted by FMR on a voluntary basis on January 1, 1992. Rates in excess of
$174 billion were adopted by FMR on a voluntary basis on November 1, 1993.
Each was adopted pending shareholder approval of a new management contract
reflecting the extended schedule. The extended schedule provides for lower
management fees as total assets under management increase.
The individual fund fee rate is .30%. Based on the average group
net assets of funds advised by FMR for September 1993, the annual basic
fee rate would be calculated as follows:
GROUP FEE RATE INDIVIDUAL FUND FEE RATE BASIC FEE RATE
.3262% + .30% = .6262%
One-twelfth of this annual basic fee rate is applied to the 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 an
upward or downward adjustment, depending upon whether, and to what extent,
the Fund's investment performance for the performance period exceeds, or is
exceeded by, the record of the S&P 500 over the same period. The
performance period consists of the most recent month plus the previous 35
months. Each percentage point of difference (up to a maximum difference of
+ or -10) is multiplied by a performance adjustment rate of .02%. The
maximum annualized adjustment rate is therefore + or -.20%. The Fund
is comprised of three classes of shares: Initial 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 of this rate is then applied to the 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.
The Fund's performance is calculated based on change in NAV. For the
purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the Fund are treated as if reinvested in
Fund shares at the NAV as of the record date for payment. The record of
the S&P 500 is based on change in value; this is adjusted for any cash
distributions from the companies whose securities comprise the S&P 500.
Because the adjustment to the basic fee is based on the Fund's performance
compared to the investment record of the S&P 500, the controlling
factor is not whether the Fund's performance is up or down per se, but
whether it is up or down more or less than the record of the S&P 500.
Moreover, the comparative investment performance of the Fund is based
solely on the relevant performance period without regard to the cumulative
performance over a longer or shorter period of time.
Because the Performance Adjustment rate is applied to the Fund's average
net assets for the entire performance period, the dollar amount of the
Performance Adjustment will depend upon the Fund's average net assets over
the extent of the performance period rather than current net assets.
Accordingly, application of the Performance Adjustment rate to average net
assets for the full performance period generally will result in a higher
dollar amount when the Fund's net assets are decreasing (and a lower dollar
amount when the Fund's net assets are increasing), than would occur if the
Performance Adjustment rate were applied to the current month's assets.
During the fiscal years ended September 30, 1993, 1992, and 1991, FMR
received $1,291,906, $1, 087,250, and $1,240,019, respectively, for its
services as investment adviser to the Fund. The fees were equivalent
to .54%, .51%, and .60%, respectively, of the average net assets of the
Fund for each of those years. For fiscal 1992 and 1991, the downward
performance adjustments amounted to $268,871, and $86,141, respectively.
The fee for fiscal 1993 includes the basic fee, an upward performance
adjustment of $81,040, and an upward adjustment of $377, 292 to prior
periods' fees.
To comply with the California Code of Regulations, FMR will reimburse the
Fund if and to the extent that the Fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the Fund's expenses for purposes of this regulation, the
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.
FMR retains the ability to be repaid by the Fund for these expense
reimbursements in the amount that expenses fall below the limit prior to
the end of the fiscal year. Fee reimbursements by FMR will increase the
Fund's total return, and reimbursements by the Fund will lower its total
return.
SUB-ADVISERS. FMR has entered into sub-advisory agreements with
FMR U.K. and FMR Far East . P ursuant to the sub-advisory
agreements, FMR may receive investment advice and research services
outside the United States from the sub-advisers.
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, are wholly-owned subsidiaries
of FMR .
Under t he sub-advisory agreements FMR pays the fees of FMR
U.K. and FMR Far East . For providing non-discretionary investment
advice and research services, the sub-advisers are compensated as
follows:
Fmr pays FMR U.K. and FMR Far East fee 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.
State Street is transfer, dividend disbursing and shareholder servicing
agent for Class A shares of the Fund. State Street has delegated
certain transfer, dividend-paying and shareholder services to FIIOC. Under
the trust's contract with State Street, the Fund pays a per account fee at
$30 and a monetary transaction fee of $6. 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.
FIIOC is the transfer, dividend disbursing and shareholder servicing
agent for Class B shares of the Fund. Under the trust's contract with
FIIOC, the Fund pays a per account fee of $95 and a monetary transaction
fee of $20 or $17.50 depending on the nature of services provided. From
June 1, 1990 through December 31, 1992, FIIOC was paid a per account fee
and a monetary transaction fee of $65 and $14, or $60 and $12,
respectively.
Fees for certain institutional retirement plan accounts are based on
the NAV of all such accounts in the fund. FIIOC pays out-of-pocket
expenses associated with providing transfer agent services. In addition,
FIIOC bears the expenses of typesetting, printing, and mailing
prospectuses, statements of additional information, and all other reports,
notices, and statements to shareholders, with the exception of proxy
statements.
The trust has a contract with Service which provides that
Service will perform the calculations necessary to determine the
Fund's NAV and dividends and maintain the Fund's accounting records.
Prior to July 1, 1991, the annual fee for these pricing and bookkeeping
services was based on two schedules, one pertaining to the Fund's average
net assets, and one pertaining to the type and number of transactions the
Fund made. The fee rates in effect as of July 1, 1991 are based on the
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. Pricing and bookkeeping fees including related
out-of-pocket expenses paid to Service for fiscal 1993, 1992, and 1991 were
$145,494, $129,183, and $134,423, respectively.
THE DISTRIBUTOR
The Fund has a General 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
di stribution a greement calls for Distributors to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the 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 PLAN
The Trustees of the Trust have adopted a Distribution and Service Plan
on behalf of Class A and Class B shares of the Fund (the
Plan s ) pursuant to Rule 12b-1 under the 1940 Act (the Rule).
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 applicable class and its
shareholders .
For the fiscal years ended September 30, 1993, 1992, and 1991 Class
A paid distribution fees of $1,423,456, $1,266,638, and $1,222,07,
respectively, of which $330,491, $273,263, and $282,114, respectively,
was retained by Distributors.
Pursuant to the Class A Plan, Class A pays Distributors a distribution
fee at an annual rate of up to .65% of its average net assets determined as
of the close of business on each day throughout the month, but excluding
assets attributable to Class A shares purchased more than 144 months prior
to such day. Currently the Trustees have approved a distribution fee for
Class A at an annual rate of .65% of its average net assets. This fee may
be increased only when, in the opinion of the Trustees, it is in the best
interests of Class A shareholders to do so.
Pursuant to the Class B Plan, Class B pays Distributors a distribution
fee of .75% of its average daily net assets determined as of the close of
business on each day throughout the month. Class B 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.
Each Plan also specifically recognizes that FMR, either directly or
through Distributors, 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 s hares of the
applicable class. Under each Plan, if the payme nt by the Fund to FMR
of management fees should be deemed to be indirect financing of the
distribution of shares of the applicable class, such payment is
authorized by the Plan. In addition, each Plan provides that FMR
may use its resources, includin g its management fee revenues, to make
payments to third parties that assist in selling sha res or in other
dis tribution activities relating to that class. To the extent that
each Plan gives FMR and Distributors greater flexibility in connection with
the distribution of shares of the applicable class, additional shares 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 Plan s provide for specific payment s by
the applicable class of any of the expenses of Distributors, or
obligate s Distributors 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 Distributors
for advertising, marketing and distribution, and payments to investments
professionals, the amounts remaining, if any, may be used as Distributors
may elect.
