SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-86711) UNDER THE
SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 26* [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. [ ]
Fidelity Advisor Series VIII
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Office)
Registrant's Telephone Number: (617) 570-7000
Arthur S. Loring, Esq.
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b) of Rule 485
( ) On ( ) pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a) of Rule 485
(X) On (May 2, 1994) pursuant to paragraph (a) of Rule 485
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule by January 29, 1995.
* The last Post-Effecitve Amendment for Fidelity Advisor Series VIII, which
was electronically transmitted to the SEC on January 27, 1994, was filed in
error as Post-Effective Amendment No. 24. The correct Post-Effective
Amendment number should have been No. 25. This Post-Effective Amendment is
being filed as No. 26.
FIDELITY ADVISOR SERIES VIII
FIDELITY STRATEGIC OPPORTUNITIES FUND
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 Summary of Fund Expenses
3 a,b Financial Highlights
c Performance
4 a(i) The Fund and the Fidelity Organization
a(ii),b,c How the Fund Works, Matching the Fund to Your Investment
Needs, Limiting Investment Risks, Appendix
5 a The Fund and the Fidelity Organization
b,c,d,e Management and Service Fees, The Fund and the Fidelity
Organization
f Portfolio Transactions
5A *
6 a The Fund and the Fidelity Organization; How to Buy Additional
Shares; Shareholder Services; How to Redeem Shares;
Shareholder Services
b *
c How the Fund Works; The Fund and the Fidelity Organization
d The Fund and the Fidelity Organization
e How to Buy Additional Shares; How to Redeem Shares;
Shareholder Services
f,g Shareholder Services; Distributions and Taxes
7 a Management and Service Fees
b Management and Service Fees; How to Buy Additional Shares
c Shareholder Services
d How to Buy Additional Shares
e,f Management and Service Fees
8 How to Redeem Shares
9 *
</TABLE>
- --------------------------------------
* Not Applicable
FIDELITY ADVISOR FUNDS - CLASS A
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 Financial History
3 a,b Financial Highlights
c Performance
4 a(i) The Trusts and the Fidelity Organization
a(ii),b,c Investment Objectives; Investment Policies and Risks; Investment
Limitations; Appendix
5 a The Trusts and the Fidelity Organization
b,c,d,e The Trusts and the Fidelity Organization; Fees
f Portfolio Transactions
5A *
6 a The Trusts and the Fidelity Organization; How to Buy Shares;
How to Exchange; How to Sell Shares; Shareholder Services
b *
c Investment Policies and Risks; The Trusts and the Fidelity
Organization
d Cover Page; Financial History; The Trusts and the Fidelity
Organization
e Investor Services; Shareholder Communications; How to Buy
Shares; How to Exchange; How to Sell Shares
f,g Distribution Options; Distributions and Taxes
7 a Fees
b Valuation; How to Buy Shares
c Investor Services
d How to Buy Shares
e,f Fees
8 How to Sell Shares
9 *
</TABLE>
- --------------------------------------
* Not Applicable
NOTE:!! Paragraph border is not supported. !!
NOTE:!! Text line numbering is not supported. !!
1440
FIDELITY ADVISOR FUNDS - CLASS B
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Form N-1A Item Number
Part A Prospectus Caption
1 Cover Page
2 Financial History
3 a,b Financial Highlights
c Performance
4 a(i) The Trusts and the Fidelity Organization
a(ii),b,c Investment Objectives; Investment Policies and Risks; Investment
Limitations; Appendix
5 a The Trusts and the Fidelity Organization
b,c,d,e The Trusts and the Fidelity Organization; Fees
f Portfolio Transactions
5A *
6 a The Trusts and the Fidelity Organization; How to Buy Shares;
How to Exchange; How to Sell Shares; Shareholder Services
b *
c Investment Policies and Risks; The Trusts and the Fidelity
Organization
d Cover Page; Financial History; The Trusts and the Fidelity
Organization
e Investor Services; Shareholder Communications; How to Buy
Shares; How to Exchange; How to Sell Shares
f,g Distribution Options; Distributions and Taxes
7 a Fees
b Valuation; How to Buy Shares
c Investor Services
d How to Buy Shares
e,f Fees
8 How to Sell Shares
9 *
</TABLE>
- --------------------------------------
* Not Applicable
FIDELITY ADVISOR SERIES VIII
FIDELITY STRATEGIC OPPORTUNITIES FUND
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Form N-1A Item Number
Part B Statement of Additional Information
10 Cover Page
11 Table of Contents
12 FMR; Description of the Trust
13 a,b,c Investment Policies and Limitations
d Portfolio Transactions
14 a,b Trustees and Officers
c *
15 a *
b Description of the Trust
c *
16 a(i, ii) FMR, Management and Other Services, Trustees and Officers;
Distribution and Service Plan
a(iii),b,c,d Management and Other Services
e Portfolio Transactions
f Distribution and Service Plan
g *
h Description of the Trust
i Management and Other Services
17 a,b,c,d Portfolio Transactions
e *
18 a Description of the Trust
b *
19 a Additional Purchase, Exchange and Redemption Information
b Valuation of Portfolio Securities
20 Distributions and Taxes
21 Distribution and Service Plan
22 a *
b Performance
23 *
</TABLE>
- -------------------------------------
* Not Applicable
FIDELITY ADVISOR SERIES VIII
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS B
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Form N-1A Item Number
Part B Statement of Additional Information
10 Cover Page
11 Table of Contents
12 FMR; Description of the Trust
13 a,b,c Investment Policies and Limitations
d Portfolio Transactions
14 a,b Trustees and Officers
c *
15 a *
b Description of the Trust
c *
16 a(i, ii) FMR, Management and Other Services, Trustees and Officers;
Distribution and Service Plan
a(iii),b,c,d Management and Other Services
e Portfolio Transactions
f Distribution and Service Plan
g *
h Description of the Trust
i Management and Other Services
17 a,b,c,d Portfolio Transactions
e *
18 a Description of the Trust
b *
19 a Additional Purchase, Exchange and Redemption Information
b Valuation of Portfolio Securities
20 Distributions and Taxes
21 Distribution and Service Plan
22 a *
b Performance
23 *
</TABLE>
- --------------------------------------
* Not Applicable
FIDELITY ADVISOR SERIES VIII
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND - CLASS A
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND - CLASS B
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Form N-1A Item Number
Part B Statement of Additional Information
10 Cover Page
11 Table of Contents
12 FMR; Description of the Trust
13 a,b,c Investment Policies and Limitations
d Portfolio Transactions
14 a,b Trustees and Officers
c *
15 a *
b Description of the Trust
c *
16 a(i,ii) FMR; Management and Other Services; Trustees and Officers;
Distribution and Service Plan
a(iii),b,c,d Management and Other Services
e Portfolio Transactions
f Distribution and Service Plan
g *
h Description of the Trust
i Management and Other Services
17 a,b,c,d Portfolio Transactions
e *
18 a Description of the Trust
b *
19 a Additional Purchase and Redemption Information
b Valuation of Portfolio Securities
20 Taxes
21 Distribution and Service Plan
22 a *
b Performance
23 *
</TABLE>
- --------------------------------------
* Not Applicable
FIDELITY STRATEGIC
OPPORTUNITIES FUND:
82 Devonshire Street
Boston, Massachusetts 02109
A FUND OF
FIDELITY ADVISOR SERIES VIII
PROSPECTUS
THE FUND page 2
SHAREHOLDER'S SERVICES page 16
May 2, 1994
Fidelity Strategic Opportunities Fund (the Fund) seeks capital
appreciation by investing primarily in securities of companies believed by
Fidelity Management & Research Company to involve a "special
situation."
TABLE OF CONTENTS
2 Summary of Fund Expenses
3 Summary
4 Financial Highlights
5 How the Fund Works
6 Matching the Fund to Your
Investment Needs
6 Limiting Investment Risks
7 Portfolio Transactions
8 Performance
10 Distributions and Taxes
11 The Fund and the Fidelity
Organization
12 Management and Service Fees
13 How to Buy Additional Shares
15 Investment Requirements to
Remember
16 Shareholder Services
20 How to Redeem Shares
22 Appendix
The Fund is comprised of two group s of shares, Fidelity Strategic
Opportunities Fund ( " Initial Shares") and Fidelity Advisor Strategic
Opportunities Fund ( " Advisor Shares") (formerly Special Situations:
Initial Class and Advisor Class). Both groups share a common investment
objective and investment portfolio. Initial Shares are available only to
current holders of Initial Shares. Advisor Shares are offered to new
investors.
Initial Shares are offered through this prospectus. Advisor Shares are
offered 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 (date d May 2, 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, 82 Devonshire Street,
Boston, MA 02109.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, SAVINGS ASSOCIATION, INSURED DEPOSITORY
INSTITUTION OR GOVERNMENT AGENCY, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. INVESTMENTS IN THE FUND INVOLVE INVESTMENT RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL. THE VALUE OF THE INVESTMENT AND ITS RETURN
WILL FLUCTUATE AND ARE NOT GUARANTEED. WHEN SOLD, THE VALUE OF THE
INVESTMENT MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
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.
1.THE FUND
2.SUMMARY OF FUND EXPENSES
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in the Fund would bear directly
or indirectly. This standard format was developed for use by all mutual
funds to help you make your investment decisions. This expense information
should be considered along with other important information in the
Prospectus such as the Fund's investment objective, past performance and
financial highlights.
For information regarding expenses of Advisor Shares, see The Fund and the
Fidelity Organization, below.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases
(as a percentage of the offering price) 4.75%
Sales Load on Reinvested Dividends 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 shares 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 Fidelity Management & Research
Company (FMR) for managing its investments and business affairs and will
vary based on performance. The Fund incurs other expenses for maintaining
shareholder records, furnishing shareholder statements and reports and
other services. Management fees and other expenses already have been
reflected in the Fund'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 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 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 FUND PERFORMANCE
OR EXPENSES, BOTH OF WHICH MAY VARY.
3.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
securities of 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. Fidelity Management &
Research Company, 82 Devonshire Street, Boston, MA 02109, is the investment
adviser to the Fund. FMR, one of the largest investment management
organizations in the U.S., serves as investment adviser to investment
companies that had aggregate net assets of more than $200 billion and
approximately 15 million shareholder accounts as of November 30, 1993.
Fidelity Distributors Corporation (Distributors) is the general distributor
for shares of the Fund.
INVESTING IN THE FUND. Strategic Opportunities Fund is closed to new
investors. Current shareholders may make additional investments in the Fund
of $250 or more. The Fund's shares of beneficial interest 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 shares 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; see
the 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 shares of the Fund.
4.FINANCIAL HIGHLIGHTS
The following table gives you information about the financial history of
Fidelity Strategic Opportunities Fund. It uses the Fund's fiscal year
(September 30) and expresses the information in terms of a single share
outstanding throughout each period. The information in this table (and
Annual Report) does not reflect Advisor Shares' per share data and
expenses, which is different.
December 31,
1983,
(Commencement
of Operations) to
Years Ended September 30, September 30,
1993 1992(dagger)(dagger) 1991 1990 1989 1988 1987 1986 1985 1984
SELECTED PER-SHARE DATA
Net asset value,
beginning of period $ 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 .45 .73 .77 .80 .64 .48 .53 .36 .35 .16
Net realized and
unrealized
gain (loss) on
investments 4.46 .58 4.26 (2.49) 4.08 (1.80) 2.95 5.05 1.56
.88
Total from investment
operations 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 (.70) (.72) (.85) (.71) (.60) (.25) (.09) (.24) (.06)
- --
From net realized gain on
investments (1.21) (2.42) - -- - (1.91) (.97) (1.16) (.20) --
Total Distributions (1.91) (3.14) (.85) (.71) (.60) (2.16) (1.06)
(1.40) (.26) --
Net asset value, end
of period $ 22.72 $ 19.72 $ 21.55 $ 17.37 $ 19.77 $ 15.65 $ 19.13 $ 16.71
$ 12.70 $ 11.05
TOTAL RETURN (dagger) 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) $ 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 .89%(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 2.74% 3.78% 4.12% 4.21% 4.08% 3.31% 2.88% 2.40% 2.87%
2.03%
Portfolio turnover rate 183% 211% 223% 114% 89% 160% 255% 225%
214% 284%
(dagger) TOTAL RETURN DOES NOT INCLUDE THE ONE TIME SALES CHARGE.
(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%.
(diamond) INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FIDELITY MANAGEMENT
& RESEARCH COMPANY FOR ADJUSTMENTS TO PRIOR PERIODS' FEES. IF THIS
REIMBURSEMENT HAD NOT EXISTED THE RATIO OF EXPENSES TO AVERAGE NET ASSETS
WOULD HAVE BEEN 1.05%.
The Financial Highlights table has been audited by Coopers & Lybrand,
independent accountants, whose unqualified report for the fiscal year ended
September 30, 1993 is included in the Fund's Annual Report. The Annual
Report is incorporated by reference into the Statement of Additional
Information.
5.HOW THE FUND WORKS
6.THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Fidelity 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.
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.
FMR intends to invest primarily in common stocks and securities that are
convertible into common stocks; however, the Fund 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 (commonly referred to as "junk bonds''), although it intends to
limit its investments in these securities to 35% of its assets. 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. The Fund may purchase restricted
securities. 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
enter into repurchase agreements, engage in portfolio securities lending,
invest in warrants and zero coupon bonds. The Fund may invest in loans and
other direct debt instruments. In addition, the Fund may buy and sell stock
index futures contracts, options and options on futures with respect to a
portion of its assets. 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.
7.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 STRATEGIC
OPPORTUNITIES MAY BE
CONSIDERED MORE SPECULATIVE
THAN AN INVESTMENT IN OTHER
FUNDS WHICH SEEK CAPITAL
APPRECIATION.
8.LIMITING INVESTMENT RISKS
The Fund has adopted the following investment limitations designed to
reduce investment risk:
WHILE AN INVESTMENT IN
STRATEGIC OPPORTUNITIES 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.
9.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 will allocate such
transactions if commissions are comparable to those charged by
non-affiliated qualified broker-dealers for similar services. FMR will also
allocate brokerage transactions to the Fund's custodian so long as
transaction quality is comparable to other qualified brokers. The custodian
may credit a portion of the commissions paid toward payment of the Fund's
custodian charges.
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 183%. Because a higher turnover rate increases
transaction costs and may increase taxable capital gains, FMR carefully
weighs the anticipated benefits of short-term investment against these
consequences.
10.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.
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.
The following chart compares the Initial Shares 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. The Initial Shares total return figures do not include
the effect of the Initial Shares 4.75% maximum sales charge. 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.
11.COMPARE THE PERFORMANCE OF THE INITIAL SHARES OF STRATEGIC
OPPORTUNITIES TO THE RECORD OF THE S&P 500.
STRATEGIC
YEARS ENDED OPPORTUNITIES S&P 500
SEPTEMBER 30, 1993 TOTAL RETURN TOTAL RETURN
1984 10.39* 4.31
1985 17.64 14.39
1986 46.10 31.51
1987 21.87 43.27
1988 -4.63 -12.54
1989 31.19 32.97
1990 -8.96 -9.23
1991 30.01 31.17
1992 7.89 11.05
1993 26.98 13.00
* From fund commencement date, December 31, 1983 through September 30,
1984.
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.
Other illustrations of performance may show moving averages over specified
periods.
For performance information regarding Advisor Shares, see "The Fund and the
Fidelity Organization," on page 11.
12.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 shares, 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 shares. 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
share value 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.
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.
13.THE FUND AND THE FIDELITY ORGANIZATION
The Fund is a fund of Fidelity Advisor Series VIII (the Trust), and is an
open-end, diversified management investment company organized as a
Massachusetts business trust on September 23, 1983. As a Massachusetts
business trust, the Fund is not required to hold annual shareholder
meetings, although special meetings may be called for a specific class or
the Fund 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 and Advisor shareholders vote
separately on those matters, which pertain only to Initial Shares and
Advisor Shares, respectively. There is a possibility that claims asserted
against Advisor Shares may subject Initial Shares to certain liabilities.
Performance calculations will be made separately for Initial Shares and
Advisor Shares.
THE TRUST'S BOARD OF TRUSTEES
SUPERVISES FUND ACTIVITIES
AND REVIEWS CONTRACTUAL
ARRANGEMENTS WITH
COMPANIES THAT PROVIDE THE
FUND WITH SERVICES.
CLASS A. Class A shares are offered to retail investors who engage an
investment professional for investment advice, with a maximum 4.75% sales
charge ("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 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 of 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
.65% (the Board can approve a maximum rate of .75%). All or a
portion of the distribution fee is paid to investment professionals that
provide shareholder support services to Class A shareholders or sell Class
A shares.