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, in Distributors'
opinion it should not preclude a bank from being paid for shareholder
servicing and recordkeeping functions. Distributors intends to engage
banks to perform only such functions. However, changes in federal or state
statutes and regulations pertaining to the permissible activities of banks
and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a
bank were prohibited from so acting, the Trustees would consider what
actions, if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the operation
of the Fund might occur, including possible termination of any automatic
investment or redemption or other services then provided by the bank. It
is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The Fund may execute
portfolio transactions with and purchase securities issued by depository
institutions that receive payments under the Plan. No preference will be
shown in the selection of investments for the instruments of such
depository institutions. 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.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor Strategic Opportunities Fund is a
series of Fidelity Advisor Series VIII (formerly Fidelity Special
Situations Fund), 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. Currently there are two funds in the Trust:
Fidelity Advisor Strategic Opportunities Fund and Fidelity Advisor Emerging
Markets Income Fund. The 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 f und, 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. The 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. The F und 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 th e Prospec tus. 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 term inated 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 June 10 , 1994, the following owned of record or
beneficially more than 5% of the outstanding shares of the Fund: Merrill
Lynch Price Fenner & Smith, Jacksonville, FL, owned 2 0 %; A.G.
Edwards & Sons, St. Louis, MO, owned 9 %; Smith Barney Shearson,
New York, NY, owned 8 %; Cigna Securities, Inc., Hartford, CT, owned
8 %.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water St., Boston,
Massachusetts, is custodian of the assets of the Fund. 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 the Fund. The 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. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the Trust's independent accountant. The auditor
examines financial statements for the Fund and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
Class A's financial statements and financial highlights for the
fiscal year ended September 30, 1993 are included in its Annual Report,
which is a separate report supplied with this Statement of Additional
Information. Class A's financial statements and financial highlights are
incorporated herein by reference.
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND - CLASS A
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND - CLASS B
A FUND OF FIDELITY ADVISOR SERIES VIII
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30 , 1994
This Statement is not a prospectus but should be read in conjunction
with the current Fidelity Advisor Emerging Markets Income Fund (the Fund)
Prospectuses (dated June 30, 1994). The Fund offers Class A and Class B
shares. Please retain this document for future reference. Additional
copies of either Prospectus or this Statement of Additi onal Information
are available , without charge , upon request from Fidelity
Distributors Corporation, 82 Devonshire Street, Boston, Massachusetts,
02109, or from your investment professional.
NATIONWIDE 800- 840-6333
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Special Considerations Affecting Latin America 12
Special Considerations Affecting the Pacific Basin 13
Special Considerations Affecting Europe 14
Special Considerations Affecting Africa 14
Portfolio Transactions 15
Valuation of Portfolio Securities 16
Performance 17
Additional Purchase, Exchange and Redemption Information 21
Distributions and Taxes 24
FMR 25
Trustees and Officers 25
Management and Other Services 27
The Distributor 29
Distribution and Service Plan 30
Description of the Trust 30
Appendix 32
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 (Distributors)
TRANSFER AGENT FOR CLASS A
State Street Bank and Trust Company (State Street) or (Transfer
Agent)
TRANSFER AGENT FOR CLASS B
Fidelity Investments Institutional Operations Company (FIIOC) or
(Transfer Agent)
CUSTODIAN
Chase Manhattan Bank, N.A. (Chase) or (Custodian)
AE MI - PTB-694
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 the 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 the Fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment
policies and limitations.
The Fund's fundamental investment policies and limitations cannot be
changed without approval of a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 ( 1 940
Act)) of the Fund. However, except for the fundamental investment
limitations set forth below, the investment policies and limitations
described in this Statement of Additional information are not fundamental
and may be changed without shareholder approval. THE FOLLOWING ARE THE
FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE
FUND MAY NOT:
(1) 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 9 .
AFFILIATED BANK TRANSACTIONS. The 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; purchases, as principal, of
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); m unicipal securities; U .S.
government securities with affiliated financial institutions tha t
are primary dealers in these securities; short-term currency transactions;
and short-term b orrowing s . In accordance with exemptive
orders issued by the S ecurities and Exchange Commission (SEC) , the
Board of Trustees has established and periodically reviews procedures
applicable to transactions involving affiliated financial institutions.
THE FUND'S RIGHTS AS A SHAREHOLDER. The Fund does not intend to direct or
administer the day-to-day operations of any company. The 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
other shareholders of a company when FMR determines that such matters could
have a significant effect on the value of the Fund's investment in the
company. The activities that the 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 the 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 the Fund is
involved in litigation. No guarantee can be made, however, that litigation
against the Fund will not be undertaken or liabilities incurred.
DELAYED-DELIVERY TRANSACTIONS. The Fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the 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. The Fund may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the Fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the Fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the Fund's other investments. If the 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, the Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the Fund has sold a security on a
delayed-delivery basis, the Fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the Fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The 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.
LOWER- QUALITY SECURITIES. 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-rated debt securities and the Fund's ability to dispose of these
securities.
Since the risk of default is higher for lower- quality debt
securities, FMR's research and credit analysis are an especially important
part of managing securities of this type held by the Fund. In considering
investments for the Fund, FMR will attempt to identify those issuers of
high-yielding debt 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.
The Fund may chose, at is 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.
FOREIGN SECURITIES. Investing in securities issued by companies or other
issuers whose principal activities are outside of the U.S. may involve
significant risks not present 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, 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. Investments in foreign securities
also involve the risk of possible adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitation on
the removal of monies or other assets of the Fund, political or financial
instability, or diplomatic and other developments which could affect such
investments. Further, economies of particular countries or areas of the
world may differ favorably or unfavorably from the economy of the U.S.
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 U.S. Foreign stock markets, while growing in volume
and sophistication, are generally not as developed as those in the U.S.,
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 the Fund to increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer. In
addition, foreign brokerage commissions and other fees are generally higher
than on securities traded in the U.S. and may be non-negotiable. In
general, there is less overall governmental supervision and and regulation
of securities exchanges, brokers and listed companies than in the U.S.
The Fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject
to such transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to
such restrictions.
American Depository Receipts and European Depository 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.
FOREIGN CURRENCY TRANSACTIONS. The 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. The 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 the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. Forward contracts are generally traded in an
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or may
hold the contract to maturity and complete the contemplated currency
exchange.
The Fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes some, but
not all, of the possible currency management strategies involving forward
contracts that could be used by the Fund. The Fund may also use options
and futures contracts relating to foreign currencies for the same purposes.
When the 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, the 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." The 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.
The Fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if the Fund owned securities denominated in pounds sterling, the
Fund 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. The 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 will 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.
The Fund may enter into forward contracts to shift its investment exposure
from one currency into another currency that is expected to perform better
relative to the U.S. dollar. For example, if the Fund held investments
denominated in Deutschemarks, the 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 the 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 the 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. The 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 forward contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the Fund's investment exposure to changes in currency
exchange rates, and could result in losses to the Fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the Fund by selling that currency in exchange for
dollars, the Fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
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 the Fund's exposure to a foreign currency, and that
currency's value declines, the Fund will realize a loss. There is no
assurance th at FMR's use of currency forward contracts will
be advantageous to the Fund or that they will hedge at an appropriate time.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the Fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the 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 the Fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
over-the-counter options and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, government stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments and swap agreements to be illiquid.
However, with respect to over-the-counter options the Fund writes, all or a
portion of the value of the underlying instrument may be illiquid depending
on the assets held to cover the option and the nature and terms of any
agreement the Fund may have to close out the option before expiration. In
the absence of market quotations, illiquid investments are priced at fair
value as determined in good faith by a committee appointed by the Board of
Trustees. If through a change in values, net assets or other
circumstances, the Fund were in a position where more than 15% of its net
assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
INDEXED SECURITIES. The 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.
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 the 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 the 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
the 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 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 the 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 the Fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the 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, the 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 the 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 the 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. The Fund will
set aside appropriate liquid assets in a segregated custodial account to
cover its potential obligations under standby financing commitments.
The Fund limits the amount of total assets that it will invest in issuers
within the same industry (see fundamental investment limitation
(4)). For purposes of this limitation, the Fund generally will treat the
borrower as the "issuer" of indebtedness held by the Fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between the Fund and the borrower, if the
participation does not shift to the Fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the Fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for the purposes of determining
whether the Fund has invested more than 5% of its total assets in a single
issuer. Treating a financial intermediary as an issuer of indebtedness may
restrict the 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.
MORTGAGE-BACKED SECURITIES. The Fund may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations, or
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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date. 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. A
repurchase agreement involves the obligation of the seller to pay the
agreed-upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed-upon resale price and marked to
market daily) of the underlying security. The Fund may engage in
repurchase agreements with respect to any security in which it is
authorized to invest. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
of a decline in the market value of the underlying securities, as well as
delay and costs to the Fund in connection with bankruptcy proceedings), it
is the policy of the Fund to limit repurchase agreements whose
creditworthiness has been reviewed and found satisfactory by FMR.
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 , i.e., 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, the 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, the Fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The 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 the Fund's
assets and may be viewed as a form of leverage.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the 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 the Fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
SECURITIES LENDING. The 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 the 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 the Fund
may engage in loan transactions only under the following conditions: (1)
the Fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the Fund must be able to terminate
the loan at any time; (4) the Fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the Fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the 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 the Fund's exposure to long- or
short-term interest rates (in the U.S. o r 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. The Fund is not
limited to any particular form of swap agreement if FMR determines it is
consistent with the 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 right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift the Fund's investment exposure from one
type of investment to another. For example, if the Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the Fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of 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 the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. The 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.
The Fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the
Fund enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the
Fund is entitled to receive under the agreement. If the Fund enters into a
swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the Fund's accrued obligations under the
agreement.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Fund intends to file
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. The Fund intends to comply with
Rule 4.5 under the Commodity Exchange Act which limits the extent to which
the Fund can commit assets to initial margin deposits and option premiums.
In addition, the Fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the Fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the Fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the Fund would
exceed 5% of the Fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the Fund's investments in futures contracts and
options, and the Fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the 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 the 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 Stock
Price Index (S&P 500). Futures can be held until their delivery dates,
or can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the Fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the 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 the Fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the Fund, the Fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the Fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The Fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the Fund will lose the entire premium it paid. If the Fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The 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 the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract, the Fund will be required to make margin payments to an FCM as
described above for futures contracts. The 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 the Fund has written, however, the
Fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the 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. The Fund may purchase and write options in combination
with futures or forward contracts, to adjust the risk and return
characteristics of its overall position. For example, the 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 the Fund's current or
anticipated investments exactly. The 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 the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the 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. The 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 the 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 the 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 the Fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the 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-cou nter (OTC) options ( not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows
the 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. The
Fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The 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
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the Fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the Fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the Fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The 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 the Fund's assets
could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
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 U.S., and Canada. Latin American
equity markets can be extremely volatile and in the past have shown little
correlation with the U.S. 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 U.S. is Mexico's major
trading partner, accounting for two-thirds of its exports and imports. In
fact, the U.S. 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 U.S. 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 of 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. Privitization 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 THE PACIFIC BASIN
Thailand has been transformed into one of the fastest growing stock markets
in the world. On February 23, 1991, the military staged its 17th coup
since the overthrow of the absolute monarchy in 1932. The newly appointed
government quickly focused on the economy and enacted major tax revisions,
slashing personal income tax and reducing taxes on imports. Most
significantly it pushed through a 7% value added tax. Released from
political consideration by the coup, the Bank of Thailand was finally able
to implement a monetary tightening. As a result, interest rates rose and
GDP declined to 7.7% from 10% the previous year. These changes contributed
to the stock market's poor performance, but have positioned Thailand for
continued strong economic growth. Deterioration of infrastructure may
limit future growth.
Hong Kong's impending return to Chinese dominion in 1997 has dampened its
economic growth which was vigorous in the 1980s. However, authorities in
Beijing have agreed to maintain a capitalist system in Hong Kong for 50
years, which, along with Hong Kong's continued economic growth, continued
to further strong stock market returns. 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 U.S. 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 GNP, industrial standards, and level of education, South Korea
is second only to Japan in Asia. It enjoys the benefits of a diversified
economy with well-developed sectors in electronics, automobiles, textiles
and shoe manufacturing, steel and shipbuilding, among others. The driving
force behind the economy's dynamic growth has been the planned development
of an export-oriented economy in a vigorously entrepreneurial society.
Real GNP grew about 7.5% in 1991. 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. Moreover, the international situation between South and North
Korea continues to be uncertain.
Indonesia is a mixed economy with many socialist institutions and central
planning but with a recent emphasis on deregulation and private enterprise.
Financial markets in Indonesia are characterized by less disclosure of
information, more thinly capitalized issuers, and less frequent trading
than in more developed markets. Like Thailand, Indonesia has extensive
natural wealth, yet with a large and rapidly increasing population, it
remains a poor country. Agriculture, including forestry and fishing, is an
important sector, accounting for 21% of GDP and over 50% of the labor
force. Once the world's largest rice importer, Indonesia is now nearly
self-sufficient.
The Malaysian economy continues to perform well growing at an average
annual rate of 9% from 1987 through 1991. This placed Malaysia as one of
the fastest growing economics in the Asian-Pacific region. Malaysia has
become the world's third-largest producer of semiconductor devices (after
the U .S. 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. Moreover, Malaysia's
infrastructure may need significant improvement to support additional
growth.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its entrepot 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.
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 remains 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,
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 the Fund by FMR pursuant to authority contained in th e
Management Contract. Since FMR has granted investment
management a uthority to the sub-advisers (see the section
entitled "Management Contract s " , 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 affili ates act as
investment ad viser. 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;
t he reasonableness of any c ommissions ; and arrangements
for payment of fund expenses . Commissions for foreign investments
traded on foreign exchanges will generally be higher than for U.S.
investments and may not be subject to negotiation.
The Fund may execute portfolio transa ctions with broker-dealers who
provide research and execution services to the Fund or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; 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). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with
execution considerations) in accordance with a ranking of broker-dealers
determined periodically by FMR's investment staff based upon the quality of
research and execution services provi ded.
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to FMR in re ndering investment
management services to the Fund or its other clients, and conversely, such
research provided by broker-dealers who have executed transaction orders on
behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the Fund. The receipt of such research has not reduced
FMR's normal independent research activities; however, it enables FMR to
avoid additional expenses that could be incurred if FMR tried to develop
comparable information through its o wn 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
the Fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers
viewed in terms of a particular transaction or FMR's overall
responsibilities to the Fund and its other clients. In reaching
this determination, FMR will not attempt to place a specific dollar value
on the brokerage and research services provided, or to determine what
portion of the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the Fund 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.
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 satis fied. Pursuant to such requirements, the Board of Truste es
has authorized FBSI to execute portfolio transactions on national
securities exchanges in accordance with approved procedures and applicable
SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Fund and review the commissions paid by the Fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the Fund.
The Fund's annual portfolio turnover rate in its first fiscal period is not
expected to exceed 200%. The portfolio turnover rate will vary from year
to year depending upon market conditions. Because a high turnover rate
increases transaction costs and may increase taxable capital gains, FMR
carefully weighs the benefits of short-term investing against these
consequences.
From time to time the Trustees will review whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar
fees paid by the Fund on portfolio transactions is legally permissible and
advisable. The Fund seek s to recapture soliciting
broker- dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees intend
to continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine, in the exercise of their
business judgment, whether it would be advisable for the Fund to seek such
recapture.