CLASS B. 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). Class B shares are subject to a .75%
annual distribution fee, a .25% annual service fee and a contingent
deferred sales charge upon redemption within six years of purchase, which
decreases from a maximum of 4% to 0%. At the end of the six year period,
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 FIIOC. For the current fiscal year, total
operating expenses for Class B shares are estimated to be___%.
Class B shares of the Fund will generally have a lower yield and total
return than Class A shares of the Fund, due to higher expenses in general.
Investment 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.
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. 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 NOVEMBER 30, 1993,
FMR ADVISED FUNDS HAVING
MORE THAN 15 MILLION
SHAREHOLDER ACCOUNTS WITH A
TOTAL VALUE OF MORE THAN $200
BILLION.
14.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 30, 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 translated 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 is + or - .20%.
FMR has entered into sub-advisory agreements with Fidelity Management &
Research (U.K.) Inc. (FMR U.K.) and Fidelity Management & Research (Far
East) Inc. (FMR Far East), whose principal business offices are situated in
London and Tokyo, respectively. Pursuant to the agreements, FMR U.K. and
FMR Far East provide research and investment recommendations with respect
to companies based outside the United States; FMR U.K. focuses primarily on
companies based in Europe, FMR Far East focuses primarily on companies
based in Asia and the Pacific Basin.
Under the sub-advisory agreements, FMR 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 U.K. and FMR
Far East are wholly owned subsidiaries of FMR, both formed in 1986 to
provide research with respect to foreign securities.
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.
The Fund pays Service, an affiliate of FMR, transfer agent fees based on
the type, size and number of accounts in the Fund, and the number of
monetary transactions made by shareholders. For the 1993 fiscal year, the
Fund's transfer agent fees amounted to $38,794.
FIDELITY SERVICE CO. (SERVICE)
ACTS AS THE FUND'S TRANSFER
AND DIVIDEND-PAYING AGENT
AND MAINTAINS ITS
SHAREHOLDER RECORDS.
The Fund also pays Service to calculate its daily share 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 Fund's fees for pricing and bookkeeping and securities lending services
(including related out-of-pocket expenses) amounted to $145,494.
The Fund's operating expenses include custodial, legal and accounting fees,
charges to register the Fund with federal and state regulatory authorities
and other miscellaneous expenses. The Fund's total operating expenses for
the fiscal year ended September 30, 1993 were .89% of average net assets.
15.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>
16.SHARE PRICE
The price of one share (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.
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
CALCULATING NAV. Service calculates the Fund's NAV which is computed by
adding the value of all security holdings and other assets of the Fund,
deducting liabilities, and dividing the result by the number of shares 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 the
Fund. 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 the
Fund 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 shares 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.
17.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.
18.SHAREHOLDER SERVICES
19.CHOOSING A DISTRIBUTION OPTION.
A. The SHARE OPTION reinvests your income dividends and capital gain
distributions in additional shares.
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 from the Fund automatically invested into
another 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 shares of the Fund purchased through the
Directed Dividends Option if the originating fund has an equal or higher
sales load. Certain restrictions apply. Call or write Fidelity to learn
more or to change your distribution option.
If you select Option B or C and the U.S. Postal Service cannot deliver your
checks, or if your checks remain uncashed for six months, your
distributions will be reinvested in your account at the then current NAV
and your election will be changed to the Share 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.
20.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 from this Fund.
(bullet) Call Fidelity for information and a free prospectus for the fund
into which you want to exchange.
(bullet) Complete and sign an application, taking care to register your
new account 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: Each 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 Funds' 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.
21.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.
22.FIDELITY MONEY LINESM
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
SHARES 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.
23.STATEMENTS AND REPORTS
Service will send you a statement after every transaction (except a
reinvestment of dividends or capital gains) that affects your share 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 shares 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.
24.HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your
shares 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 60 days, you may redeem shares
of the Fund worth $100,000 or less by calling 1-800-544-7777. For your
protection, if you redeem shares of the Fund having a value of more
than $100,000, or 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, or if you have requested a change of address within the preceding
60 days, 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 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).
25.REDEMPTION REQUIREMENTS TO REMEMBER
Remember that if you should redeem all of your shares, your account will be
closed and you will not be able to reopen an account in the Fund. Once your
shares 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 Securities and Exchange Commission 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
shares 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 shares 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 shares will be redeemed at the
NAV next determined on the day your account is closed.
26.HOW TO REDEEM SHARES
27.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 shares to be sold, your name, your account number, and the additional
requirements listed below that apply to your particular account.
28.TYPE OF REGISTRATION
Individual, Joint Tenants, Sole Proprietorship, Custodial (Uniform Gifts or
Transfers To Minors Act), General Partners.
29.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).
30.CORPORATIONS, ASSOCIATIONS:
Letter of instruction and a corporate resolution, signed by person(s)
required to sign for the account accompanied by signature guarantee(s).
31.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 60 days.)
32.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 $50,000. (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.
Daniel R. Frank is portfolio manager and vice president of Fidelity
Strategic Opportunities Fund which he has managed since December 1983.
Previously, he was an assistant to Peter Lynch on Fidelity Magellan
Fund.
33.APPENDIX
FOREIGN INVESTMENTS. The Fund may invest in foreign securities, which
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, foreign markets may be less liquid or more volatile than U.S.
markets, and may offer less protection to investors such as the Fund. FMR
considers these factors in making investments for the Fund. FMR may invest
up to 30% of the Fund's assets in foreign securities. Within this
limitation, there is no restriction on the amount that may be invested in
any one country or currency.
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. 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. The Fund may lend portfolio securities to
an affiliate, Fidelity Brokerage Services, Inc.
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.
The Fund will not hedge more than 25% of its total assets by selling
futures, writing calls, or purchasing 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. The Fund's policies regarding futures
contracts and options are not fundamental and may be changed at any time
without shareholder approval.
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of its assets in
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.
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-QUALITY 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 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 FUNDS - CLASS A
PROSPECTUS
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
MAY 2 , 1994
The Fidelity Advisor Funds (Funds) offer investors a broad selection of
diversified portfolios.
EQUITY FUNDS:
FIDELITY ADVISOR OVERSEAS FUND - CLASS A
FIDELITY ADVISOR EQUITY PORTFOLIO GROWTH - CLASS A
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND - CLASS A
FIDELITY ADVISOR GLOBAL RESOURCES FUND - CLASS A
(formerly Fidelity Advisor Global Natural Resources Portfolio)
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A
(formerly Fidelity Special Situations Fund: Advisor Class)
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME - CLASS A
FIDELITY ADVISOR INCOME & GROWTH FUND - CLASS A
FIXED-INCOME FUNDS:
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND - CLASS A
FIDELITY ADVISOR HIGH YIELD FUND - CLASS A
FIDELITY ADVISOR LIMITED TERM BOND FUND - CLASS A
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND - CLASS A
FIDELITY ADVISOR SHORT FIXED-INCOME FUND - CLASS A
MUNICIPAL/TAX-EXEMPT FUNDS:
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND - CLASS A
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND - CLASS A
FIDELITY ADVISOR SHORT-INTERMEDIATE TAX-EXEMPT
FUND - CLASS A
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 portfolio s 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
portfolio s of Fidelity Advisor Series VIII. Certain funds sell two
classes of shares to retail investors : Class A sh a res and
Class B sh a res. Class A shares are offered through this prospectus.
Class B shares are offered through a separate prospectus.
FIDELITY ADVISOR HIGH YIELD FUND INVESTS IN LOWER-RATED DEBT SECURITIES,
WHICH PRESENT HIGHER RISKS OF UNTIMELY INTEREST AND PRINCIPAL PAYMENTS,
DEFAULT, AND PRICE VOLATILITY THAN HIGHER-RATED SECURITIES, AND MAY PRESENT
PROBLEMS OF LIQUIDITY AND VALUATION.
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 May 2 , 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 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR ENDORSED OR GUARANTEED
BY ANY BANK, SAVINGS ASSOCIATION, INSURED DEPOSITORY INSTITUTION OR
GOVERNMENT AGENCY, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE VALUE OF THE
INVESTMENT AND ITS RETURN WILL FLUCTUATE AND ARE NOT GUARANTEED. WHEN SOLD,
THE VALUE OF SHARES OF THE INVESTMENT MAY BE HIGHER OR LOWER THAN THE
AMOUNT ORIGINALLY INVESTED.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(Registered trademark)
TABLE OF CONTENTS Page
FINANCIAL HISTORY
Shareholder Transaction Expenses
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVES
INVESTMENT POLICIES AND RISKS 13
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
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 - CLASS A
The purpose of the table below is to assist you in understanding the
various costs and expenses that an investor in Class A would bear
directly or indirectly. This standard format was developed for use by all
mutual funds to help investors make their investment decisions. This
expense information should be considered along with other important
information such as each Fund's investment objective and past performance.
For information regarding expenses of Class B shares, see "The Trusts and
the Fidelity Organization."
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 Dividends 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 21.
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 Overseas, Growth Opportunities and
Strategic Opportunities will vary based on performance. 12b-1 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 Dealers (NASD) due to 12b-1 fees . The Funds incur other
expenses for maintaining shareholder records, furnishing shareholder
statements and reports, and for other services. A portion of the brokerage
commissions that Equity Portfolio Growth, Growth Opportunities, Global
Resources and Income & Growth paid were used t o reduce Fund
expenses. Without this reduction, the total operating expenses
for their Class A shares would have been 1.85%, 1.65%, 2.63% and 1.52%,
respectively. FMR has voluntarily agreed to reimburse Emerging Markets
Income, Government Investment, Limited Term Tax-Exempt, and
Short-Intermediate Tax-Exempt, 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%, 0.60% , 0.90% and .75% , respectively, of
average net assets. If reimbursements were not in effect, the management
fees, other expenses (including 12b-1 fees) and total fund operating
expenses for Class A shares would have been: .46%, .86%, and 1.32%,
(Government Investment); and .42%, .94%, and 1.36%, (Limited Term
Tax-Exempt). Please refer to the section "Fees," page 26.
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 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.
2.ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY FUNDS: MANAGEME 12B-1 OTHER TOTAL
NT FEE EXPENSES OPERATING 1 YEAR 3 YEARS 5 YEARS 10 YEARS
FEE EXPENSES
Overseas - Class A .77% .65% .96% 2.38% $ 70 $ 118 $ 169 $ 306
Equity Portfolio Growth
- Class A .66% .65% .53%* 1.84% 65 103 142 265
Growth Opportunities -
Class A .68% .65% .31%* 1.64% 63 97 132 233
Global Resources - Class
A .77% .65% 1.20%* 2.62% 73 125 180 329
Strategic Opportunities
- Class A .54% .65% .38% 1.57% 63 95 129 225
Equity Portfolio Income -
Class A .50% .65% .62% 1.77% 65 101 139 246
Income & Growth -
Class A .53% .65% .33%* 1.51% 62 93 126 219
FIXED-INCOME FUNDS:
Emerging Markets Income -
Class A1 .42% .25% .83% 1.50% 62 93 -- --
High Yield - Class A .51% .25% .35% 1.11% 58 81 106 176
Limited Term Bond -
Class A .42% .25% .56% 1.23% 59 85 112 189
Government Investment -
Class A .00% .25% .35%* .60% 53 66 79 119
*
Short Fixed-Income -
Class A .47% .15% .33% .95% 25 45 67 130
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal -
Class A .42% .25% .25% .92% 56 75 96 155
Limited Term Tax-Exempt -
Class A .12% .25% .53%* .90% 56 75 95 153
*
Short-Intermediate Tax-Exempt .09% .15% .51% .75% 26 48 -- --
- - Class A1
</TABLE>
* AFTER EXPENSE REDUCTIONS
1 PROJECTIONS ARE BASED ON ESTIMATED EXPENSES.
FINANCIAL HIGHLIGHTS
The following tables give information about each Fund's financial history
and use its fiscal year. They have been audited by each Fund's independent
accountant whose unqualified report is included in each Fund's Annual
Report. The Annual Report for each Fund is incorporated by reference into
its SAI. On or about May 2, 1994, Strategic Opportunities, Equity
Portfolio Income, Emerging Markets Income, High Yield, Limited Term Bond,
Government Investment, High Income Municipal, and Limited Term Tax-Exempt,
each is expected to offer Class B shares to retail investors. The
information in each Fund's respective table (and Annual Report) does not
reflect payment of 12b-1 fees or shareholder service fees, and may not be
representative of the expected operational results of Class B shares.
FIDELITY ADVISOR OVERSEAS FUND - CLASS A
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)(1DIAMOND) - (.01)(1diamond) -
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 EQUITY PORTFOLIO GROWTH - CLASS A
Equity Portfolio Growth Institutional Equity Portfolio Growth
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%
* 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.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION.
(1diamond) INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN
CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
# 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.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND - CLASS A
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# .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%*(dagger)
* (dagger)
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>
FIDELITY ADVISOR GLOBAL RESOURCES FUND - CLASS A
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(1diamond) (.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%*
* 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) 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 THE ADVISER NOT REIMBURSED
CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
# NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO
$.09 PER SHARE.
(1DIAMOND) NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED
TO $.17 PER SHARE.
</TABLE>
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A
August 20,1986
(Commencement
of Operations) to
Years Ended September 30, September 30,
1993 1992(dagger)(dagger) 1991 1990 1989 1988 1987 1986
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 19.53 $ 21.38 $ 17.21 $ 19.55 $
15.53 $ 19.06 $ 16.71 $ 17.81
Income from Investment Operations
Net investment income .33 .61 .66 .70 .50 .42 .46
.08(1DIAMOND)
Net realized and unrealized gain (loss) on investments 4.44 .58 4.26
(2.49) 4.08 (1.80) 2.95 (1.18)
Total from investment operations 4.77 1.19 4.92 (1.79) 4.58 (1.38)
3.41 (1.10)
Less Distributions
From net investment income (.57) (.62) (.75) (.55) (.56) (.24)
(.09) --
From net realized gain on investments (1.21) (2.42) - -- --
(1.91) (.97) --
Total distributions (1.78) (3.04) (.75) (.55) (.56) (2.15) (1.06)
- -
Net asset value, end of period $ 22.52 $ 19.53 $ 21.38 $ 17.21 $ 19.55
$ 15.53 $ 19.06 $ 16.71
TOTAL RETURN (dagger)(double dagger) 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) $ 269,833 $ 194,694 $ 199,604 $
172,083 $ 198,198 $ 191,454 $ 283,117 $ 22,141
Ratio of expenses to average net assets 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 2.06% 3.22% 3.61%
3.70% 3.23% 3.10% 2.36% 2.77%*
Portfolio turnover rate 183% 211% 223% 114% 89% 160% 225% --
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME - CLASS A
Equity Portfolio Income Institutional Equity Portfolio Income
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%(2DIAMOND) .67%(2DIAMOND) .61%(2DIAMOND) .55%(2DIAMOND) .55%(2DIAMOND)
.54%(2DIAMOND) .61% .63% .77%
Ratio of expenses to average net assets
before expense reductions 1.77% 1.55%* .80%## .79%(2DIAMOND)
.77%(2DIAMOND) .71%(2DIAMOND) .65%(2DIAMOND) .65%(2DIAMOND) .61%(2DIAMOND)
.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%
* 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) AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF
EQUALIZATION ACCOUNTING.
(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.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION. IN ADDITION, DURING THE PERIOD JULY 1,
1986 THROUGH OCTOBER 31, 1987 THE INVESTMENT ADVISER WAIVED .05% OF THE
ANNUAL INDIVIDUAL FUND FEE OF .35%.
++ INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FIDELITY MANAGEMENT &
RESEARCH COMPANY FOR ADJUSTMENTS TO PRIOR PERIODS' FEES. IF THIS
REIMBURSEMENT HAD NOT EXISTED THE RATIO OF EXPENSES TO AVERAGE NET ASSETS
WOULD HAVE BEEN 1.73%.
(2DIAMOND) EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992 THE ADVISER
REDUCED .10% OF THE ANNUAL MANAGEMENT FEE OF .50%.
(1DIAMOND) 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.
# 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 INCOME & GROWTH FUND - CLASS A
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# .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>
FIDELITY ADVISOR HIGH YIELD FUND - CLASS A
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%*
voluntary
(2DIAMOND)
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%*
* ANNUALIZED.
** FMR HAS DIRECTED CERTAIN 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.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
# NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO
$.26 PER SHARE.