Although the Trustees and officers of the Fund are substantially the same
as those of other funds managed by FMR, investment decisions for the Fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and
accounts are managed by the same investment adviser, particularly when
the same security is suitable for the investment objective of more than one
fund or account .
When two or more fu nds are engaged simultaneously in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with a formula considered by the officers of the funds involved
to be equitable to each fund. In some cases this system could have a
detrimental effect on the price or value of the security as far as the Fund
is concerned. In other cases, however, the ability of the Fund to
participate in volume transactions will produce better executions and
prices for the Fund. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
The Fund's portfolio securities, including ADRs, EDRs and other forms of
depository receipts, are valued (i) by appr aising portfolio
securities that are traded on the NYSE or AMEX at the closing bid
price, or, if no closing price is available, at the last traded bid price;
and (ii) by appraising foreign securities as nearly as possible in the
manner described in clause (i) if traded on any other U.S. ,
Canadian, or foreign exchange, and, if not so traded, on the basis of
closing over-the-counter bid prices, if available.
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
appropriate 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.
Foreign securities are valued at the closing bid price in the principal
market where they are traded, or, if closing prices are unavailable, at
the last traded bid price available prior to the time the Fund's net
asset value per share (NAV) is determined. Foreign portfolio security
prices are furnished by quotation services expressed in the local
currency's value. Fidelity Service Co. (Service) translates the value of
foreign securities from the local currency into U.S. dollars. Foreign
security prices that cannot be obtained by the quotation services are
priced individually by Service using dealer-supplied quotations.
Short-term obligations that mature in 60 days or less 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.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
government securities, money market instruments, and repurchase agreements,
is substantially completed each day at various times prior to the close of
the NYSE. The values of any such securities held by the Fund are
determined as of such times for the purpose of computing the Fund's NAV.
The procedures set forth in (i) and (ii) above need not be used to
determine the value of debt securities owned by the 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 debt
securities. Foreign currency exchange rates are also generally determined
prior to the close of the NYSE. If an extraordinary event that is expected
to affect the value of a portfolio security materially 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.
PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied in advertisin g 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.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the NAV over the 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 return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual return that would equal 100% growth on a
compounded basis in ten years. While average annual total returns are a
convenient means of comparing investment alternatives, investors should
realize that performance is not constant over time, but changes from year
to year, and that average annual returns represent averaged figures as
opposed to 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, and/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 with
or without taking the maximum sales charge into account. Total
r eturns may be quoted on a before-tax or after-tax basis. Excluding
the sales charge from a total return calculation produces a higher total
return figure. Total returns , yields and other performance
information may be quoted numerically or in a table, graph or similar
illustration. To illustrate the components of overall performance the Fund
may separate its cumulative and average annual returns into income results
and capital gains or losses.
YIELD CALCULATIONS. Yields u sed in advertising are computed by
dividing the class' interest and dividend income for a given 30-day
or one-month period, net of expenses, by the average number of shares
entitled to receive distribution s during the period, dividing this
figure by the NAV per share at the end of the period and annualizing the
result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations.
In general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at
a discount by adding a portion of the discount to daily income. For the
Fund's investments denominated in foreign currencies, income and expenses
are calculated first in their respective currencies, and 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.
Investors should recognize that in periods of declining interest rates,
yield will tend to be somewhat higher than the prevailing market rates, and
that in periods of rising interest rates, the yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the Fund from the continuous sale of shares will likely be
invested in instruments producing lower yields than the balance of the
Fund's holdings, thereby reducing the current yield. In periods of rising
interest rates, the opposite can be expected to occur.
The distribution rate, which expresses the historical amount of income
dividends paid as a percentage of the share price may also be quoted. The
distribution rate is calculated by dividing the daily dividend per share by
its offering price (including the maximum sales charge, if any) for each
day in the 30-day period, averaging the resulting percentages, then
expressing the average rate in annualized terms.
Income calculated for the purposes of calculating yield differs from income
as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding of income assumed
in yield calculations, the yield may not equal its distribution rate, the
income paid to your account, or the income reported in the Fund's financial
statements.
PERFORMANCE COMPARISONS. Performance may be compared to the performance of
other mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that mo nitors the performance
of mutual funds. Lipper generally ranks funds on the basis of total
return, assuming rein vestment of distributions, but does not take sales
charges or redemption fees into consideration and is prepared without
regard to tax consequences. Lipper m ay also rank funds based on
yield. In addition to mutual fund rankings, performance may be compared to
mutual fund performance indices prepared by Lipper.
From time to time, performance may also be compared to other mutual funds
tracked by financial or business publications and periodicals. For
example, Morningstar, Inc. may be quoted in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
The Fund may be compared in advertising to certificates of deposit (CDs) or
other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, the Fund may offer greater
liquidity or higher potential returns than CDs, and the Fund does not
guarantee your principal or your return.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's Asset Allocation Program materials may include :
computerized investment planning software, a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting , a questionnaire designed to help
create a personal financial profile; and an action plan offering investment
alternatives.
Ibbotson A ssociates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the U.S., including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term g overnment bonds,
Treasury bills, the U.S. rate of inflation (based on the Consumer Price
Index (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 di rectly to those of the
Fund. Ibbotson calculates total returns in the same method as the Fund.
Performance comparisons m ay also be made to that of other compilations
or indices that may be developed and made available in the future.
Performance may also be compared to that of the S&P 500, the Dow Jones
Industrial Average (the DOW or DJIA),the Dimensional Fund Advisors (DFA)
Small Company Fund, and the NASDAQ Composite Index (NASDAQ). The
Standard and Poor's 500 Composite Stock Price Index (the S&P
500) and the DOW are widely recognized, unmanaged indices of common
stock prices. The performance of the S&P 500 is b ased on
changes in the prices of stocks comprising the index and assumes the
reinvestment of all dividends paid on such stocks. Taxes, brokerage
commissions and other fees are disregarded in computing the level of the
S&P 500 and the DJIA. The DFA is a market-value-weighted index of the
ninth and tenth deciles of the NYSE, plus stocks listed on the AMEX
and OTC with the same or less capitalization as the upperbound of
the NYSE ninth decile stocks. The yield or total return of Ginnie Maes,
Fannie Maes, Freddie Macs, corporate bonds and U.S. Treasury bonds and
notes, may be quoted either in comparison to each other or to the
performance of the Fund.
From time to time, the Fund may quote its performance in advertising and
other types of literature as compared to the performance of the J.P. Morgan
Emerging Market Bond Index, the Lehman Brothers Aggregate Bond Index, the
Salomon Brothers World Government Bond Index, the S &P 500 , the
J.P. Morgan Government Bond Index, and the Morgan Stanley Emerging Markets
Index.
Performance may be compared to the following unmanaged indices of bond
prices and yields.
Lehman Brothers Government Bond Index is comprised of all public
obligations of the U.S. Treasury, of U.S. Government agencies,
quasi-federal corporations, and corporate debt guaranteed by the U.S.
Government. The index excludes flower bonds, foreign targeted issues and
mortgage-backed securities.
Lehman Brothers Corporate Bond Index is comprised of all public,
fixed-rate, non-convertible investment grade domestic corporate debt.
Issues included in this index are rated at least Baa by Moody's Investors
Service (Moody's) or BBB by Standard & Poors ( S&P ) ,
or in the case of bonds unrated by Moody's or S&P, BBB by Fitch
Investor Service. Collateralized mortgage obligations are not included in
the Corporate Bond Index.
Salomon Brothers High Yield Composite Index is comprised of high yielding
utility and corporate bonds with a minimum maturity of seven years and with
total debt outstanding of at least $50 million. Issues included in the
index are rated Baa or lower by Moody's or BBB or lower by S&P.
Salomon Brothers High Grade Corporate Bond Index is comprised of high
quality corporate bonds with a minimum maturity of at least ten years and
with total debt outstanding of at least $50 million. Issues included in
the index are rated Aa or better by Moody's or AA or better by S&P. The
Fund also may compare its performance to that of other compilations or
indices of comparable quality to those listed above which may be developed
and made available in the future.
Performance, or the performance of securities in which the Fund may invest,
may be compared to averages published by IBC USA (Publications), Inc. of
Ashland, Massachusetts. These averages assume reinvestment of
distribu tions. THE BOND FUND REPORT
AVERAGES(trademark)/fixed-income which is reported in the BOND FUND
REPORT(registered trademark), covers over 250 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. The Fund,
however, invests in longer-term instruments and its share price changes
daily in response to a variety of factors.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging . In addition, Fidelity
may quote financial or business publications or periodicals, including
model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques.
The Fund may present its Fund number, Quotron(trademark) number and
CUSIP number, and discuss or quote its current portfolio manager.
According to the Investment Company Institute, over the past ten
years, assets in fixed-income funds increased from $26 billion in 1984 to
approximately $389 billion at the end of 1993. As of April 30, 1994, FMR
managed approximately $100 billion in fixed-income assets, as defined and
tracked by Lipper. From time to time the Fund may compare FMR's
fixed-income assets under management with that of other investment
advisers.
VOLATILITY. Various measures of volatility and benchmark correlation
may be quoted in advertising. In addition, the Fund may compare th ese
measures to those of other funds. Measures of volatility seek to compare
historical share price fluctuations or total returns compared 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.
MOVING AVERAGES. Performance may be illustrated 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.
MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the mo mentum indicator represents
the Fund's percentage change in price movements over that period.
NET ASSET VALUE. Charts and graphs using the Fun d's adjusted NAVs
a nd benchmark indices may be used to exhibit performance. An adjusted
NAV includes any distributions paid by the Fund and reflects all elements
of its return. Unless otherwise indicated, the Fund's adjusted NAVs are
not adjusted for sales charges, if any.
DURATION. Duration is a measure of volatility commonly used in the bond
market. Bonds with long durations are more volatile, or interest rate
sensitive, than bonds with short durations. (Interest rate sensitivity is
the magnitude of the change in a bond's price for a given change in a
bond's yield to maturity.) Duration also can be calculated for other
fixed-inc ome securities, or for portfolios of fixed-income
securities.
Unlike the maturity of a bond, which reflects only the time remaining until
the final principal payment is made to the bondholders, duration reflects
all of the coupon payments made to bondholders during the life of the bond,
as well as the final principal payment made when the bond matures. More
precisely, duration is the weighted average time remaining for the payment
of all cash flows generated by a bond, with the weights being the present
value of these cash flows. Present values are calculated using the bond's
yield to maturity.
Because there is only one payment to take into account, the duration of a
bond that pays all of its interest at matu rity (a zero cou pon bond)
is the same as its maturity. The duration of a coupon bearing security
will be shorter than its maturity, however, because of the effect of its
regular interest payments. Generally, bonds with lower coupons or longer
maturities will have longer durations, and thus be more volatile, than
otherwise similar bonds with higher coupons or shorter maturities.
With the investment in mortgage-backed securities, callable corporate bonds
or other bonds with imbedded options, there is a degree of uncertainty
regarding the timing of these securities' cash flows. As a result, in
order to calculate the durations of these securities, forecasts of their
probable cash flow patterns must be made. These forecasts require various
assumptions to be made as to future interest rate levels and, for example,
mortgage prepayment rates. Because duration calculations for these types
of securities are based in part on assumptions, duration figures may not be
precise and may change as economic conditions change.
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 portfolio 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 had been purchased
at the same intervals. In evaluating such a plan, investors should
consider their ability to continue purchasing shares through periods of low
price levels.
Shares of the Fund may be ava ilable 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.
TRADITION OF PERFORMANCE. Fidelity's tradition of performance is achieved
through:
MONEY MANAGEMENT: a proud tradition of money management motivated by the
expectation of excellence backed by solid analysis and worldwide resources.
Fidelity employs a bottom-up approach to security selection based upon
in-depth analysis of the fundamentals of that investment opportunity.
INNOVATION: constant attention to the changing needs of today's investors
and vigilance to the opportunities that arise from changing global markets.
Research is central to Fidelity's investment decision-making process.
Fidelity's greatest resource--over 200 skilled investment professionals--is
supported with the most sophisticated technology available.
Fidelity provides:
(bullet) Global research resources: an opportunity to diversify
portfolios and share in the growth of markets
outside the United States.
(bullet) In-house, proprietary bond-rating system, constantly updated,
which provides extremely sensitive credit
analysis.
(bullet) Comprehensive chart room with over 1500 exhibits to provide
sophisticated charting of worldwide
economic, financial, and technical indicators, as well as to provide
tracking of over 800 individual
stocks for portfolio managers.
(bullet) State-of-the-art trading desk, with access to over 200 brokerage
houses, providing real-time information
to achieve the best executions and optimize the value of each
transaction.
(bullet) Use of extensive on-line computer-based research services.
(bullet) SERVICE: Timely, accurate and complete reporting. Prompt and
expert attention when an investor or an
investment professional needs it.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
The Fund is open for business and the NAV of each class is calculated each
day the NYSE is open for trading. The NYSE has designated the following
holiday closings for 1994: Presidents' Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time. On any day that the NYSE closes
early, or as permitted by the SEC, the right is reserved to advance the
time on that day by which purchase and redemption orders must be received.
To the extent that portfolio securities are traded in other markets
on days the NYSE is closed, each class' NAV may be affected on days when
investors do not have access to the Fund to purchase or redeem shares.
Certain Fidelity funds may follow different holiday 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 the NAV of each class of shares. Shareholders receiving
any such 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 (the Rule), the Fund is required
to give shareholders at least 60 days' notice prior to te rminating
or modifying the Fund's 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 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 each prospectus, the 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.
PURCHASE INFORMATION
As provided for in Rule 22d-1 under the 1940 Act, Distributors exercises
its right to waive Class A's maximum 4.75% sal es charge in connection
with the Fund's merger with or acquisition of any investment company or
trust.
CLASS A NE T ASSET VALUE PURCHASES. S ales charges do not
apply to shares purchased: (1) by registered representatives, bank
trust officers and other employees (and their immediate families) of
investment professionals having agreements with Distributors; (2) by a
current or former Trustee or officer of a Fidelity fund or a current or
retired officer, director or regular employee of FMR Corp. or its direct or
indirect subsidiaries (a "Fidelity Trustee or employee"), the spouse of a
Fidelity Trustee or employee, a Fidelity Trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for
the sole benefit of the minor child of a Fidelity Trustee or employee; (3)
by a charitable organization (as defined in Section 501(c)(3) of the
Internal Revenue Code) investing $100,000 or more; (4) by 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) by trust institutions (including bank trust departments)
investing on their ow n behalf or on behalf of their clients; (6) in
accounts as to which a bank or broker-dealer charges an asset
management fee, provided the bank or broker-dealer has an agreement
with Distributors; (7) as part of an employee benefit plan (including
Fidelity-Sponsored 403(b) and Corporate IRA programs, but otherwise as
defined in the Employee Retirement Income Se curity Act (ERISA)),
maintained by a U.S. employer having more than 200 eligible employees, or a
minimum of $1,000,000 invested in Fidelity Advisor mutual funds, and the
assets of which are held in a bona fide trust for the exclusive benefit of
employees participating therein; (8) in a Fidelity or Fidelity Advisor IRA
account purchased 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 pl an assets invested in Fidelity mutual funds or
$1,000,000 invested in Fidelity Advisor mutual funds, or an insurance
company separate account qualifying under (9) below, or funding annuity
contracts purchased by employee benefit plans which, in the aggregate, have
at least $3,000,000 in plan assets invested in Fidelity mutual funds; (9)
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 em ployee s or a minimum of $1,000,000 in assets
invest in Fidelity Advisor mutual funds; (10) by any state, county, or
city, or any gov ernmental instrumentality, department, authority or
agency; or (11) with redemption proceeds from other mutual fund complexes
on which the investor has paid a front-end sales charge only.