(2DIAMOND) LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
</TABLE>
FIDELITY ADVISOR LIMITED TERM BOND FUND - CLASS A
Limited Term
Bond Fund Institutional Limited Term Bond Fund
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 - CLASS A
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>
* 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) 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 LIMITED TERM BOND FUND SHARES IN
RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
FIDELITY ADVISOR SHORT FIXED-INCOME FUND - CLASS A
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%*
voluntary (2DIAMOND)
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>
FIDELITY ADVISOR HIGH INCOME MUNICIPAL FUND - CLASS A
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 (2DIAMOND) (2DIAMOND) (2DIAMOND)
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>
* 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) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
(2DIAMOND) LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND - CLASS A
Limited Term
Tax-Exempt Fund Institutional Limited Term Tax-Exempt Fund
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 ARE NOT ANNUALIZED.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
As of December 31, 1993, ( fiscal y e ar end ) Fidelity
Advisor Emerging Markets Income Fund , the Fund had not
commen c ed oper a tions.
As of November 30, 1993, ( fiscal year end ) Fidelity Advisor
Short-Intermediate Tax-Exempt F und , the Fund had not
commenced oper a tions.
INVESTMENT OBJECTIVES
EQUITY FUNDS:
FIDELITY ADVISOR OVERSEAS FUND seeks growth of capital primarily through
investments in foreign securities.
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 500 Composite Stock Price Index
(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 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.
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. The Fund normally maintains a dollar-weighted average
maturity of ten years or less.
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. The Fund
normally maintains a dollar-weighted average maturity of ten years or
less.
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.
The Fund normally maintains a dollar-weighted average maturity of three
years or less.
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 Fund
normally maintains a dollar-weighted average maturity of ten years or
less.
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 Fund normally maintains a dollar-weighted average maturity
of between two and four years.
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, Emerging
Markets Income, Limited Term Bond, Government Investment, High Income
Municipal, Limited Term Tax-Exemp t and Short-Intermediate 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 Overseas, Growth Opportunities, Global
Resources, Equity Portfolio Income, High Yield, and Short Fixed-Income 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.
EQUITY FUNDS. Equity Funds invest mainly in common stock and other equity
securities in search of growth or a combination of growth and income. Their
performance 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 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 (commonly referred to as "junk bonds"),
although it intends to limit its investments in these securities to
3 5% 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.
FOREIGN CURRENCIES. The value of the Fund's investments, and the value of
dividends and interest earned by the Fund, may be significantly affected by
changes in currency exchange rates. Some foreign currency values may be
volatile, and there is the possibility of government controls on
currency exchange or government intervention in currency markets,
which could adversely affect the 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 the 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 the Fund's performance. FMR may manage the 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. The 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 the Fund's assets that may be committed to currency
management strategies.
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. As a
non-fundamental policy, the Fund may invest up to 35% of its total assets
in debt obligations of all types and quality, a high percentage of which
are expected to be convertible into common stocks. The Fund may invest in
lower-quality, high yielding debt securities (commonly referred to as "junk
bonds" ) although as a non-fundamental policy it 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 (commonly referred to as "junk bonds"),
although the Fund currently 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 for the
purpose of managing exchange rate risks. The 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 (commonly 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 3 5% 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 seeks capital appreciation by
investing primarily in securities of companies believed by FMR to involve 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.
As a non-fundamental policy, the Fund normally will invest at least 65% of
its assets in companies involving a special situation. 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 (commonly 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 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
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 seeks to obtain reasonable income
from a portfolio consisting primarily of income-producing equity
securities. In addition, consistent with the primary objective of obtaining
reasonable income, in managing its portfolio, the Fund will consider the
potential for achieving capital appreciation.
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 (commonly referred to as "junk bonds"),
although it currently intends to limit its investments in these securities
to 35% of its assets. Additionally, the 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 ( unlike an
index fund), 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 will invest 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
(commonly 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.
Under normal conditions, the Fund will invest at least 65% of its total
assets in debt securities and other instruments of issuers in emerging
markets. 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.
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-rated, high-yielding debt
securities (commonly 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.
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 IN 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.
FIDELITY ADVISOR HIGH YIELD FUND :
As a non-fundamental policy, the Fund normally will invest at least 65% of
its assets in high-yielding, income producing debt securities and preferred
stocks, including convertible and zero coupon securities. The Fund may
invest all or a substantial portion of its assets in lower-quality debt
securities (commonly referred to as "junk bonds"). Please refer to
"Risks of Lower-Quality Debt Securities". 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 direct
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 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 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-rated 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-rated debt securities
to finance highly leveraged corporate acquisitions and restructurings. Past
experience may not provide an accurate indication of the future performance
of lower-rated debt securities, especially during periods of economic
recession. In fact, from 1989 to 1991, the percentage of lower-rated debt
securities that defaulted rose significantly above prior levels, although
the default rate decreased in 1992.
Lower-rated 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-rated
debt securities will be valued in accordance with standards set by the
Board s of Trustees, including the use of outside pricing services.
Judgment plays a greater role in valuing lower-rated 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-rated debt
securities, and the Fund's ability to dispose of these securities.
The market prices of lower-rated 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-rated 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-rated 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 31 and 32 for a
discussion of Moody's and S&P ratings.
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, 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.
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 .
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. 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. 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 issues.
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, loans and other direct debt instruments, 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. As of November 30, 1993, its average maturity was 8.12 years. 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 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
(commonly 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
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 municipa l
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-rated 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 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 from time to time 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 a single economic,
political or regulatory development 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-rated
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-rated bonds.
While lower-rated bonds traditionally have been less sensitive to interest
rate changes than higher-rated investments, as with all bonds, the prices
of lower-rated bonds will be affected by interest rate changes. Economic
changes may affect lower-rated securities differently than other
securities. Lower-rated 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-rated 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-rated
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 engage in delayed delivery transactions and may purchase
restricted securities. The Fund also may purchase and sell futures
contracts and may purchase and write put and call options.
The Fund may invest up to 25% of its total assets in a single issuer's
securities. The Fund may invest any portion of its assets in industrial
revenue bonds (IRBs) backed by private issuers, and may invest up to 25% of
its total assets in IRBs related to a single industry.
The Fund 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 will maintain a
dollar-weighted average portfolio maturity of between two and four years
under normal conditions. 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 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 the 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 may invest up to 25% of its total assets in a single issuer's
securities. The Fund may invest any portion of its assets in industrial
revenue bonds (IRBs) backed by private issuers, and may invest up to 25% of
its total assets in IRBs related to a single industry. The Fund may also
invest 25% or more of its total assets in municipal securities whose
revenue sources are from similar types of projects, e.g., education,
electric utilities, healthcare, housing, transportation, or water, sewer,
and gas utilities.
The Fund's investments in municipal securities may include fixed,
variable, or floating rate general obligations 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 Fund may buy or
sell securities on a when-issued or delayed-delivery basis (including
refunding contracts), and may purchase restricted and illiquid securities.
The Fund may also buy and sell options and futures contracts. See the
Appendix for further discussion of the Fund's investments.
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.
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) 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 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, and Short
Fixed-Income 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) Emerging Markets Income and Short Intermediate Tax-Exempt are
considered non-diversified. To meet quarterly federal tax requirements for
qualification as a "regulated investment company," Fund limits its
investments so that (a) no more than 25% of its total assets are invested
in the securities of a single issuer, and (b) with respect to at least 50%
of its total assets, no more than 5% of total assets are invested in the
securities of a single issuer. These limitations do not apply to U.S.
government securities. Short-Intermediate Tax-Exempt may invest more than
25% of its total assets in tax-free securities that finance similar types
of projects.
(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.
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) Growth Opportunities may not purchase any security while
borrowings representing more than 5% of its net assets are outstanding.
(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 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 assets would be invested in illiquid
investments.
HOW TO BUY SHARES
Class A 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.
2.SALES CHARGES AND INVESTMENT PROFESSIONAL CONCESSIONS - CLASS A
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 - CLASS A:
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, OF DAILY MONEY
FUND, OR OF 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.
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) having Agreements with Distributors.
You can open an account with a minimum initial investment of $2,500 in
Class A shares or more in Class A shares by completing and
returning an account application. You can make additional investments in
Class A shares 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 ACCOUNT APPLICATION.
It is the responsibility of your investment professional to transmit your
order to purchase Class A 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.
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 Class A shares with a certified check. Shares 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
Class A shares for a period of time and to reject any order for the
purchase of Class A shares, including certain purchases by exchange
(see "How to Exchange,'' page ).
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 account
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. (A Sales Charge Waiver
Form must accompany these transactions.)
Qualification for s ales charge waivers must be cleared
through Distributors in advance, and employee benefit plan investors must
meet additional requirements specified in the 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 ) alone or in combination with purchases of Class A or
Class B shares of other Fidelity Advisor Funds ,
Initial shares or Class B shares of Daily Money Fund and shares
of Daily Tax-Exempt Money Fund acquired by exchange from other Fidelity
Advisor Funds. 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 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
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 Fidelity Advisor Fund
Class A and Class B shares , and Initial shares or Class B shares
of Daily Money Fund and shares of 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
sales charge.
8.LETTER OF INTENT. If you anticipate purchasing $50,000 or more
($1,000,000 for Short Fixed-Income or Short-Intermediate Tax-Exempt )
of a Fund's Class A shares alone or in combination with Class A
or Class B shares of other Fidelity Advisor Funds 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 taken in
additional Class A or Class B shares will apply toward the
completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class
A shares held in escrow cannot be redeemed or exchanged until the
Letter is satisfied or the additional sales charges have been paid. You
will earn income dividends and capital gain distributions on escrowed
Class A shares. The escrow will be released when your purchase of the
total amount has been completed. You are not obligated to complete the
Letter.
If you purchase more than the amount specified in the Letter and qualify
for a 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, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient
escrowed Class A shares will be redeemed to pay such charges.
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. Class A 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 will send you a confirmation after every transaction
that affects your Class A 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.
A 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 Class A 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 p rospectus. Certain features of a
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 shares of Daily Money Fund, and shares of Daily
Tax-Exempt Money Fund provided such funds are registered in your state.
To protect the performance of each Fund's Class A shares and
shareholders, FMR discourages frequent trading in response to short-term
market fluctuations. The Funds reserve the right to refuse Class A
exchange purchases by any person or group if, in FMR's opinion, a 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. 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 s hares 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 1.5%
front-end sales charge when you purchased your Short Fixed-Income or
Short-Intermediate Tax-Exempt 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 into Class A shares of a Fidelity
Advisor Fund from the Initial shares of Daily Money Fund or shares of
Daily Tax-Exempt Money 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 only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
4. You may make four exchanges out of a 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 represent s a sale
and is taxable. The Transfer Agent will send you 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 on a monthly, quarterly or
semiannual 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, except that Systematic Exchanges into Class A shares
of a Fidelity Advisor Fund from Initial shares of Daily Money Fund
or shares of 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 Class A 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. Orders to sell received by the Transfer Agent before 4:00
p.m. Eastern time will receive that day's 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 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 can 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
Class A shares registered in the name of a corporation, agent or
fiduciary or a surviving joint owner. Call 1-800-221-5207 for specific
requirements.
11.REDEMPTION REQUESTS BY TELEPHONE:
TO RECEIVE A CHECK. You may sell Class A 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 60 days.
TO RECEIVE A WIRE. You may sell Class A 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 Class A
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
Class A shares of a Fund having a value of more than $100,000, or 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, or if you have
requested a change of address within the preceding 60 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 Fund and Short-Intermediate
Tax-Exempt Fund each offer a check-writing service ($500 minimum) to
allow the redemption of shares from your account. Refer to the account
application or each SAI and complete the attached signature card.
Upon receipt of the properly completed 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 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 PROGRAM. Dividends and capital gain distributions
will be automatically invested in Class A 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; High Yield, Limited Term Bond,
Government Investment, Short Fixed-Income, Emerging Markets 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 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.
If a Fund has paid withholding or other taxes to foreign governments during
the year, the taxes will reduce the Fund's dividends but will 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 a Fund. Your tax statement will show the amount of foreign tax for which
a credit or deduction may be available.
STATE AND LOCAL TAXES. Mutual fund dividends from most U.S. government
securities generally are free from state and local income taxes. However,
certain types of securities, such as repurchase agreements and certain
agency backed securities, may not qualify for the government interest
exemption on a state-by-state basis. GNMA and other mortgage backed
securities are other notable exceptions in many states. Some states may
impose intangible property taxes. You should consult your own tax advisor
for details and up-to-date information on the tax laws in your state.
19.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. Because some states exempt their own municipal obligations from tax,
you will receive tax information each year showing how High Income
Municipal Limited Term Tax-Exempt and Short-Intermediate
Tax-Exempt allocated their investments by state.
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
20.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. 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 management 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
EQUITY FUNDS:
Overseas 0.45% 0.77%(dagger)
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:
Emerging Markets Income* 0.55% 0.71%
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-Free* 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 basic 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
basic 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, Government Investment and Limited
Term Tax-Exempt to the extent that total expenses exceed , 1.50%,
0.0%, and 0.90%, 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 companies based outside the U nited States and FMR
may grant sub-advisers investment management authority as well as the
authority to buy and sell securities if FMR believes it would be beneficial
to a Fund.
Overseas, Equity Portfolio Growth, Strategic Opportunities, Equity
Portfolio Income, Emerging Markets Income, High Yield and Limited
Term Bond each have entered into sub-advisory agreements with Fidelity
Management & Research (U.K.) Inc. (FMR U.K.) and Fidelity Management
& Research (Far East) Inc. (FMR Far East). FMR U.K. focuses primarily
on companies based in Europe, and FMR Far East focuses primarily on
companies based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, and not the Fund, may pay 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). 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.). Currently, FIIAL U.K.
focuses on companies other than the U.S., 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 FIIA has 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.
The Transfer Agent has delegated certain transfer, dividend paying and
shareholder services to Fidelity Investments Institutional Operations
Company (FIIOC), 82 Devonshire Street, Boston, Massachusetts 02109, an
affiliate of FMR. The Transfer Agent reallows to FIIOC a portion of its fee
for accounts for which FIIOC provides limited services, or its full fee for
accounts that FIIOC maintains on its behalf.
The Funds pay transfer agent fees based on the type, size and number of
accounts in a Fund and the number of monetary transactions made by
shareholders.
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 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 ended, 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 , L imited 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 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.
The Funds' operating expenses include custodial, legal and accounting fees,
charges to register a Trust or Fund with federal and state regulatory
authorities and other miscellaneous expenses. Each Fund's total operating
expenses for Class A shares after reimbursement, if any, as a
percent of average net assets, including the 12b-1 fee (see below), for the
most recent fiscal year ended were as follows: 2.38% (Overseas); 1.84%
(Equity Portfolio Growth); 1.64% (Growth Opportunities); 2.62% (Global
Resources); 1.57% (Strategic Opportunities); 1.77% (Equity Portfolio
Income); 1.51% (Income & Growth); 1.11% (High Yield); 1.23% (Limited
Term Bond); .68% (Government Investment); .95% (Short Fixed-Income); .92%
(High Income Municipal); .90% (Limited Term Tax-Exempt). If FMR had not
reimbursed certain Funds, total operating expenses for Class A
shares for the most recent fiscal year ended would have been as
follows: 1.32% (Government Investment) and 1.36% (Limited Term Tax-Exempt).
21.DISTRIBUTION AND SERVICE PLANS. The Board of Trustees of each Trust has
adopted a Distribution and Service Plan (the Plans) on behalf of 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 f und except pursuant to a plan
adopted by the f und 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 a Fund 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.
Each Fund pay Distributors a distribution fee at an annual rate of
average net assets of Class A shares of the Fund determined as of
the close of business on each day throughout the month. The Board of
Trustees for certain Funds has approved a distribution fee that is
less than the maximum allowed. The distribution 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. This distribution fee is paid
by the Class A shares of each Fund, not by individual accounts.
The Class A shares of Overseas, Growth Opportunities, Global Resources,
Strategic Opportunities, and Income & Growth each pay .65%. The
Class A shares of Equity Portfolio Growth and Equity Portfolio Income
each pay .65% (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 .25% (the Board can approve a maximum rate of .40%).
The Class A shares of Short Fixed-Income and Short-Intermediate
Tax-Exempt pay .15%.
All or a portion of the distribution fee may be paid by Distributors to
investment professionals as compensation for selling Class A shares
of the Funds . The distribution fee is a Class expense. Such
expenses will reduce the net investment income and total return of Class
A shares .
The 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. Investment
professionals will be compensated 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 qualify for
a Sales Charge Waiver described on page 12. FMR may terminate the program
at any time.
Fees paid pursuant to each Fund's Class A Distribution and Service
Plan will be limited by the restrictions imposed by the NASD rule which
subjects asset based sales charges to a maximum.
Distributors may pay all or a portion of the applicable sales charge and
distribution fee to investment professionals who sell Class A shares
of the Funds. 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 will, at its
expense, provide promotional incentives such as sales contests and trips to
investment professionals who support the sale of Class A 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 Class A 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 Class A shares are valued at NAV. NAV is determined for
Class A shares of each Fund by adding the value of all security
holdings and other assets of the Fund, deducting liabilities allocated to
C lass A (when appropriate), and then dividing the result by
the proportional number 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
Class A'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 after 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) . Because a high
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 diversified 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 Prospectus about another Fund. Each
class of shares is offered through a separate prospectus.
INSTITUTIONAL SHARES CLASS. 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 offer its
shares to two groups of investors: institutional investors 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 may be exchanged for
Institutional shares of other Fidelity Advisor Funds. Transfer agent and
shareholder services are performed by FIIOC. For the fiscal year ended
November 30, 1993, total operating expenses as a percent of average net
assets were: .94% for Fidelity Advisor Institutional Equity Portfolio
Growth, .79% for Fidelity Advisor Institutional Equity Portfolio Income,
.64% for Fidelity Advisor Limited Term Bond and .65% for Fidelity Advisor
Institutional Limited Term Tax-Exempt. Because the Institutional Shares
have lower total expenses, they will generally have a higher yield and
total return than the shares sold to retail investors. The Institutional
shares have a Distribution and Service Plan that does not provide for
payment of a separate distribution fee; rather the Plan recognizes 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 shares.
Investment professionals currently do not receive compensation in
connection with distribution and/or shareholder servicing of Institutional
Shares.
CLASS B. Fidelity Advisor High Income Municipal Fund, Fidelity Advisor
High Yield Fund, Fidelity Advisor Government Investment Fund, Fidelity
Advisor Emerging Markets Income Fund, Fidelity Advisor Equity Portfolio
Income, Fidelity Advisor Limited Term Bond Fund, and Fidelity Advisor
Limited Term Tax-Exempt Fund each offer a class of shares to retail
investors who engage an investment professional for investment advice with
a contingent deferred sales charge ("Class B" shares). Class B shares are
subject to a .75% annual distribution fee, a 25% annual service fee 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 a six
year period, 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 of a Fidelity Advisor Fund may be
exchanged only for Class B shares of 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 of Fidelity
Advisor Equity Portfolio Income Fund, Fidelity Advisor Emerging markets
income Fund, Fidelity Advisor High Yield Fund, Fidelity Advisor Limited
Term Bond Fund and Fidelity Advisor Government Investment Fund are
performed by FIIOC and through a sub-contract arrangement with United
Missouri for Class B shares of Fidelity Advisor High Income Municipal Fund
and Fidelity Advisor Limited Term Tax-Exempt Fund. For the current fiscal
year, total operating expenses for Class B shares are estimated to be as
follows: 1.67% for Fidelity Advisor High Income Municipal Fund; 1.86% for
Fidelity Advisor High Yield Fund; 1.70% for Fidelity Advisor Government
Investment Fund; 2.25% for Fidelity Advisor Emerging Markets Income Fund;
2.12% for Fidelity Advisor Equity Portfolio Income; 1.92% for Fidelity
Advisor Strategic Opportunities Fund; 1.98% for Fidelity Advisor Limited
Term Bond Fund; and 1.65% for Fidelity Advisor Limited Term Tax-Exempt
Fund. Class B shares of a Fund will generally have a lower yield and total
return than Class A shares of the same Fund, due to higher expenses in
general. Investment professionals may receive different levels of
compensation with respect to one particular class of shares over another
class of shares in the Funds.
Strategic Opportunities is comprised of two groups of shares, Fidelity
Strategic Opportunities Fund ("Initial Shares") and Fidelity Advisor
Strategic Opportunities Fund ("Advisor Shares") (formerly Special
Situations: Initial Class and Advisor Class). Investment performance will
be measured separately for Initial Shares and Advisor Shares, and the
lesser of the two results obtained will be used in calculating the
performance adjustment to the management fee paid by Strategic
Opportunities. Advisor Shares are comprised of two classes: Class A shares
and Class B shares. Class A shares are offered through this prospectus.
Class B shares are described above and offered through a separate
prospectus.
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 December 31, 1993, FMR advised funds
having approximately 15 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 1985. Mr. Haley also manages
California Tax-Free Insured, California Tax-Free High Yield, and Spartan
California Municipal High Yield. Mr. Haley joined Fidelity in 1981.
John R. Hickling is manager of Advisor Overseas, which he has managed since
February 1993. Mr. Hickling also manages Japan, Overseas, VIP: Overseas and
International Growth & Income. Previously he managed Emerging Markets,
Europe and Pacific Basin. Mr. Hickling joined Fidelity in 1982.
Curtis Hollingsworth is vice president and manager of Advisor Government
Investment, which he has managed since January 1992. Mr. Hollingsworth also
manages Short-Intermediate Government, Government Securities, Institutional
Short-Intermediate Government, Spartan Limited Maturity Government Bond,
Spartan Long-Term Government Bond and Spartan Short-Intermediate
Government. He joined Fidelity in 1983.
Malcolm W. MacNaught is vice president and manager of Advisor Global
Resources, which he has managed since November 1988. Mr. MacNaught also
manages Select Precious Metals and Minerals and Select American Gold. Mr.
MacNaught joined Fidelity in 1968.
David Murphy is manager of Advisor Short-Intermediate Tax-Exempt Fund.
He also manages Limited Term Municipals, New York Tax-Free Insured, Spartan
Intermediate Municipal and Spartan New Jersey Municipal High Yield. Before
joining Fidelity in 1989, he managed municipal bond funds at Scudder,
Stevens & Clark.
Robert E. Stansky is vice president and manager of Advisor Equity Portfolio
Growth, which he has managed since April 1987. Mr. Stansky also manages
Growth Company. Previously, he managed Emerging Growth and Select Defense
and Aerospace. Mr. Stansky joined Fidelity in 1983.
Donald G. Taylor is vice president and manager of Advisor Short
Fixed-Income, which he has managed since September 1989. Mr. Taylor also
manages Short-Term Bond, Spartan Short-Term Bond, and VIP II: Investment
Grade Bond. In addition, he manages Income Plus for Fidelity International
and serves as an assistant on Asset Manager: Income. Previously, he managed
Corporate Trust, Qualified Dividend, VIP: Zero Coupon Bond and Utilities
Income. Mr. Taylor joined Fidelity in 1986.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities, which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp., Leader of the Growth Group, and joined Fidelity in 1971.
APPENDIX
The following paragraphs provide a brief description of securities in which
the Funds may invest and transactions they may make. Consistent with its
investment objective and policies, each Fund may invest in or engage in one
or more of the following securities transactions. However, the Funds are
not limited by this discussion and may purchase or engage in one or more of
the following securities or transactions.
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.
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, foreign markets may be less liquid or
more volatile than U.S. markets, and may offer less protection to investors
such as a Fund. These risks are typically greater for investments in less
developed countries whose governments and financial markets may be more
susceptible to adverse political and economic developments. 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.
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.
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 had no investments below Baa/BBB.
MOODY'S RATING & PERCENTAGE OF INVESTMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MOOD EQUITY STRATE EQUITY INCOME EMERGING HIGH SHORT HIGH
Y'S PORTFOLI GIC PORTFOLIO & MARKETS YIELD FIXED- INCOME
RATIN O OPPORT INCOME GROWTH INCOME 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% -- --
</TABLE>
S&P RATING & PERCENTAGE OF INVESTMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S&AM EQUITY STRATE EQUITY INCOM EMERGI HIGH SHORT HIGH
P;P PORTFO GIC PORTFO E NG YIELD FIXED INCOM
RATIN LIO OPPORT LIO & MARKET - E
G GROWT UNITIES INCOM GROWT S INCO MUNICI
H E H INCOME 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%
</TABLE>
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
FIDELITY ADVISOR HIGH INCOME
82 Devonshire Street
Boston, Massachusetts 02109
May 2, 1994
The Fidelity Advisor Funds (the Funds) offer investors a broad selection of
diversified portfolios.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS B
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME FUND - CLASS B
FIDELITY ADVISOR EMERGING MARKETS INCOME - CLASS B
FIDELITY ADVISOR HIGH YIELD FUND - CLASS B
FIDELITY ADVISOR LIMITED TERM BOND FUND - CLASS B
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND - CLASS B
FIDELITY INVESTMENT HIGH INCOME MUNICIPAL FUND - CLASS B
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND - CLASS B
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 HIGH YIELD FUND INVEST IN LOWER-RATED DEBT SECURITIES,
WHICH PRESENT HIGHER RISKS OF UNTIMELY INTEREST AND PRINCIPAL PAYMENTS,
DEFAULT, AND PRICE VOLATILITY THAN HIGHER-RATED SECURITIES, AND MAY PRESENT
PROBLEMS OF LIQUIDITY AND VALUATION.
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 May 2, 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 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY, ANY BANK, OR SAVINGS ASSOCIATION, INSURED DEPOSITORY INSTITUTION OR
GOVERNMENT AGENCY, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN
THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE VALUE OF THE INVESTMENT AND ITS RETURN WILL FLUCTUATE AND ARE NOT
GUARANTEED. WHEN SOLD, THE VALUE OF THE INVESTMENT MAY BE HIGHER OR LOWER
THAN THE AMOUNT ORIGINALLY INVESTED.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Fidelity Investments logo
TABLE OF CONTENTS PAGE
FINANCIAL HISTORY 3
Shareholder Transaction Expenses 3
FINANCIAL HIGHLIGHTS 4
INVESTMENT OBJECTIVES 5
INVESTMENT POLICIES AND RISKS 6
INVESTMENT LIMITATIONS 13
HOW TO BUY SHARES 14
Minimum Account Balance 16
INVESTOR SERVICES 16
Combined Purchases 16
Rights of Accumulation 16
Letter of Intent 16
Fidelity Advisor Systematic Investment Program 17
SHAREHOLDER COMMUNICATIONS 17
HOW TO EXCHANGE 17
Fidelity Advisor Systematic Exchange Program 18
HOW TO SELL SHARES 18
Redemption Requests by Telephone 18
Redemption Requests in Writing 19
Reinstatement Privilege 19
DISTRIBUTION OPTIONS 20
DISTRIBUTIONS AND TAXES 20
Distributions 20
Capital Gains 20
"Buying a Dividend" 20
Federal Taxes 20
State and Local Taxes 21
Other Tax Information 21
FEES 21
Management and Other Services 21
Distribution and Service Plans 20
VALUATION 24
PERFORMANCE 24
PORTFOLIO TRANSACTIONS 25
THE TRUSTS AND THE FIDELITY ORGANIZATION 26
APPENDIX 28
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. The standard format was developed for
use by all mutual funds to help investors make their investment decisions.
The expense information should be considered along with other important
information such as each Fund's investment objective and past performance.
For information regarding expenses of Class A shares, see "The Trusts and
the Fidelity Organization" page __.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds) 4.00%*
Sales Charge on Reinvested Dividends None
Exchange Fees
*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.
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. Distribution Fees are paid
by Class B shares of the Funds to Distributors for services and expenses in
connection with the distribution of Class B 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 Dealers, Inc.
(NASD). Shareholder Service Fees are paid to investment professionals for
services and expenses incurred in connection with providing individual
assistance to Class B shareholders. The Funds incur other expenses for
maintaining shareholder records, furnishing shareholder statements and
reports, and for other services. FMR has voluntarily agreed to reimburse
Emerging Markets Income, Government Investment and Limited Term Tax-Exempt
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%, and 1.65%, respectively, of
average net assets. If reimbursements were not in effect, the management
fees, other expenses (including Distribution Fee and Shareholder Service
Fee) and total operating expenses for Class B shares would be .71%, 1.83%,
and 2.54% (Emerging Markets Income); .46%, 1.61%, and 2.07%, (Government
Investment); and .42%, 1.69%, and 2.11% (Limited Term Tax-Exempt). Please
refer to the section "Fees," page __.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MANAGEMENT DISTRIBUTION SHAREHOLDER OTHER TOTAL
FEE FEE SERVICE FEE EXPENSES1 OPERATING
EXPENSES
EQUITY FUNDS:
Strategic Opportunities .54% .75% .25% .38% 1.92%
Equity Portfolio Income .50% .75% .25% .62% 2.12%
FIXED-INCOME FUNDS:
Emerging Markets Income .42%* .75% .25% .83% 2.25%
High Yield .51% .75% .25% .35% 1.86%
Limited Term Bond .42% .75% .25% .56% 1.98%
Government Investment .09%* .75% .25% .61% 1.70%
MUNICIPAL/TAX-EXEMPT FUNDS:
High Income Municipal .42% .75% .25% .25% 1.67%
Limited Term Tax-Exempt .03%* .75% .25% .62% 1.65%
</TABLE>
* AFTER EXPENSE REDUCTIONS
1PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
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 estimated expenses (after
reimbursements, if any) in the table, 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 FUND PERFORMANCE OR EXPENSES, BOTH OF
WHICH MAY VARY.
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 or (2) no redemption at the end of each time period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
(1)* (2) (1)* (2) (1)* (2) (1)(dagger) (2)(dagger)
EQUITY FUNDS:
Strategic Opportunities $59 $19 $90 $60_ $114 $104 $211 $211
Equity Portfolio Income $62 $22 $96 $66 $124 $114 $232 $232
FIXED-INCOME FUNDS:
Emerging Markets Income $63 $23 $100 $70 $130 $120 $231 $231
Limited Term Bond $60 $20 $92 $62 $117 $107 $203 $203
High Yield $59 $19 $88 $58 $111 $101 $190 $190
Government Investment $57 $17 $84 $54 $102 $92 $172 $172
MUNICIPAL/TAX-EXEMPT
FUNDS:
High Income Municipal $57 $17 $83 $53 $101 $91 $169 $169
Limited Term Tax-Exempt $57 $17 $82 $52 $100 $90 $166 $166
</TABLE>
* REFLECTS DEDUCTION OF APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
(dagger) REFLECTS CONVERSION TO CLASS A AFTER SIX YEARS.
FINANCIAL HIGHLIGHTS
The following tables give information about each Fund's financial history
and use its fiscal year. They have been audited by each Fund's independent
accountant whose unqualified report is included in each Fund's Annual
Report. The Annual Report for each Fund is incorporated by reference into
its SAI.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A
August 20,1986
(Commencement
of Operations) to
Years Ended September 30, September 30,
1993 1992(dagger)(dagger) 1991 1990 1989 1988 1987 1986
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 19.53 $ 21.38 $ 17.21 $ 19.55 $
15.53 $ 19.06 $ 16.71 $ 17.81
Income from Investment Operations
Net investment income .33 .61 .66 .70 .50 .42 .46
.08(1diamond)
Net realized and unrealized gain (loss) on investments 4.44 .58 4.26
(2.49) 4.08 (1.80) 2.95 (1.18)
Total from investment operations 4.77 1.19 4.92 (1.79) 4.58 (1.38)
3.41 (1.10)
Less Distributions
From net investment income (.57) (.62) (.75) (.55) (.56) (.24)
(.09) --
From net realized gain on investments (1.21) (2.42) - -- --
(1.91) (.97) --
Total distributions (1.78) (3.04) (.75) (.55) (.56) (2.15) (1.06)
- -
Net asset value, end of period $ 22.52 $ 19.53 $ 21.38 $ 17.21 $ 19.55
$ 15.53 $ 19.06 $ 16.71
TOTAL RETURN (dagger)(double dagger) 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) $ 269,833 $ 194,694 $ 199,604 $
172,083 $ 198,198 $ 191,454 $ 283,117 $ 22,141
Ratio of expenses to average net assets 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 2.06% 3.22% 3.61%
3.70% 3.23% 3.10% 2.36% 2.77%*
Portfolio turnover rate 183% 211% 223% 114% 89% 160% 225% --
FIDELITY ADVISOR EQUITY PORTFOLIO INCOME
Equity Portfolio Income - Class A Institutional Equity Portfolio Income
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%(2diamond) .67%(2diamond) .61%(2diamond) .55%(2diamond) .55%(2diamond)
.54%(2diamond) .61% .63% .77%
Ratio of expenses to average net assets
before expense reductions 1.77% 1.55%* .80%## .79%(2diamond)
.77%(2diamond) .71%(2diamond) .65%(2diamond) .65%(2diamond) .61%(2diamond)
.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%
* 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) AS OF OCTOBER 1, 1991, THE FUND DISCONTINUED THE USE OF
EQUALIZATION ACCOUNTING.
(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.
+ EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET ASSETS IN ACCORDANCE
WITH A STATE EXPENSE LIMITATION. IN ADDITION, DURING THE PERIOD JULY 1,
1986 THROUGH OCTOBER 31, 1987 THE INVESTMENT ADVISER WAIVED .05% OF THE
ANNUAL INDIVIDUAL FUND FEE OF .35%.
++ INCLUDES REIMBURSEMENT OF $.03 PER SHARE FROM FIDELITY MANAGEMENT &
RESEARCH COMPANY FOR ADJUSTMENTS TO PRIOR PERIODS' FEES. IF THIS
REIMBURSEMENT HAD NOT EXISTED THE RATIO OF EXPENSES TO AVERAGE NET ASSETS
WOULD HAVE BEEN 1.73%.
(2diamond) EFFECTIVE APRIL 1, 1987 TO SEPTEMBER 10, 1992 THE ADVISER
REDUCED .10% OF THE ANNUAL MANAGEMENT FEE OF .50%.
(1diamond) 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.
# 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
1.11% 1.16% 1.76% 2.04% 2.17% 2.22% 2.25%*
before voluntary
(2diamond)
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%*
* 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.
(2diamond) LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
</TABLE>
FIDELITY ADVISOR LIMITED TERM BOND FUND
Limited Term
Bond Fund - Class A Institutional Limited Term Bond Fund
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) 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 LIMITED TERM BOND 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 (2diamond) (2diamond) (2diamond)
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>
* 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) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN.
(2diamond) LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
FIDELITY ADVISOR LIMITED TERM TAX-EXEMPT FUND
Limited Term
Tax-Exempt Fund - Class A Institutional Limited Term Tax-Exempt Fund
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 ARE NOT ANNUALIZED.
(double dagger) TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
As of December 31, 1993, (its fiscal year end, FIDELITY ADVISOR EMERGING
MARKETS INCOME FUND) the Fund had not commenced operations.
INVESTMENT OBJECTIVES
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 500 Composite Stock Price Index
(S&P 500).
FIXED-INCOME FUNDS:
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.
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. The Fund normally maintains a dollar-weighted maturity of ten
years or less.
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 Fund normally
maintains a dollar-weighted maturity of ten years or less.
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, Emerging Markets Income, 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 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, investment in
the Funds involve certain risks and therefore a Fund may not always achieve
its investment objective. See "Investment Policies" beginning on page ___.
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.
EQUITY FUNDS. Equity Funds invest mainly in common stock and other equity
securities in search of growth or a combination of growth and income.
Their performance 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 STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by
investing primarily in securities of companies believed by FMR to involve 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.
As a non-fundamental policy, the Fund normally will invest at least 65% of
its assets in companies involving a special situation. A special situation
may involve one or more of the following characteristics:
A technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts.
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.
New or changed management, or material changes in management policies or
corporate structure.
Significant economic or political occurrences abroad, including changes in
foreign or domestic import and tax laws or other regulations.
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 (commonly 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 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 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 seeks to obtain reasonable income
from a portfolio consisting primarily of income-producing equity
securities. The Fund seeks a yield from dividend and interest income which
exceeds the composite dividend yield on securities comprising the S&P
500. In addition, consistent with the primary objective of obtaining
reasonable income, in managing its portfolio, the Fund will consider the
potential for achieving capital appreciation.
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 (commonly referred to as "junk bonds"),
although it currently intends to limit its investments in these securities
to 35% of its assets. Additionally, the 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 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.
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-rated, 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.
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 IN 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 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.
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.
As a non-fundamental policy, the Fund normally will invest at least 65% of
its assets in high-yielding, income producing debt securities and preferred
stocks, including convertible and zero coupon securities. The Fund may
invest all or a substantial portion of its assets in lower-quality debt
securities (commonly referred to as "junk bonds"). Please refer to "Risks
of Lower-Quality Debt Securities." 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 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-rated 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-rated debt securities
to finance highly leveraged corporate acquisitions and restructurings.
Past experience may not provide an accurate indication of the future
performance of lower-rated debt securities, especially during periods of
economic recession. In fact, from 1989 to 1991, the percentage of
lower-rated debt securities that defaulted rose significantly above prior
levels, although the default rate decreased in 1992.
Lower-rated 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-rated 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-rated 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-rated debt
securities, and the Fund's ability to dispose of these securities.
The market prices of lower-rated 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-rated 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-rated 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 __ and __ for a
discussion of Moody's and S&P ratings.
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, 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.
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.
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. 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 BBB. 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 issues.
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. As of November 30, 1993, its average maturity was 8.12 years. 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 seeks a high level of current
income by investing primarily in obligations issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities. Under normal
circumstances, as a non-fundamental policy at least 65% of the Fund's
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-rated 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 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 from time to time 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 a single
economic, political or regulatory development 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 seeks to provide a high current
yield by investing in a diversified portfolio of municipal obligations. It
is the policy of the Fund that under normal conditions at least 80% of its
net assets will be invested in municipal obligations whose interest is not
included in gross income for purposes of calculating federal income tax.
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-rated
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-rated bonds. While lower-rated bonds traditionally have been less
sensitive to interest rate changes than higher-rated investments, as with
all bonds, the prices of lower-rated bonds will be affected by interest
rate changes. Economic changes may affect lower-rated securities
differently than other securities. Lower-rated 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-rated 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-rated 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 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. 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 engage in delayed delivery transactions and may purchase
restricted securities. The Fund also may purchase and sell futures
contracts and may purchase and write put and call options. The Fund may
invest up to 25% of its total assets in a single issuer's securities.
The Fund may invest any portion of its assets in industrial revenue bonds
(IRBs) backed by private issuers, and may invest up to 25% of its total
assets in IRBs related to a single industry.
The Fund 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.
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;
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.
Each Fund 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).
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.
Emerging Markets is considered non-diversified. To meet quarterly federal
tax requirements for qualification as a "regulated investment company," the
Fund limits its investments so that: (A) no more than 25% of its total
assets are invested in the securities of a single issuer, and (B) with
respect to at least 50% of its total assets, no more than 5% of total
assets are invested in the securities of a single issuer. These
limitations do not apply to U.S. government securities.
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.
BORROWING: The following limitations are fundamental.
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;
STRATEGIC OPPORTUNITIES
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.
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.
Each other Fund may not purchase any security while borrowings
representing more than 5% of its total assets are outstanding.
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.
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).
Each 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 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% (High Yield) or 10% (all others) of its assets would
be invested in illiquid investments.
HOW TO BUY SHARES
Class B 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. Fidelity Investments Institutional Operations Company (FIIOC)
(the Transfer Agent), ZR5, P.O. Box 1182, Boston, MA 02103-1182, provides
transfer and dividend paying services for each Fund.
The Class B shares are offered at NAV without an initial a sales charge.
Class B shares 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 or more
by completing and returning an account application. You can make
additional investments of $250 or more. The maximum purchase amounts of
$250,000 or more 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 account application.
It is the responsibility of your investment professional to transmit your
order to purchase Class B shares to the Transfer Agent before 4:00 p.m.
Eastern time in order for you to receive that day's 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.
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. Class B shares 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
Class B 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 ___).
MINIMUM ACCOUNT BALANCE. You must maintain an account balance of $1000.
If your account falls below $1000 due to redemption, 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. For Class A shares, reduced front-end sales charges
are applicable to purchases 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). 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.
COMBINED PURCHASES. When you invest in a Fund for a 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 can
add the value of currently held Class A and Class B shares of Fidelity
Advisor Funds, Initial shares and Class B shares of Daily Money Fund and
shares of 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 sales charge.
LETTER OF INTENT. You may qualify for reduced front-end sales charges on
purchases of Class A shares made within a 13-month period by filing a
non-binding Letter of Intent (the Letter) to purchase at least $50,000
($1,000,000 for Fidelity Advisor Short Fixed Income Fund and Fidelity
Advisor Short Intermediate Tax-Exempt Fund). You may include, as an
accumulation credit toward the completion of the Letter, the value of all
Class A and Class B shares held in Fidelity Advisor Funds, and the value of
Initial shares and Class B shares of Daily Money Fund and shares of 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 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. Class B shares 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.
A 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 Class B 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 a 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 BY EXCHANGE, AND THE
APPLICABLE CDSC FOR EXCHANGED CLASS B SHARES WILL BE BASED ON THE DATE OF
THE CLASS B SHARES INITIALLY PURCHASED. The exchange privilege is a
convenient way to sell and buy Class B shares of other Fidelity Advisor
Funds and of Daily Money Fund: U.S. Treasury Portfolio (DMF: Treasury)
registered in your state.
To protect each Fund's performance and shareholders, FMR discourages
frequent trading in response to short-term market fluctuations. The Funds
reserve the right to refuse exchange purchases by any person or group if,
in FMR's opinion, a 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. 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 DMF: Treasury, 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 a 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 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 DMF: Treasury on a monthly, quarterly or
semiannual 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 Class B 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, minus any applicable CDSC
(see below). Orders to sell may be placed by you in writing or by
telephone or through your investment professional. Orders to sell received
by the Transfer Agent before 4:00 p.m. Eastern time will be priced at that
day's 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 share price.
Once your Class B 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 can 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 sell Class B
shares registered in the name of a corporation, agent or fiduciary or a
surviving joint owner. Call 1-800-221-5207 for specific requirements.
REDEMPTION REQUESTS BY TELEPHONE:
TO RECEIVE A CHECK. You may sell Class B 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 60 days.
TO RECEIVE A WIRE. You may sell Class B 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 Class B 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 Class B
shares of a Fund having a value of more than $100,000, or 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, or if you have requested a
change of address within the preceding 60 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 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 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 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 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%
*After a maximum holding period of 6 years, Class B shares will convert
automatically to Class A shares of the same Fidelity Advisor Fund. See
"Conversion Feature" below for more information.
The CDSC will be calculated based on the lesser of the value of Class B
shares at the initial date of purchase or on 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.
CONVERSION FEATURE. After a maximum holding period of 6 years from the
initial date of purchase, Class B shares convert automatically to Class A
shares of the same Fidelity Advisor Fund. Conversion to Class A shares
will be made at NAV. At the time of conversion, a portion of the Class B
shares purchased through the reinvestment of dividends or capital gains
(Dividend Shares) will also convert to Class A shares. The portion of
Dividend Shares that will convert is determined by the ratio that your
Class B non-Dividend Shares converting bear to your total Class B
non-Dividend Shares. (A portion of Class B shares that had been acquired by
exchange also may convert, representing the appreciated value and/or
reinvested dividends or capital gains applicable to Class B shares prior to
their exchange into a Fund.)
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 certain distributions 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 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
Shares 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 may pay 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; and Equity Portfolio Income declare
dividends in March, June, September, and December and pay 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 redemption's 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) to the extent that the Fund's
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.
If a Fund has paid withholding or other taxes to foreign governments during
the year, the taxes will reduce the Fund's dividends but will 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 a Fund. Your tax statement will show the amount of foreign tax for which
a credit or deduction may be available.
STATE AND LOCAL TAXES. Mutual fund dividends from most U.S. government
securities generally are free from state and local income taxes. However,
certain types of securities, such as repurchase agreements and certain
agency-backed securities, may not qualify for the government interest
exemption on a state-by-state basis. GNMA and other mortgage backed
securities are other notable exceptions in many states. Some states may
impose intangible property taxes. You should consult your own tax advisor
for details and up-to-date information on the tax laws in your state.
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. Because some states exempt their own municipal obligations from tax,
you will receive tax information each year showing how High Income
Municipal and Limited Term Tax-Exempt allocated their investments by state.
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 CONTAINS 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 management 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
EQUITY FUNDS:
STRATEGIC OPPORTUNITIES 0.30% 0.54%
EQUITY PORTFOLIO INCOME NA 0.50%
FIXED-INCOME FUNDS:
EMERGING MARKETS INCOME 0.55%* 0.71%*
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 FUND 0.25% 0.42%
LIMITED TERM TAX-EXEMPT FUND 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" 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 Government Investment and
Limited Term Tax-Exempt to the extent that total expenses exceed 1.70%, and
1.65%, respectively, of the Fund's average net assets.
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 companies based outside the U.S. and FMR may grant
sub-advisers investment management authority as well as the 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.) and Fidelity Management
& Research (Far East) Inc. (FMR Far East). FMR U.K. focuses primarily
on companies based in Europe, and FMR Far East focuses primarily on
companies based in Asia and the Pacific Basin. Under the sub-advisory
agreements, FMR, and not the Fund, may pay 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, Emerging Markets Income has entered into a sub-advisory
agreement with Fidelity International Investment Advisors (FIIA). 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.). Currently, FIIAL U.K. focuses on companies other than the U.S.,
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 FIIA has 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.
FIIOC, 82 Devonshire Street, Boston, MA and affiliate of FMR, acts as
transfer and dividend-paying agent and maintains shareholder records.
FIIOC is paid fees based on the typed, size and number of accounts in Class
B shares, and the number of transactions made by shareholders of Class B
shares.
The Funds pay transfer agent fees based on the type, size and number of
accounts in a Fund and the number of monetary transactions made by
shareholders.
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 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 ended, 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. 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.
The Funds' operating expenses include custodial, legal and accounting fees,
charges to register a Trust or Fund with federal and state regulatory
authorities and other miscellaneous expenses. The total operating expenses
for Class A shares of each Fund after reimbursement, if any, as a percent
of average net assets, including the 12b-1 fee, for the most recent fiscal
year ended were as follows: 1.57% (Strategic Opportunities) 1.77% (Equity
Portfolio Income); 1.51% (Income & Growth); 1.11% (High Yield); 1.23%
(Limited Term Bond); .68% (Government Investment); 92% (High Income
Municipal); .90% (Limited Term Tax-Exempt). If FMR had not reimbursed
certain Funds, total operating expenses for the most recent fiscal year
ended would have been as follows: 1.32% (Government Investment) and 1.36%
(Limited Term Tax-Exempt). Total operating expenses for Class B shares
will be different due to different expenses than those for Class A shares.
DISTRIBUTION AND SERVICE AND SHAREHOLDER SERVICING PLANS. The Board of
Trustees of each Trust has adopted a Distribution and Service Plan (the
Plan) on behalf of each Fund'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 Plans 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 a Fund 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. The Class B shares of
each Fund pay Distributors a distribution fee at an annual rate of .75%
based on the average net assets of that Fund's Class B shares determined as
of the close of business on each day throughout the month.
The distribution fee is a Class B expense in addition to the management fee
and the other Class B expenses. Such expenses will reduce the net
investment income and total return of a Fund's Class B shares.
The 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 of each Fund also has a Shareholder Servicing Plan adopted under
Rule 12b-1. Under Shareholder Servicing Plans in effect for the Class B
shares of each Fund, investment professionals are compensated at an annual
rate of .25% of average daily net assets of that Fund's Class B shares for
providing ongoing shareholder support services to investors in Class B
shares. The Shareholder Servicing Plans have been approved by each
Trust's Board of Trustees.
Class B shares of each Fund bear the fees paid pursuant to their
Distribution and Service Plan and Shareholder Servicing Plan. Such fees
are not borne by individual accounts, and will be limited by the
restrictions imposed by the NASD rule regarding asset based sales charges.
Distributors may at its expense, provide promotional incentives such as
sales contests and trips to investment professionals who support the sale
of Class B shares. 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 Class B 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 Class B shares are valued at NAV. NAV is determined for Class B
shares of each Fund by adding the value of all security holdings and other
assets of the Fund, deducting liabilities allocated to Class B (when
appropriate), and then dividing the result by the proportional 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 after 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. Emerging Markets Income's annualized turnover rate is not
expected to exceed 200% for its first fiscal period ended December 31,
1994.
Because a high 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 diversified (except Emerging Markets Income which
is non-diversified) investment management company. Each Trust was
established by a separate Declaration of Trust as a Massachusetts business
trust on each date 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 Fund's contractual arrangements with companies
that provide the Funds with services. As Massachusetts business trusts,
the Funds 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
separate prospectus.
INSTITUTIONAL SHARES. Fidelity Advisor Equity Portfolio Income, Fidelity
Advisor Limited Term Bond Fund and Fidelity Advisor Limited Term Tax-Exempt
Fund each offers of 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 may be exchanged for certain other
Fidelity funds including Institutional Shares of other Fidelity Advisor
Funds. Transfer agent and shareholder services for these shares are
performed by FIIOC. For the fiscal year ended November 30, 1993, total
operating expenses as a percent of average net assets were: .79% for
Fidelity Advisor Institutional Equity Portfolio Income, .64% for Fidelity
Advisor Institutional Limited Term Bond and .65% for Fidelity Advisor
Institutional Limited Term Tax-Exempt. Because the Institutional Shares
have lower total expenses, the Institutional Shares of a Fund will
generally have a higher yield and total return than the shares of the same
Fund offered to retail investors. The Institutional Shares have a
Distribution and Service Plan that does not provide for payment of a
separate distribution fee; rather the Plan recognizes 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 shares. The Institutional Shares also
do not bear a shareholder servicing fee. Investment professionals
currently do not receive compensation in connection with distribution
and/or shareholder servicing of Institutional Shares.
CLASS A. Each Fund offers a class of shares to retail investors who
engage an investment professional for investment advice, with a maximum
initial 4.75% sales charge (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 or in combination with purchases of shares of other Fidelity
Advisor Funds. Class A investors also may qualify for a reduction in sales
charge under the Rights of Accumulation or Letter of Intent programs. Sales
charges 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 Fund 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
Limited Term Tax-Exempt through a sub-contractual arrangement with United
Missouri. For the fiscal year ended November 30, 1993, total operating
expenses of average net assets for the 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; .60% for Fidelity Advisor
Government Investment; .92% for High Income Municipal; and .90% for
Fidelity Advisor Limited Term Tax- Exempt. Fidelity Advisor Emerging
Markets Income has an estimated total operating expense of 1.50% for the
first year. Because the Class A shares of a Fund have lower total expenses
than Class B shares of the same Fund, Class A shares will generally have
higher yields and total returns than Class B shares.
Under their Distribution and Service Plans, the Class A shares of Fidelity
Advisor Strategic Opportunities, Fidelity Advisor Equity Portfolio Income,
Fidelity Advisor Emerging Markets Income each pay a .65% annual
distribution fee (the Board can approve a maximum rate of .75%); 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 a .25% annual
distribution fee (the Board can approve a maximum rate of .40%). All or a
portion of the distribution fee is paid to investment professionals that
provide shareholder support services or sell Class A shares. Class A shares
do not pay a shareholder servicing 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.
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 December 31, 1994, FMR advised funds
having approximately 15 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 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. 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. 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 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. Consistent with its
investment objective and policies, each Fund may invest in or engage in one
or more of the following securities transactions. However, the Funds are
not limited by this discussion and may purchase or engage in other types of
securities and enter into other types of transactions if they are
consistent with a 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.
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, foreign markets may be less liquid or
more volatile than U.S. markets, and may offer less protection to investors
such as a Fund. These risks are typically greater for investments in less
developed countries whose governments and financial markets may be more
susceptible to adverse political and economic developments. 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.
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 __.
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.
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
MOOD STRATE EQUITY EMERGIN HIGH HIGH
Y'S GIC PORTFOLIO G YIELD INCOME
RATIN OPPORT INCOME MARKETS MUNICI
G UNITIES INCOME PAL
Aaa/A 15.99 1.02% -- .02% 27.39%
a/A %
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&AM STRATE EQUITY EMERGI HIGH HIGH
P;P GIC PORTFO NG YIELD INCOM
RATIN OPPORT LIO MARKET E
G UNITIES INCOM S MUNICI
E INCOME PAL
AAA/A 15.99 1.03 -- .97% 29.05
A/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.
FACOMPRO- B-594
Prospectus
FIDELITY STRATEGIC OPPORTUNITIES FUND
A FUND OF FIDELITY ADVISOR SERIES VIII
STATEMENT OF ADDITIONAL INFORMATION
MAY 2, 1994
This Statement is not a prospectus but should be read in conjunction with
the current Prospectus of Fidelity Strategic Opportunities Fund (the Fund)
(formerly Fidelity Special Situations: Initial Class) (dated May 2 ,
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 the Prospectus,
Statement of Additional Information and 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 11
Valuation of Portfolio Securities 13
Performance 13
Additional Purchase, Exchange and Redemption Information 17
Distributions and Taxes 19
FMR 19
Trustees and Officers 20
Management and Other Services 21
The Distributor 25
Description of the Trust 25
Financial Statements 26
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- 5 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
8.
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 Investment Company Act of 1940. 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. If 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 hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies
in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged 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. Forward contracts generally are traded in an inter bank
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 to manage currency risks and
to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Fund.
In connection with purchases and sales of securities denominated in
foreign currencies, the Fund may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the Fund's foreign investments. The Fund
could 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.
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 forward currency 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 that FMR's use of forward currency contracts will be advantageous
to the Fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the Fund.
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 and restricted securities. Also, FMR may
determine some 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 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, 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 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. 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-rated debt securities that defaulted rose significantly above
prior levels, although the default rate decreased in 1992.
The market for lower-rated debt securities may be thinner and less active
than that for higher-rated debt securities, which can adversely affect the
prices at which the former are sold. If market quotations are not
available, lower-rated 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-rated 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 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 agreements 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 will comply with
Section 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 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 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 Fund by FMR pursuant to authority contained in the Management
Contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment advisor. 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; and the
reasonableness of any commissions and the existence of any directed
brokerage arrangements. Commissions for foreign investments traded on
foreign exchanges will generally be higher than for U.S. investments and
may not be subject to negotiation.
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; and the reasonableness of any commissions;
and arrangements for payment of Fund expenses.
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.
The Fund may execute portfolio transactions 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 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 such research and
execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to FMR in rendering investment management
services to the Fund or its other clients, and conversely, such information
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 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 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 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.
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
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.
For the fiscal years ended September 30, 1993 and 1992, the Fund's annual
portfolio turnover rate amounted to 183%, and 211%, respectively. The
Fund's turnover rate for these periods was substantially greater due to a
higher volume of shareholder purchase orders, short-term interest rate
volatility and other special market conditions.
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, approximately $872,596 or 82% of these
commissions were paid to brokerage firms which provided research services,
although the providing of such services was not necessarily a factor in the
placement of all 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 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 in the 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 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 seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine, in the exercise of their business judgment,
whether it would be advisable for the Fund to seek such recapture.
Although the Trustees and officers of the Trust 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 advised 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 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 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. 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. 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. 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 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 16. 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 Strategic
Opportunities Fund 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 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), 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; 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 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 inequity 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 fixed
income assets under management with that of other investment advisors.
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 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 PORTFOLIO 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, 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 STRATEGIC OPPORTUNITIES FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial 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 15,859 109,879
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. The yield of the S&P 500 for the twelve month period ended
September 30, 1993, was ____%, calculated by dividing the $ value of
dividends paid by the S&P 500 stocks during the period by the actual
value of the S&P 500 in ________, 199__.
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: President's 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
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 securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (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 temporarily suspends the offering of shares 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 each class' 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 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) with trust
assets; (6) in accounts as to which a bank or broker-dealer charges an
account management fee, provided the bank or broker-dealer has a Dealer
agreement with Distributions; (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
sales charges on future purchases after you have reached a new breakpoint.
You can add the value of your existing 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 public offering price, to determine your reduced sales charge.
LETTER OF INTENT. If you anticipate purchasing additional shares within a
13-month period in an amount that will exceed $50,000, you may obtain
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 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 price will be received on future purchases, you or your
investment professional must inform Service 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
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. All income
dividends and capital gain distributions on escrowed shares will be paid to
you. 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 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 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, the sales charge will be adjusted upward, corresponding to the
amount actually purchased, and if after written notice, you do not pay the
increased sales charge, sufficient escrowed 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 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 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 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.
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
to their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a 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
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 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). Before retiring in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) 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 (1988), 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).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and 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, which became effective on November 1, 1989, a
Trustee, upon reaching age 72, may 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 December 31, 1993, 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
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 Fund, all Trustees who are "interested
persons" of the Fund or of FMR, and all personnel of the Fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of 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
FSC, each fund pays all of its expenses, without limitation, that are not
assumed by those parties. The funds pay for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although each fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to existing shareholders, each trust has entered into
a revised transfer agent agreement with FSC, pursuant to which FSC bears
the cost of providing these services to existing shareholders. Other
expenses paid by the funds include interest, taxes, brokerage commissions,
each fund's proportionate share of insurance premiums and Investment
Company Institute dues, and the costs of registering shares under federal
and state securities laws. Each fund is also liable for such 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 the trusts'
officers and Trustees with respect to litigation.
FMR is the Fund's manager pursuant to an Amended 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
on the left. Also shown below is the effective annual fee rate schedules
which 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 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 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 net assets
of funds advised by FMR for December 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
average net assets for the current month, giving a dollar amount which is
the fee for that month.
Effective August 1, 1988, FMR voluntarily agreed to collect its basic fee
according to the schedule shown above (minus the break points added January
1, 1992 and November 1, 1993) until shareholders could meet to consider the
current contract. With the exception of changing the group fee rate
schedule, the terms of the current contract are identical to those of the
prior contract.
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%. 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. These fees were equivalent to .54%, .51%,
and .60%, respectively, of the average net assets of the Fund for these
periods. The fee for fiscal year 1993 includes the basic fee, an upward
adjustment of $81,040. 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. On November 1, 1990, FMR entered into sub-advisory
agreements with FMR U.K. and FMR Far East pursuant to which FMR U.K. and
FMR Far East supply FMR with investment research and recommendations
concerning foreign securities for the benefit of the Fund.
FMR U.K. and FMR Far East, both wholly-owned subsidiaries of FMR, were
formed in 1986 and registered under the Investment Advisers Act of 1940 on
May 11, 1987 to research and to make recommendations with respect to
companies located outside of North America.
The sub-advisory agreements provide that FMR, and not the Fund, will pay
fees to FMR U.K. and FMR Far East equal to 110% and 105%, respectively, of
FMR U.K.'s and FMR Far East's costs incurred in connection with each
agreement, said costs to be determined in relation to the assets of the
Fund that benefit from the services of the sub-advisers.
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, located
at 82 Devonshire Street, Boston, Massachusetts 02109, 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. On April 15, 1993 the
name of the Trust was changed from Fidelity Special Situations Fund to
Fidelity Advisor Series VIII. Fidelity Strategic Opportunities fund
currently offers Class A shares, Class B shares and Initial Class shares
(Initial Class shares are closed to new investors). The Fund's Declaration
of Trust permits the Trustees to create additional series.
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. There is a remote possibility that
one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of the Trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the Trust. Expenses with respect to the Trust are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the Trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. 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 any neglect or
wrongdoing, but nothing in the Declaration of Trust protec ts
Tru stees against any liability to which t he y would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of
their office .
VOTING RIGHTS. Each fund capital consists of shares of beneficial
interest of Fidelity Strategic Opportunities Fund consists of two classes
of shares of beneficial interest: Fidelity Strategic Opportunities Fund and
Fidelity Advisor Strategic Opportunities Fund. 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 January 31, 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 24%; A.G. Edwards & Sons,
St. Louis, MO, owned 10%; Smith Barney Shearson, New York, NY, owned 6%;
Cigna Securities, Inc., Hartford, CT, owned 5%.
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
sub 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, serves as the Fund's independent
accountant. The auditor examines financial statements for the Fund and
provides other audit, tax, and related services.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended September 30, 1993 is a
separate report supplied with this Statement of Additional information and
is incorporated herein by reference.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS A
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS B
A FUND OF FIDELITY ADVISOR SERIES VIII
STATEMENT OF ADDITIONAL INFORMATION
MAY 2, 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 May 2, 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 Class A 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 the Prospectus, Statement of Additional Information and Annual
Report are available without charge upon request from Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts 02109, or from
your investment professional.
NATIONWIDE 800-522-7297
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions 11
Valuation of Portfolio Securities 13
Performance 13
Additional Purchase, Exchange and Redemption Information 17
Distributions and Taxes 20
FMR 21
Trustees and Officers 21
Management and Other Services 23
The Distributor 26
Distribution and Service Plan 26
Description of the Trust 27
Financial Statements 28
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 - CLASS A
State Street Bank and Trust Company (State Street)
TRANSFER AGENT - CLASS B
Fidelity Investments Institutional Operations Company ("FIIOC")
CUSTODIAN
Brown Brothers Harriman & Co. (Brown Brothers)
I.BDSOSAI- 5 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 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 8.
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 Investment Company Act of 1940. 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 substantial delays. If 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 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 hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies
in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged 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. Forward contracts generally are 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 to manage currency risks and
to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Fund.
In connection with purchases and sales of securities denominated in
foreign currencies, the Fund may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the Fund's foreign investments. The Fund
could 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.
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 forward currency 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 that FMR's use of forward currency contracts will be advantageous
to the Fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the Fund.
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 and restricted securities. Also, FMR may
determine some 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 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, 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 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 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-rated debt securities that defaulted rose significantly above
prior levels, although the default rate decreased in 1992.
The market for lower-rated debt securities may be thinner and less active
than that for higher-rated debt securities, which can adversely affect the
prices at which the former are sold. If market quotations are not
available, lower-rated 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-rated 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 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 agreements 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 will comply with
Section 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 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 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 Fund by FMR pursuant to authority contained in the Management
Contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment advisor. 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; and 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.
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; and the reasonableness of any commissions;
and arrangements for payment of Fund expenses.
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.
The Fund may execute portfolio transactions 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 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 such research and
execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to FMR in rendering investment management
services to the Fund or its other clients, and conversely, such information
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 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 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 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.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute po rtfolio 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.
For the fiscal years ended September 30, 1993 and 1992, the Fund's annual
portfolio turnover rate amounted to 183% and 211%, respectively. The
Fund's turnover rate for these periods was substantially greater due to a
higher volume of shareholder purchase orders, short-term interest rate
volatility and other special market conditions.
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, approximately $872,596 or 82% of these
commissions were paid to brokerage firms which provided research services,
although the providing of such services was not necessarily a factor in the
placement of all 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 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 in the 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 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 seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine, in the exercise of their business judgment,
whether it would be advisable for 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 advised 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 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 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. 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. 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. 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. 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 16. 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% 15.96% 26.33% 107.18% 345.24%
</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% 15.96% 26.33% 107.18% 345.24%
</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
4.75% front-end 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 commenced operations on August 20, 1986, and
instituted a Distribution and Service Plan on January 1, 1987. Total
returns for the Fidelity Advisor Strategic Opportunities Fund include the
effect of the distribution and service fee as if that fee had been in
effect for the life of the Fund. Because it has higher expenses, total
returns for the Fidelity Advisor Strategic Opportunities will be lower
than for the Fidelity Strategic Opportunities Fund (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. Neither
total returns include the effects of Class B shares distribution and
service fees. Class B shares are expected to be available on or about May
2, 1994.
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 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), 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 perfor mance 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; 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 reference and present its fund number, Quotron number,
and CUSIP number, and discuss or quote its current portfolio manager.
Performance 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 fixed
income assets under management with that of other investment advisors.
VOLATILITY. Various measures of volatility and benchmark correlation
may be quoted in advertising. In addition these measures 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 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 PORTFOLIO 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, 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 $44,683 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 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* $10,465 $ 0 $ 0 $10,465 $ 8,971 $10,432 $ 9,950 $10,365
9/30/85 11,957 64 214 12,236 10,062 11,948 11,490 10,691
9/30/86 15,642 385 1,735 17,763 12,587 15,741 15,859 10,879
9/30/87 17,822 550 3,172 21,543 15,947 22,580 24,007 11,352
9/30/88 14,521 773 5,175 20,469 13,916 19,789 20,252 11,826
9/30/89 18,280 1,907 6,515 26,702 16,975 26,319 26,782 12,340
9/30/90 16,092 2,340 5,735 24,167 12,366 23,886 25,348 13,100
9/30/91 19,991 4,183 7,124 31,298 18,912 31,333 32,299 13,544
9/30/92 18,261 4,837 10,473 33,571 20,936 34,798 36,071 13,949
9/30/93 21,057 6,762 14,590 42,409 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 $25,191. 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 $3,441 for income dividends and
$7,359 for capital gain distributions. Class B shares are expected to be
available on or about May 2, 1994. Tax consequences have not been factored
into the above figures.
The yield of the S&P 500 (or the twelve month period ended
September 30, 1993, was ______%, calculated by dividing the $ value of
dividends paid by the S&P 500 stocks during the period by the actual
value of the S&P 500 in ______ 199___.
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 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, 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
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 for Class A and Class B shares . Shareholders
receiving securities or other property on redemption may realize a gain or
loss for tax purposes, and will incur any costs of sale, as well as the
associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (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 temporarily suspends the offering of shares 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 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 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 maximum front-end 4.75% sales charge in
connection with the Fund's merger with or acquisition of any investment
company or trust.
NET ASSET VALUE PURCHASES. Front-end s ales charges do not apply to
shares of Class A 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) with trust assets ; (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
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. Employer having more than 200 eligible employees or a
minimum of $ 1 ,000,000 i nvested in Fidelity Advisor
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 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 a Fidelity Advisor
IRA account purchase with the proceeds of a distribution from an employee
benefit plan that is part of an employee benefit plan having more than 200
eligible employees, or a minimum of $3,000,000 in plan assets invested in
Fidelity mutual funds or $1,000,000 invested in Fidelity Advisor mutual
funds; (9) 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 or 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; and (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.
Distributors compensates securities dealers and banks having agreements
with Distributors (investment professionals), who sell shares according to
the schedule in the p rospectus es . Distributors will, at its
expense, provide promotional incentives to investment professionals who
support the sale of shares w ithout reimbursement from the Fund. In
some instances, these incentives will be offered only to certain investment
professionals such as bank-affiliated or non-bank-affiliated broker-dealers
whose representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
The 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 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 Sales Charge Waiver
described in the Fund's 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
Fidelity Advisor Funds made at any one time (and Daily Money Fund and Daily
Tax-Exempt Money Fund shares acquired by exchange from any Fidelity Advisor
Fund). 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 portfolios
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 the 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 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, 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 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 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 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.
SYSTEMATIC INVESTMENT PLAN. You can make regular investments in Class
A or Class B shares of the Fund or other Fidelity Advisor Funds with the
Systematic Investment Plan by completing the appropriate section of the
account application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is
jointly owned, be sure that all owners sign. Investments may be made
monthly by automatically deducting $100 or more from your bank checking
account. You may change the amount of your monthly purchase at any time.
There is a $1,000 minimum initial investment requirement for systematic
investment plans.
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 plan 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
SYSTEMATIC EXCHANGE PLAN. With the Systematic Exchange Plan, 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 Daily Money Fund or Daily Tax-Exempt Money Market Fund will be
processed at the offering price next determined on the transaction date,
unless the shares of Daily Money Fund or Daily Tax-Exempt Money Market Fund
were acquired by exchange from another Fidelity Advisor Fund.
REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE. If you have redeemed 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.
SYSTEMATIC WITHDRAWAL PLAN. 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 Plan by
contacting your investment professional. Your Systematic Withdrawal Plan
payments are drawn from front-end share redemptions. If Systematic
Withdrawal Plan redemptions exceed income dividends earned on your shares,
your account eventually may be exhausted. Since a front-end sales charge
is applied on new shares you buy, it is to your disadvantage to buy Class A
shares while also making systematic redemptions.
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, 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 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 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.
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
to their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a 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 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 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). Before retiring in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) 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 (1988), 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).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and 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 Distributors.
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, which became effective on November 1, 1989, a
Trustee, upon reaching age 72, becomes eligible to participate in a defined
benefit retirement program under which he receives payments during his
lifetime based on his final year's basic trustees fees and length of
service. Currently Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham and David L. Yunich are participating in this program .
As of December 31, 1993, 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
Fidelity Service Co. (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, FMR is paid 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
on the left. On the right the effective annual fee rate schedules are the
results of cumulatively applying the annualized rates at varying asset
levels. For example, the effective annual group fee 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 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 for the most recent month, giving a dollar amount, which is the fee
for that month.
Effective August 1, 1988, FMR voluntarily agreed to collect its basic fee
according to the schedule shown above (minus the break points added January
1, 1992 and November 1, 1993) until shareholders could meet to consider the
current contract. With the exception of changing the group fee rate
schedule, the terms of the current contract are identical to those of the
prior contract.
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%. 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, including both the
basic fee and the performance adjustment, 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. On November 1, 1990, FMR entered into sub-advisory
agreements with FMR U.K. and FMR Far East pursuant to which FMR U.K. and
FMR Far East supply FMR with investment research and recommendations
concerning foreign securities for the benefit of the Fund.
FMR U.K. and FMR Far East, both wholly-owned subsidiaries of FMR, were
formed in 1986 and registered under the Investment Advisers Act of 1940 on
May 11, 1987 to research and to make recommendations with respect to
companies located outside of North America.
The sub-advisory agreements provide that FMR will pay fees to FMR U.K. and
FMR Far East equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with each agreement, said costs to
be determined in relation to the assets of the Fund that benefit from the
services of the sub-advisers.
State Street is transfer, dividend disbursing and shareholder servicing
agent for Class A shares. State Street also is reimbursed for its
out-of-pocket expenses for such items as postage, forms, telephone charges
and mail insurance. State Street has delegated certain transfer, dividend
paying and shareholder services to FIIOC, 82 Devonshire Street,
Boston, Massachusetts 02109, affiliate of FMR. Under a revised fee
arrangement effective January 1, 1993, the Fund pays a per account fee and
a monetary transaction fee of $30 and $6, respectively. For accounts that
FIIOC maintains on behalf of State Street, FIIOC receives all such fees.
For accounts as to which FIIOC provides limited services, FIIOC may receive
a portion (currently up to $20 and $6, respectively) of related per account
fees and monetary transaction fees, less applicable charges and expenses of
State Street for account maintenance and transactions.
FIIOC is the transfer, dividend disbursing and shareholder servicing
agent for Class B shares. Under its contract with Class B, FIIOC pays
out-of-pocket expenses associated with providing transfer agency services,
and FIIOC bears the expenses of typesetting, printing and mailing of
Prospectuses, Statements of Additional Information, reports, notices and
statements to shareholders. FIIOC is paid a per acccount fee of $95 and a
monetary transaction fee of $20 or $17.50 depending on the nature of
services provided.
Service, an affiliate of FMR, performs the calculations necessary to
determine the NAV and dividends of Class A and Class B shares 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) were $145,494, $129,183,
and $134,423, respectively. 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, there were no fees paid to
Service for securities lending.
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, 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 at NAV. Distributors
also act as general distributor for other publicly offered Fidelity funds.
The expenses of these operations are borne by FMR.
DISTRIBUTION AND SERVICE PLAN
The Trustees of the Trust have adopted a Distribution and Service Plan
(the Plan) pursuant to Rule 12b-1 of the 1940 Act (the Rule). The Plan has
been approved by the Trustees and by the Fund's shareholders at a meeting
held August 5, 1986. As required by the Rule, the Trustees carefully
considered all pertinent factors relating to the implementation of the Plan
prior to its approval, and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. In
particular, the Trustees noted that payments under the Plan may provide
additional incentives to promote the sale of shares of Class A ,
which may result in additional sales of Class A' s shares and an
increase in Class A's assets. The distribution fee is payable at
the annual rate of .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. This distribution fee will be paid by Class A, not by
individual accounts.
For the fiscal years ended September 30, 1993, 1992, and 1991 the Fund
paid distribution fees to Distributors 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.
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 at an
annual rate of .25% for providing ongoing shareholder support services.
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. Under the
Plans, if the payme nt by the Fund to FMR of management fees should be
deemed to be indirect financing of the distribution of shares, such
payment is authorized by the Plan. In addition, the Plans provide
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.
The Plan does not provide for specific payment by the Fund of any of the
expenses of Distributors, nor obligate 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. On April 15, 1993 the
name of the Trust was changed from Fidelity Special Situations Fund to
Fidelity Advisor Series VIII. Fidelity Strategic Opportunities fund
currently offers Class A shares, Class B shares and Initial Class shares
(Initial Class shares are closed to new investors). The Fund's Declaration
of Trust permits the Trustees to create additional series.
In the event that FMR ceases to be the investment adviser to the Fund, the
right of the Fund to use the identifying name "Fidelity" may be withdrawn.
The Fund's Declaration of Trust permits the Trustees to create additional
portfolios.
There is a remote possibility that one fund might become liable for any
misstatement in its prospectus or statement of additional information about
another fund. The assets of the Trust received for the issue or sale of
shares of each fund and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially allocated
to such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund are segregated on the books of account, and
are to be charged with the liabilities with respect to such fund and with a
share of the general expenses of the Trust. Expenses with respect to the
Trust are to be allocated in proportion to the asset value of the
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the Trust, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds. In the event of the dissolution or liquidation of the
Trust, shareholders of each fund are entitled to receive as a class the
underlying assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The fund 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 fund 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
fund or the Trustees shall include a provision limiting the obligations
created thereby to the fund and its assets. The Declaration of Trust
provides for indemnification out of the Fund's property of any shareholders
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 any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office. Claims asserted
against Class A shares may subject holders of Class B shares to certain
liabilities and claims against Class B shares may subject holders of Class
A shares to certain liabilities.
VOTING RIGHTS. Each series capital consists of s hares of
beneficial interes t. 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 each Class' 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, or class may, as
set forth in the Declaration of Trust, call meetings of the Trust,
Fund or C lass A or Class B shares as applicable , as the case
may be, for any purpose including the purpose of voting on removal of one
or more Trustees. The Fu nd may be terminated upon the sale of its
assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the
holders of a majority of the outstanding shares of the Fund. If not so
terminated, the Trust or Fund will continue indefinitely.
As of January 31, 1994, the following owned of record 5% or more of the
Class A's outstanding shares: Merrill Lynch Pierce Fenner,
Jacksonville, Florida, owned 24%; A.G. Edwards & Sons, St. Louis,
Missouri, owned 10%; Smith Barney Shearson, New York, New York, owned 6%;
and Securities, Inc., Hartford, CT, owned 5%.
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 Fund'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
The Annual Report for Class A for the fiscal year ended September
30, 1993 is a separate report supplied with this Statement of Additional
Information and is 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
MAY 2, 1994
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the current Fidelity Advisor Emerging Markets
Income Fund (the "Fund") Prospectuses (dated May 2, 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.
Additional copies of the Prospectuses or this Statement of Additional
Information are available without charge upon request from Fidelity
Distributors Corporation, 82 Devon shire Street, Boston, Massachusetts,
02109, or from your investment professional.
NATIONWIDE 800-522-7297
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 15
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 Contract and Other Services 27
The Distributor 30
Distribution and Service Plans 30
Description of the Trust 31
Appendix 33
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 - CLASS A
State Street Bank and Trust Company (State Street) or (Transfer Agent)
TRANSFER AGENT - CLASS B
Fidelity Investments Institutional Operations Company ("FIIOC") or
(Transfer Agent)
CUSTODIAN
Chase Manhattan Bank, N.A. (Chase) or (Custodian)
I.BD-AEMISAI- 5 94
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus es . 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 (the 1940
Act)) of the Fund. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
Fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements;
or
(8) notwithstanding any other fundamental investment policy or limitation,
invest all of its assets in the securities of a single open-end management
investment company with substantially the same fundamental investment
objectives, policies, and limitations as the Fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualifications as a "regulated
investment company," the Fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "government securities" as defined for federal tax purposes.
(ii) The Fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The Fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The Fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The Fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the Fund's total
assets.
(v) The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The Fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX) or
traded on the NASDAQ National Market System.
(vii) The Fund does not currently intend to lend assets other than
securities to other parties, except (a) by lending money (up to 7.5% of the
Fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser, or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(viii) The Fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation or merger.
(ix) The Fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The Fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(xi) The Fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 10% of the Fund's net assets.
Included in that amount, but not to exceed 2% of net assets, are warrants
whose underlying securities are not traded on principal domestic or foreign
exchanges. Warrants acquired by the Fund in units or attached to
securities are not subject to these restrictions.
For the Fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 6.
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); transactions in municipal securities;
transactions in U.S. government securities with affiliated banks that are
primary dealers in these securities; short-term currency transactions; and
short-term secured borrowing. In accordance with exemptive orders issued by
the 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 b oard of
d irectors, 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.
LOWER-RATED DEBT SECURITIES. The market for lower-rated debt securities
may be thinner and less active than that for higher-rated debt securities,
which can adversely affect the prices at which the former are sold. If
market quotations are not available, lower-rated 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-rated 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 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 at FMR's use of currency forward contracts will be advantageous
to the Fund or that they will hedge at an appropriate time.
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
Section 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, 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-counter 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.
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 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 to those member
banks of the Federal Reserve System and primary dealers in U.S. government
securities whose creditworthiness has been reviewed and found satisfactory
by FMR.
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. 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 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.
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 to Brazil's basic
natural resource base, which includes some of the largest mineral reserves
in the world. A vibrant private sector is marred by an inefficient public
sector. The government has embarked on an ambitious reform program that
seeks to modernize and reinvigorate the economy by stabilizing prices,
deregulating the economy, and opening the economy to increased foreign
competition. 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 increasingly 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 remain many countries
that do not have a stable political process. Other countries have been
enmeshed in civil wars and border clashes.
Economically, the Northern Rim countries (including Morocco, Egypt, and
Algeria, Nigeria, Zimbabwe, and South Africa are the wealthier countries on
the continent due to their strong ties with the European nations. The
market capitalization of these countries has been growing recently as more
international companies invest in Africa and as local companies start to
list on the exchanges. However, religious strife has been a significant
source of instability in the Northern Rim countries. Although racial
discord in South Africa may be reduced by constitutional changes that are
in progress, the long-term future of South Africa is uncertain.
On the other end of the economic spectrum are countries, such as Burkina,
Faso, Madagascar, and Malawi, that are considered to be among the poorest
or least developed in the world. These countries are generally landlocked
or have poor natural resources. The economies of many African countries are
heavily dependent on international oil prices. Of all the African
industries, oil has been the most lucrative, accounting for 40% to 60% of
many countries' Gross Domestic Product. However, general decline in oil
prices has had an adverse impact on many economies.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the Fund by FMR pursuant to authority contained in its Management
Contract. If FMR grants investment authority to the sub-advisers as
described in the section entitled "Management Contract" beginning on page
26, the sub-advisers will be authorized to place orders for the purchase
and sale of portfolio securities and will do so in accordance with the
policies described below. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR 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; and the
reasonableness of any spreads or commissions. 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 transactions with broker-dealers who provide
research 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) based
upon the quality of such brokerage and research services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Fund may be useful to FMR in rendering investment management
services to the Fund or its other clients, and conversely, such information
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 the
additional expenses which might otherwise be incurred if it were to attempt
to develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
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 or 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 Fidelity Brokerage Services, Inc.
(FBSI), and Fidelity Brokerage Services, Ltd. (FBSL), affiliates of FMR, 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 satisfied. Pursuant to such regulations, the Board of
Trustees has authorized FBSI to execute portfolio transactions on
natinoal 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 seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine, in the exercise of their business judgment,
whether it would be advisable for 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 are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
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 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 appraising portfolio securities that
are traded on the New York Stock Exchange (NYSE) or American Stock Exchange
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 (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
Class A and B 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, yield and total returns
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 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. 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 are computed by dividing the Fund's 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 dividends
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 as are gains and losses from currency
exchange rate fluctuations.
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 which monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration. Lipper may also rank the Fund based on
yield. In addition to the mutual fund rankings, the each class'
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, the 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 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), and
combinations of various capital markets. The performance of these capital
markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance 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 and DJIA are 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. 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 Standard and Poor's 500
Composite Stock Price Index, 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 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 F und may
invest, may be compared to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. THE BOND FUND REPORT AVERAGES/fixed-income which is
reported in the BOND FUND REPORT , covers over 250 fixed-income 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; 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 reference and present its Fund number,
Quotron(trademark) number, CUSIP number, and discuss or quote its current
portfolio manager.
P erformance 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 nine years,
assets in fixed-income funds increased from $26 billion in 1984 to
approximately $389 billion at the end of 1993. As of December 31, 1993,
FMR managed approximately $95 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 advisors.
VOLATILITY. Various measures of volatility and benchmark correlation in
advertising. In addition, these measures may be compared to those
of other funds. Measures of volatility seek to compare the Fund's
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 momentum indicator represents the
fund's 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.
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
income 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 maturity (a zero coupon security) 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.
Class A and 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.
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:
Global research resources: an opportunity to diversify portfolios and
share in the growth of markets outside the United States.
In-house, proprietary bond-rating system, constantly updated, which
provides extremely sensitive credit analysis.
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.
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.
SERVICE: Timely, accurate and complete reporting. Prompt and expert
attention when an investor or an investment professional needs it.
ADDITIONAL EXCHANGE, PURCHASE AND REDEMPTION INFORMATION
The Fund is open for business and the NAV 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 (observed),
Independence Day, 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, 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 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 for Class A and B shares . Shareholders receiving
any such securities or other property on redemption may realize a gain or
loss for all 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 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
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 p rospectus, 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 maximum front-end sales charge in connection
with the Fund's merger with or acquisition of any investment company or
trust.
NET ASSET VALUE PURCHASES. Front-end s ales charges do not apply to
shares of the 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 account
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. 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 (i) an employee benefit
plan provided that is part of 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 a minimum of $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 (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 invest in Fidelity Advisor
mutual funds; (10) by any state, county, or city, or any governmental
instrumentality, department, authority or agency; and (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.
Distributors compensates securities dealers and banks having agreements
with Distributors (investment professionals), who sell shares according to
the schedule in the p rospectus es . Distributors will, at its
expense, provide promotional incentives to investment professionals who
support the sale of Class A and Class B shares without reimbursement
from the Fund. In some instances, these incentives will be offered only to
certain investment professionals whose representatives provide services in
connection with the sale or expected sale of significant amounts of shares.
The contingent deferred sales charge (CDSC) for 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 investment professionals with a fee of .25% on
purhcases of $1 million or more, except for purchases made through a bank
or bank-affiliated broker-dealer that qualify for a front-end 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 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 suich 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
Fidelity Advisor Funds made at any one time (and Daily Money Fund and Daily
Tax-Exempt Money Fund shares acquired by exchange from any Fidelity Advisor
Fund). 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 portfolios
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 the 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 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, 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 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 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 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.
SYSTEMATIC INVESTMENT PLAN. You can make regular investments in Class
A or Class B shares of the Fund or other Fidelity Advisor Funds with the
Systematic Investment Plan by completing the appropriate section of the
account application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is
jointly owned, be sure that all owners sign. Investments may be made
monthly by automatically deducting $100 or more from your bank checking
account. You may change the amount of your monthly purchase at any time.
There is a $1,000 minimum initial investment requirement for systematic
investment plans.
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 plan 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
SYSTEMATIC EXCHANGE PLAN. With the Systematic Exchange Plan, 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 Daily Money Fund or Daily Tax-Exempt Money Market Fund will be
processed at the offering price next determined on the transaction date,
unless the shares of Daily Money Fund or Daily Tax-Exempt Money Market Fund
were acquired by exchange from another Fidelity Advisor Fund.
REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE. If you have redeemed 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.
SYSTEMATIC WITHDRAWAL PLAN. 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 Plan by
contacting your investment professional. Your Systematic Withdrawal Plan
payments are drawn from front-end share redemptions. If Systematic
Withdrawal Plan redemptions exceed income dividends earned on your shares,
your account eventually may be exhausted. Since a front-end sales charge
is applied on new shares you buy, it is to your disadvantage to buy Class A
shares while also making systematic redemptions.
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. 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 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 gains
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
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 for 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 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 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 the 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 to 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
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Prior to his retirement in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) 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, 340 E. 64th Street #22C, New York, NY, Trustee (1992).
Prior to her retirement in September of 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 (1988), 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). In addition, he serves as Vice Chairman of the
Board of Directors of the National Arts Stabilization Fund, and as Vice
Chairman of the Board of Trustees of the Greenwich Hospital Association
(1989).
*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 (1990).
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).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and 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 (1988), 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 (1991), 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 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 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 and Service for Class A shares and FIIOC for Class B
shares , 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 to shareholders, legal expenses, and the fees
of the custodian, auditor and non-interested Trustees. Although the Fund's
management contract provides that the Fund will pay for typesetting,
printing and mailing prospectuses, statements of additional information,
notices and reports to shareholders, pursuant to the Fund's agreement with
State Street, State Street will now bear the cost of providing these
services to shareholders of the Fund. 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 such
litigation.
FMR is the Fund's manager pursuant to a management contract dated January
20, 1994. For the services of FMR under the contract, the Fund pays a
monthly fee to FMR at an annual fee rate made up of the sum of two
components: a group fee rate and an individual Fund fee rate.
COMPUTING THE MANAGEMENT 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 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 rates shown for average group assets in excess of $120 billion were
adopted by FMR on a voluntray basis on January 1, 1992. Rates in excess of
$174 billion were adopted 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 increases.
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 Management Fee Rate
.1621% + .55% = .7121%
</TABLE>
One-twelfth (1/12) of this annual management 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.
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 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 of the Fund. 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.
SUB-ADVISERS. FMR has entered into sub-advisory agreements with FMR U.K.,
FMR Far East, and FIIA. FIIA, in turn, has entered into a sub-advisory
agreement with its wholly owned subsidiary FIIAL U.K. Pursuant to the
sub-advisory agreements, FMR may receive investment advice and research
services with respect to companies based outside the U.S. from the
sub-advisors and may 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 funds.
Currently, FMR U.K., FMR Far East, FIIA, and FIIAL U.K. each focus on
companies 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, together with various trusts for the benefit of Johnson family members
own, 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.
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 investment advice and research services the sub-advisors are
compensated as follows: FMR pays FMR U.K. and FMR Far East fees equal to
110% and 105%, respectively, of FMR U.K.'s and FMR Far East's costs
incurred in connection with providing investment advice and research
services. FMR pays FIIA 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. 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 investment management and executing portfolio transactions,
the sub-advisors are compensated as follows: FMR pays FMR U.K., FMR Far
East, and FIIA 50% of its monthly management fee (including any performance
adjustment) with respect to the Fund's average net assets managed by the
sub-advisor on a discretionary basis. FIIA pays FIIAL U.K. 110% of FIIAL
U.K.'s costs incurred with providing investment management services.
State Street is transfer and shareholder servicing agent for Class A
shares . State Street has delegated certain transfer, dividend-paying
and shareholder services to FIIOC. The Fund pays a per account fee and a
monetary transaction fee of $30 and $6, respectively. For accounts that
FIIOC maintains on behalf of State Street, FIIOC receives all such fees.
For accounts as to which FIIOC provides limited services, FIIOC may receive
a portion (currently $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 and shareholder servicing agent for Class B
shares. Under its contract with Class B, FIIOC pays out-of-pocket expenses
associated with providing transfer agency services, and FIIOC bears the
expense of typesetting, printing and mailing of prospectuses, statements of
additional information, reports, notices and statements to shareholders.
FIIOC is paid a per account fee of $95 and a monetary transaction of $20 or
$17.50, depending on the nature of services provided.
The Fund has a contract with Service providing 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, located
at 82 Devonshire Street, Boston, Massachusetts, 02109, 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 on behalf of Class A and Class B have
adopted Distribution and Service Plans (the Plans) under Rule 12b-1 of the
1940 Act (the Rule). The Rule provides in substance that a mutual fund
may not engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the mutual fund
except pursuant to a plan adopted by the mutual fund under the Rule. The
Trustees have adopted the Plan s to assure that the Class A and
Class B shares and FMR may incur certain expenses that might be
considered to constitute indirect payment of distribution expenses. Under
the Plan s , if the payment by Class A and Class B shares to
FMR of management fees should be deemed to be indirect financing of the
distribution of its shares, such payment is authorized by the Plans.
The Plan s also specifically recognize 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 Class A and B
shares. In addition, the Plan s provide that FMR may use its
resources, including its management fee revenues, to make payments to third
parties that provide assistance in selling Class A and B shares or
to third parties, including banks, that render shareholder support
services. The Trustees have not yet authorized such payments.
In addition, Class A pays to Distributors a distribution fee at an
annual rate of up to .40% (currently at .25%) of its average net assets
determined as of the close of business on each day throughout the month,
but excluding assets attributable to shares purchased more than 144 months
prior to such day. This distribution fee will be paid by Class A ,
not by individual accounts.
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
at an annual rate of .25% for providing shareholder support services.
The Plan s have been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
the implementation of the Plans prior to their approval, and have
determined that there is a reasonable likelihood that the Plan s will
benefit shareholders of each class of shares. To the extent that the Plans
give FMR and Distributors greater flexibility in connection with the
distribution of shares, additional sales of shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the Plan s by local entities with whom shareholders
have other relationships.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, in Distributors' opinion such Act should
not preclude a bank from performing 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 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. There currently
are two series in the Trust: F idelity Strategic
Opportunities Fund and Fidelity Advisor Emerging Markets Income
Fund . The Declaration of Trust permits the Trustees to create
additional serie s.
In the event that FMR ceases to be the investment adviser to the Fund, the
right of 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
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the Trust. Expenses with respect to the Trust are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the Trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the Trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. 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 series, capital currently 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 of the Trust or Class A or Class B
shares for any purpose, including 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, theTrust or Fund will continue
indefinitely.
CUSTODIAN. Chase Manhattan Bank, N.A., 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.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statement for Strategic Opportunities Fund for the fiscal
year ended September 30, 1993, is incorporated herein by reference to
Exhibit 24 to Post-Effective Amendment No. 25.
(b) Exhibits:
(1) (a) Declaration of Trust as Amended and Restated October 1, 1986 is
incorporated herein
by reference to Exhibit 1(b) to Post-Effective Amendment No. 7.
(b) Supplement to the Declaration of Trust dated November 16, 1984 is
incorporated herein by reference to Exhibit 1(a) to Post-Effective
Amendment No. 3.
(c) Form of Supplement to the Declaration of Trust dated November 29,
1990 is incorporated
herein by reference to Exhibit 1(c) to Post-Effective Amendment No. 15.
(d) Amendment to Declaration of Trust dated July 15, 1993 is filed
herein electronically as
Exhibit 1(d).
(2) (a) By-Laws of the Trust are incorporated herein by reference to
Exhibit 2 to Registration Statement No. 2-86711.
(b) Supplement to the By-laws of the Trust dated November 29, 1990 is
incorporated herein by reference to Exhibit 2(a) to Post-Effective
Amendment No. 15.
(3) Not applicable.
(4) Not applicable.
(5) (a) Amended Management Contract between the Registrant, on behalf of
Fidelity Special Situations Fund, and Fidelity Management & Research
Co. is incorporated herein by reference to Exhibit 5 to Post-Effective
Amendment No. 8.
(b) Management Contract between the Registrant, on behalf of Fidelity
Special Situations Fund, and Fidelity Management & Research Co., dated
November 29, 1990 is incorporated herein by reference to Exhibit 5(b) to
Post-Effective Amendment No. 16.
(c) Form of Management Contract between the Registrant, on behalf of
Fidelity Advisor Emerging Markets Income Fund, and Fidelity Management
& Research Co., dated January 20, 1994, is incorporated herein by
reference to Exhibit 5(c) to Post-Effective Amendment No. 24.
(d) Sub-Advisory agreement among the Registrant, on behalf of Fidelity
Special Situations Fund, Fidelity Management & Research Co. and
Fidelity Management & Research (U.K.) Inc. dated November 29, 1990 is
electronically filed herein as Exhibit 5(d).
(e) Sub-advisory agreement among the Registrant, on behalf of Fidelity
Special Situations Fund, Fidelity Management & Research Co. and
Fidelity Management & Research (Far East) Inc. dated November 29, 1990
is electronically filed herein as Exhibit 5(e).
(f) Form of Sub-Advisory Agreement among the Registrant, on behalf of
Fidelity Advisor Emerging Markets Income Fund, Fidelity Management &
Research Co. and Fidelity Management and Research (U.K.) Inc., is
incorporated by reference to Exhibit 5(f) to Post-Effective Amendment No.
24.
(g) Form of Sub-Advisory Agreement among the Registrant, on behalf of
Fidelity Advisor Emerging Markets Income Fund, Fidelity Management &
Research Co. and Fidelity Management and Research (Far East) Inc., is
incorporated by reference to Exhibit 5(g) to Post-Effective Amendment No.
24.
(h) Form of Sub-Advisory Agreement among the Registrant, on behalf of
Fidelity Advisor
Emerging Markets Income Fund, Fidelity International Investment Advisors
(U.K.) Limited and Fidelity International Investment Advisors, is
incorporated by reference to Exhibit 5(h)
to Post-Effective Amendment No. 24.
(i) Form of Sub-Advisory Agreement among the Registrant, on behalf of
Fidelity Advisor
Emerging Markets Income Fund, Fidelity International Investment
Advisors and Fidelity
Management & Research Co., is incorporated by reference to Exhibit
5(i) to Post-Effective
Amendment No. 24.
(6) (a) Distribution Agreement between the Registrant and Fidelity
Distributors Corporation dated December 30, 1983 is incorporated herein by
reference to Exhibit 6 to Post-Effective Amendment No. 1.
(b) Amended Distribution Agreement between the Registrant and Fidelity
Distributors Corporation dated as of April 1, 1987 is incorporated by
reference to Exhibit 6(a) to Post-Effective Amendment No. 9.
(c) Form of General Distribution Agreement between the Registrant, on
behalf of Fidelity Advisor Emerging Markets Income Fund, and Fidelity
Distributors Corporation, is incorporated by reference to Exhibit 6(b) to
Post-Effective Amendment No. 24.
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, is incorporated herein by
reference to Exhibit 7 to Post-Effective No. 18.
(8) (a) Custodian Agreement between the Registrant and Brown Brothers
Harriman & Co. dated December 30, 1983, is incorporated herein by
reference to Exhibit 8 to Post-Effective Amendment No. 1.
(b) Amended Custodian Agreement between the Registrant and Brown
Brothers Harriman & Co. dated July 23, 1987, is incorporated herein by
reference to Exhibit 8(b) to Post-Effective Amendment No. 11.
(c) Form of Custodian Agreement between the Registrant, on behalf of
Fidelity Advisor Emerging Markets Income Fund, and Chase Manhattan Bank,
N.A., is incorporated by reference to Exhibit 8(c) to Post-Effective
Amendment No. 24.
(9) (a) Master Agreement between the Registrant, FMR Corp., and Fidelity
Service Co. dated April 1, 1984 and Schedules A, B and C relating to
transfer agency, portfolio bookkeeping and securities lending services are
incorporated herein by reference to Exhibit 9 to Post-Effective Amendment
No. 4.
(b) Transfer Agency Agreement between the Registrant's Plymouth Class
shares dated January 1, 1987 and State Street Bank and Trust Company is
incorporated herein by reference to Exhibit 9(b) to Post-Effective
Amendment No. 8.
(c) Form of Amended Service Agreement of Schedules C between
Registrant's Initial class, FMR Corp. and Fidelity Service Co. is
incorporated herein by reference to Exhibit 9(c) to Post-Effective
Amendment No. 15.
(d) Schedule B to the Amended Service Agreement dated July 1, 1991
between Registrant's Initial Class and Plymouth Class, FMR Corp. and
Fidelity Service Co. is incorporated by reference herein as Exhibit 9(d) to
Post-Effective Amendment No. 25.
(e) Form of Schedule A to the Transfer Agency Agreement between the
Registrant, on behalf of Fidelity Advisor Emerging Markets Income Fund, and
Fidelity Investments Institutional Operations Corporation, is incorporated
by reference to Exhibit 9(e) to Post-Effective Amendment No. 24.
(f) Form of Schedule B to the Transfer Agency Agreement between the
Registrant, on behalf of Fidelity Advisor Emerging Markets Income Fund, and
Fidelity Service Company, is incorporated by reference to Exhibit 9(f) to
Post-Effective Amendment No. 24.
(g) Form of Schedule C to the Transfer Agency Agreement between the
Registrant, on behalf of Fidelity Advisor Emerging Markets Income Fund, and
Fidelity Service Company, is incorporated by reference to Exhibit 9(g) to
Post-Effective Amendment No. 24.
(10) None.
(11) Consent of the Funds' independent accountants are filed herein as
Exhibit 11.
(12) Not Applicable.
(13) Not Applicable.
(14) Forms for:
Fidelity Strategic Opportunities Fund
(a) Individual Retirement Account, Custodial Agreement and Disclosure
Statement;
(b) Defined Contribution Retirement Plan and Trust Agreement;
(c) Defined Benefit Pension Plan and Trust;
(d) IRA Custodial Agreement and Disclosure Statement (Group);
(e) 403(b)(7) Account Custodial Agreement; and
(f) 401(a) Prototype Plan for Tax-Exempt Employees are incorporated
herein by reference to
Exhibits 14(a)-(f) to Post-Effective Amendement No. 16.
Fidelity Advisor Strategic Opportunities Fund
(g) Fidelity Master Plan for Savings and Investments - Adoption
Agreement;
(h) Fidelity Master Plan for Savings and Investments - Plan and Trust
Documents
(i) Fidelity Master Plan for Savings and Investments - Summary Plan
Description;
(j) Advisor Investments IRA Custodial Agreement; and
(k) Advisor Investments Defined Contribution Retirement Plan and Trust
Agreement are
incorporated herein by reference to Exhibits 14(g)-(k) to
Post-Effective Amendment No. 16.
(l) Form of Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement
Disclosure Statement in effect as of January 1, 1994 is incorporated
herein as Exhbit 14(l).
(15) (a) Distribution and Service