Distributors compensates investment professionals with a fee of .25% on
purchases of Class A shares of $1 million or more, except for purchases
made through a bank or bank-affiliated broker-dealer that qualify for a
Class A Sales Charge Waiver described in the Class A prospectus. All assets
on which the .25% fee is paid must remain within the Fidelity Advisor Funds
(including Class A shares exchanged into Initial shares of Daily Money
Fund: U.S. Treasury Portfolio and shares of Daily Money Fund: Money Market
Portfolio and Daily Tax-Exempt Money Fund) for a period of one
uninterrupted year or the investment professional will be required to
refund this fee to Distributors. Purchases by insurance company separate
accounts will qualify for the .25% fee only if an insurance company's
client relationship underlying the separate account exceeds $1 million. It
is the responsibility of the insurance company to maintain records of
purchases by any such client relationship. Distributors may request
records evidencing any fees payable through this program.
CLASS B WAIVERS. The contingent deferred sales charge (CDSC) on
Class B shares may be waived in the case of disability or death, provided
that the redemption is made within one year following the death or initial
determination of disability, or in connection with a total or partial
redemption made in connection with certain distributions from retirement
plan accounts.
Distributors compensates securities dealers and banks having agreements
with Distributors (investment profes sionals), who sell Class A and Class
B shares according to the schedule in each prospectus. Distributor s
will , at its expense, provides promotio nal incentives to
investment professionals who support the sale of each class of
shares without reimbursement from the Fund. In some instances, these
incentives will be offered only to certain investment professionals such as
bank-affiliated and non-bank affiliated broker-dealers whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
QUANTITY DISCOUNTS. Reduced sales charges are applicable to purchases of
Class A shares of the Fund in amounts of $50,000 or more alone or in
combination with purchases of Class A and Class B shares of certain other
Fi delity Advisor Funds made at any one time (including Daily Money Fund
and Daily Tax-Exempt Money Fund shares acquired by exchange from any
Fidelity Advisor Fund with a sales charge). To obtain a reduction of the
front-e nd sales charge, 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.
In ad dition to investing at one time in any combination of funds in
an amount entitling you to a reduced front-end sales charge, you may
qualify for a reduction in the front-end sales charge under the following
programs:
COMBINED PURCHASES. When you invest in Class A shares for several
accounts at the same time, you may combine these investments into a single
transaction if purchased through one investment professional and if
the total is at least $50,000. The following may qualify for this
privilege: an individual, or "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 trust ee, 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
benefit plans" (as defined in Section 3(3) of ERISA); and tax-exempt
organizat ions under Section 501(c)(3) of the Internal Revenue Code.
RIGHTS OF ACCUMULATION. Your "Rights of Accumulation" permit reduced
front-end sales charges on any future purcha ses after you have
reached a new breakpoint in the Class A sales charge schedule (see the
Class A prospectus for the front-end sales charge schedule). You can add
the value of existing Fidelity Advisor Fund Class A and Class B shares,
held by you, your spouse, and your children under age 21 determined at the
previous day's NAV at the close of business, to the amount of your new
purchase valued at the current offering price to determine your reduced
front-end sales charge. You can also add shares of Daily Money Fund
and Daily Tax-Exempt Money Fund, provided they were acquired by
ex change from any Fidelity Advisor Fund with a sales charge, to the
amount of your new purchase.
LETTER OF INTENT. If you anticipate purchasing Class A shares
of the Fund in amounts of $50,000 or more alone or in
combination with Class A and Class B shares of other Fidelity Advisor Funds
within a 13-month period, you may obtain Class A shares of the Fund or
Class A shares of other Fidelity Advisor Funds at the same reduced
front-end sales charge as though the total quantity were invested in one
lump sum, by filing a nonbinding Letter of Intent (the Letter) within 90
days of the start of the purchases. Each 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
toward a $50,000 Letter would receive the same reduced front-end sales
charge as if the $50,000 had been invested at one time. To ensure that the
reduced front-end sales charge will be received on future pur chase s,
you or your investment professional must inform the Transfer Agent that the
Letter is in effect each time shares are purchased. Neither income
dividends nor capital gain distributions taken in additional 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
s hares held in escrow cannot be redeemed or exchanged until the
Letter is satisfied or the additional front-end sales charges have been
paid. You will earn income dividends and capital gain distributions on
escrowed s hares. 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 further front-end sales charge reduction, the 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 of
the Fund or Class A shares of other Fidelity Advisor Funds at the then
current offering price applicable to the total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, your front-end sales charge will be adjusted upward, corresponding
to the amount actually purchased, and if after 30 days' written notice, you
do not pay the increased front-end sales charge, sufficient escrowed shares
will be redeemed to pay such charge.
FIDELIT Y ADVISOR SYSTEMATIC INVESTMENT P ROGRAM . You can
make regular investments in Class A or Class B shares of the Fund or other
Fidelity Advisor Funds with the Systematic Investment P rogram by
completing the appropriate section of the account application and attaching
a voided personal check with your bank's magnetic ink coding number across
the front. If your bank account is jointly owned, be sure that all owners
sign. Investments may be made monthly by automatically deducting $100 or
more from your bank checking account. You may change the amount of your
monthly purchase at any time. There is a $1,000 minimum initial investment
requirement for S ystematic I nvestment Program .
Your account will be drafted on or about the first business day of every
month. Class A or Class B shares will be purchased at the offering price
next determined following receipt of the order by the Transfer Agent. You
may cancel your participation in the Systematic Investment Program
at any time without payment of a cancellation fee. You will receive a
confirmation from the Transfer Agent for every transaction, and a debit
entry will appear on your bank statement.
EXCHANGE INFORMATION
FIDELITY ADVISO R SYSTEMATIC EXCHANGE P ROGRAM . With the
Systematic Exchange P rogram , you can exchange a specific dollar
amount of Class A or Class B shares of the Fund into the same class
of other Fidelity Advisor Funds on a monthly, quarterly or semiannual
basis.
1. The account from which the exchanges are to be processed must have a
minimum value of $10,000 before you may elect to begin exchanging
systematically. The account into which the exchanges are to be processed
must be an existing account with a minimum balance of $1,000.
2. Both accounts must have identical registrations and taxpayer
identification numbers. The minimum amount to be exchanged systematically
is $100.
3. Systematic Exchanges will be processed at the NAV determined on the
transaction date, except that s ystematic e xchanges into a
Fidelity Advisor Fund from any eligible money market fund will be
processed at the offering price next determined on the transaction date,
unless the shares were acquired by exchange from another Fidelity
Advisor Fund.
REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE. If you have sold all or part of your
Class A or Class B shares you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class o f the Fund or
any of the other Fidelity Advisor Funds, at the NAV next determined after
receipt of your investment order, provided that such reinvestment is made
within 30 days of redemption . Y ou must reinstate your Class A or
Class B shares into an account with the same registration. This
privilege may be exercised only once by a shareholder with respect to the
Fund and certain restrictions may apply. For purposes of the CDSC
schedule, the holding period of the Class B shares will continue as if the
Class B shares had not been redeemed.
FIDELITY ADVISOR S YSTEMATIC WITHDRAWAL P ROGRAM . If you own
Class A shares worth $10,000 or more, you can have monthly, quarterly or
semiannual checks sent from your account to you, to a person named by you,
or to your bank checking account. You may obtain information about the
Systematic Withdrawal P rogram by contacting your investment
professional. Your Systematic Withdrawal P rogram payments are drawn
from Class A share redemptions. If Systematic Withdrawal
P rogram redemptions exceed income dividends earned on your Class
A shares, your account eventually may be exhausted. Since a front-end
sales charge is applied on new Class A shares you buy, it is to your
disadvantage to buy Class A shares while also making systematic
redemptions.
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 alternative
instructions.
DIVIDENDS. Because the Fund invests significantly in foreign
securities, corporate shareholders should not expect dividends from the
Fund to qualify for the dividends-received deduction. If the Fund earns
qualifying dividends from U.S. corporations, the Fund will notify corporate
shareholders annually of the percentage of Fund dividends that qualify for
the dividends-received deduction. Gains (losses) attributable to foreign
currency fluctuations are generally taxable as ordinary income and,
therefore, will increase (decrease) dividend distributions. If foreign
currency losses exceed the Fund's net investment income during a taxable
year, all or a portion of the distributions made in the same taxable year
would be re-characterized as a return of capital to shareholders, thereby
reducing each shareholder's cost basis in their fund shares. In order to
minimize the risk of a return of capital, FMR may adjust the Fund's income
distributions to reflect the effect of currency fluctuations.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the 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
the shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of the Fund and such shares
are held s ix months or less and are sold at a loss, the
portion of the loss equal to the amount of the long-term capital gain
distribution will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes from dividends or
interest paid with respect to foreign securities typically at a rate
between 10% and 35%. The Fund intends to elect to pass through foreign
taxes paid in order for a shareholder to take a credit or deduction if, at
the close of its fiscal year, more than 50% of the Fund's total assets are
invested in securities of foreign issuers.
TAX STATUS OF THE FUND. The Fund intends to qualify each year as a
"regulated investment company" for tax purposes, so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income and excises taxes, the Fund intends
to distribute substantially all of its net taxable income and realized
capital gains within each calendar year as well as on a fiscal year basis.
The 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 the Fund's gross income for each fiscal year. Gains from
some futures contracts and options, and foreign currency denominated
forward contracts which are not directly related to the Fund's business of
investing in foreign securities, are included in this 30% calculation,
which may limit the Fund's investments in such instruments.
If the Fund purchases shares in certain foreign investment entities,
called passive foreign investment companies (PFICs), it may be subject to
U.S. federal income taxes 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.
The Fund is treated as a separate entity from the other series of
Fidelity Advisor Series VIII for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of the Fund may be subject
to state and local taxes on distributions received from the Fund.
Investors should consult their tax advis e rs to determine whether the
Fund is suitable f o r their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions, as follows: Service, which is
the transfer and shareholder servicing agent for certain of the funds
advised by FMR; FIIOC, which performs shareholder servicing functions for
certain institutional customers; and Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within the
Fidelity organization.
Several affiliates of FMR also are engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., FIJ, and FMR Far
East research and visit thousands of domestic and foreign companies each
year. FMR Texas Inc. (FMR Texas), a wholly owned subsidiary of FMR formed
in 1989, supplies portfolio management and research services in connection
with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Board of Trustees and executive officers of the Trust 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
(1989), FMR U.K., and FMR Far East.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas (1989), FMR U.K. and FMR Far
East.
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 Septembe r 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 serves
as a Director of the New York City Chapter of the National Multiple
Sclerosis Society, and is a member of the Advisory Council of the
International Executive Service Corps. and 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 , Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a 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 V ice
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 (1990), 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), and York International Corp. (air conditioning and
refrigeration, 1989), and 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 Institut e an d 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 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, 1987), 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).
ARTHUR S. LORING, Secretary , is Senior Vice President and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of Distributors.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
Under a retirement program which 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 based on their basic trustees fees and length of service.
Currently, Messrs. Robert L. Johnson, William R. Spaulding, Bertram H.
Witham and David L. Yunich participate in the program.
MANAGEMENT CONTRACT AND OTHER SERVICES
The Fund employs FMR to furnish investment advisory and other services.
Under FMR's Ma nagement C ontract with the Fund dated
January 20, 1994 , FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the Fund
in accordance with its investment objective, policies and limitations. FMR
also provides the Fund with all necessary office facilities and personnel
for servicing the Fund's investments, and compensates all officers of the
Trust, all Trustees who are "interested persons" of the Trust or FMR, and
all personnel of the Trust or FMR performing services relating to research,
statistical and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the Fund. These services include providing facilities
for maintaining the Fund's organization, supervising relations with
custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with the Fund, preparing all general shareholder
communications and conducting shareholder relations, maintaining the Fund's
records, and the registration of the Fund's shares under federal and state
law, developing management and shareholder services for the Fund and
furnishing reports, evaluations and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
State Street ( for Class A shares ), FIIOC ( for Class B
shares ) , and Service, the Fund pays all its expenses, without
limitation, that are not assumed by those parties. The Fund pays for the
typesetting, printing and mailing of proxy material s to
shareholders, legal expenses, and the fees of the custodian, auditor and
non-interested Trustees. Although the Fund's M anagement
C ontract provides that the Fund will pay for typesetting, printing
and mailing prospectuses, statements of additional information, notices and
reports to shareholders, the Fund has entered into a revised transfer
agent agreement with each Transfer Agent, pursuant to which the Transfer
Agent bears the cost of providing these services to
shareholders . Other expenses paid by the Fund include interest,
taxes, brokerage commissions, the Fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal and state securities laws. The Fund is
also liable for such non-recurring expenses as may arise, including costs
of litigation to which the Fund is a party and any obligation it may have
to indemnify its officers and Trustees with respect to l itigation.
COMPUTING THE BASIC FEE. 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.
On the right, the effective fee rate schedules are the results of
cumulatively applying the annualized rates at varying asset levels. For
example, the effective annual fee rate at $232 billion of average group net
assets - their approximate level for December 1993 - was .1621 % ,
which is the weighted average of the respective fee rates for each level of
group net assets up to $232 billion.
GROUP FEE EFFECTIVE ANNUAL
RATE SCHEDULE FEE RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average Annualized Group Effective Annual
Group Assets Rate Net Assets Fee Rates
$ 0 - 3 billion .370% $ 0.5 billion .3700%
3 - 6 .340 25 .2664
6 - 9 .310 50 .2188
9 - 12 .280 75 .1986
12 - 15 .250 100 .1869
15 - 18 .220 125 .1793
18 - 21 .200 150 .1736
21 - 24 .190 175 .1695
24 - 30 .180 200 .1658
30 - 36 .175 225 .1629
36 - 42 .170 250 .1604
42 - 48 .165 275 .1583
48 - 66 .160 300 .1565
66 - 84 .155 325 .1548
84 - 120 .150 350 .1533
120 - 174 .145
174 - 228 .140
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
</TABLE>
The individual fund fee rate is .55%. Based on the average group net
assets of funds advised by FMR for December 1993, the annual fee rate would
be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
.1621% + .55% = .7121%
</TABLE>
One-twelft h of this annual basic fee rate is applied to the
Fu nd's net assets averaged for the most recent month, giving a
dollar amount, which is the fee for that month.
To comply with the California Code of Regulations, FMR will reimburse the
Fund if and to the extent that the Fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the Fund 's expenses for purposes of this
regulation, the 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.
FMR may, from time to time, agree to voluntarily reimburse the Fund for
expenses above a specified percentage of 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.
Reimbursement by FMR will increase the Fund's total return s .
SUB-ADVISERS. FMR has entered into sub-advisory agreements with FMR
U.K., in London, England, FMR Far East in Tokyo, Japan, and FIIA, in
Hamilton, Bermuda. FIIA, in turn, has entered into a sub-advisory
agreement with its wholly owned subsidiary FIIAL U.K., in Kent, England.
Pursuant to the sub-advisory agreements, FMR may receive investment advice
and research services with respect to issuers based outside the
U nited States from the sub-advis e rs .
On behalf of the Fund, FMR may also grant the sub-advisors investment
management authority as well as the authority to buy and sell securities if
FMR believes it would be beneficial to the Fund.
Currently, FMR U.K., FMR Far East, FIIA, and FIIAL U.K. each focus on
issuers in countries other than the United States including
countries in Europe , Asia, and the Pacific Basin.
FMR U.K. and FMR Far East are wholly owned subsidiaries of FMR. FIIA is a
wholly owned subsidiary 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 of issuers throughout the world. Edward C. Johnson
3d, Johnson family members, and various trusts for the benefit of
Johnson family members, own s , directly or indirectly, more than 25%
of the voting stock of FIL. FIIA was organized in Bermuda in 1983 and
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, 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:
(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.
(bullet) FMR pays FIIA 30% of FMR's monthly management fee with respect
to the average market value of
investments held by the Fund for which FIIA has provided FMR with
investment advice.
(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.
For providing discretionary investment management and executing
portfolio transactions, the sub-advis e rs are compensated as follows:
(bullet) FMR pays FMR U.K., FMR Far East, and FIIA 50% of its monthly
management fee with respect to the
Fund's average net assets managed by the sub-advisor on a discretionary
basis.
(bullet) FIIA pays FIIAL U.K. 110% of FIIAL U.K.'s costs incurred with
providing investment management
services.
State Street is transfer , dividend disbursing and
shareholder s' servicing agent for Class A shares of the Fund .
State Street has delegated certain transfer, dividend-paying and
shareholder services to FIIOC . Under the Trust's contract with State
Street, t he Fund pays a per account fee of $30 and a monetary
transaction fee of $6. 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 $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.
FIIOC is the transfer, dividend disbursing and shareholders' servicing
agent for Class B shares of the Fund. Under the Trust's contract
with FIIOC, Class B pays a per account fee of $95 and a monetary
transaction of $20 or $17.50, depending on the nature of services provided.
Fees for certain institutional retirement plan accounts are based on the
net asset value of all such accounts in the Fund. FIIOC pays out-of-pocket
expenses associated with providing transfer agent services. In addition,
FIIOC bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements.
The Trust has a contract with Service which provides that
Service will perform the calculations necessary to determine the NAV and
dividends of Class A and Class B shares and maintain the Fund's accounting
records. The fee rates are based on the 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.
THE DISTRIBUTOR
The Fund has a General Distribution Agreement with Distributors, a
Massachusetts corporation organized on July 18, 1960. Distributors
is a broker-dealer registered under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers, Inc.
The General Distribution Agreement calls for Distributors to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the Fund which are offered continuously .
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by Distributors. Distributors also acts as general
distributor for other publicly offered Fidelity funds. The expenses of
these operations are borne by FMR or Distributors.
DISTRIBUTION AND SERVICE PLAN
The Trustees of the Trust have adopted a Distribution and Service Plan
on behalf of Class A and Class B shares of the Fund (the Plans) pursuant to
Rule 12b-1 under the 1940 Act (the Rule). As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implement of each Plan prior to its approval, and have determined that
there is a reasonable likelihood that the Plan will benefit the applicable
class and its shareholders.
Pursuant to the Class A Plan, Class A pays Distributors a distribution
fee at an annual rate of up to .40% of its average net assets determined as
of the close of business on each day throughout the month, but excluding
assets attributable to Class A shares purchased more than 144 months prior
to such day. Currently, the Trustees have approved a distribution fee for
Class A at an annual rate of .25% of its average net assets. This fee may
be increased only when, in the opinion of the Trustees, it is in the best
interests of the Class A shareholders to do so.
Pursuant to the Class B Plan, Class B pays Distributors a distribution
fee at an annual rate of .75% of its average daily net assets determined as
of the close of business on each day throughout the month. Class B 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 services and/or the maintenance of
shareholder accounts.
Each Plan also specifically recognizes that FMR, either directly or
through Distributors, 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. 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, 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 or in other distribution activities
relating to that class. To the extent that each Plan gives FMR and
Distributor greater flexibility in connection with the distribution of
shares of the applicable class, additional shares 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 provides for specific payments by the applicable class
of any of the expenses of Distributors, or obligates Distributors 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 Distributors for advertising, marketing and distribution,
and payments to investment professionals, the amounts remaining, if any,
may be used as Distributors may elect.
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 fully defined, in Distributors' opinion, it
should not prohibit banks from being paid for shareholder support services,
servicing and record keeping functions. Distributors may engage banks to
perform only these 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 an event, changes in the operation
of the Fund might occur, including possible termination of any automatic
investment or redemption or other services then provided by the bank. It
is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The Fund may execute
portfolio transactions with and purchase securities issued by depository
institutions that receive payments under the Plans. No preference for the
instruments of such depository institutions will be shown in the selection
of investments. 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.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor Emerging Markets Income Fund is a
series of Fidelity Advisor Series VIII (the Trust), an open-end
investment company organized as a Massachusetts business trust by
Declaration of Trust dated September 23, 1983, as amended and restated
October 1, 1986, and as supplemented November 29, 1990. Currently,
t here are two funds in the Trust: Fidelity Strategic
Opportunities Fund and Fidelity Advisor Emerging Markets Income Fund. The
Declaration of Trust permits the Trustees to create additional
funds .
In the event that FMR ceases to be the investment adviser to the Fund, the
right of the Trust or the 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
series . 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 series 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. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust 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 other 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 the Trust's property of any shareholder
held personally liable for the obligations of the Fund. The Declaration of
Trust also provides that the 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 involved 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. The 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 the
Trust or Class A or Class B shares may, as set forth in the Declaration of
Trust, call meetings for any purpose relating to the Trust , Fund
or a class, as the case may be, including , in the case of a meeting
of the entire Trust, the purpose of voting on removal of one or more
Trustees. The Trust or the 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 the vote of the
holders of a majority of the outstanding shares of the Trust or Fund. If
not so terminated, the Trust or Fund will continue indefinitely.
As of March 24, 1994, the FMR Corp. owned, of record or beneficially,
91.10% of Fidelity Advisor Emerging Markets Income Fund: Class A.
CUSTODIAN. Chase, One Chase Manhattan Plaza, New York, New York, is
custodian of the assets of the Fund. 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 the Fund. The 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. Transactions that have occurred to date include mortgages
and personal and general business loans. In the judgment of FMR, the terms
and conditions of those transactions were not influenced by existing or
potential custodial or other Fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the Fund's independent accountant. The auditor
examines financial statements for the Fund, and provides other audit, tax,
and related services.
APPENDIX
The descriptions that follow are examples of eligible ratings for the Fund.
The Fund may, however, consider the ratings for other types of investments
and the ratings assigned by other rating organizations when determining the
eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'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 STANDARD & POOR'S CORPORATION'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.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
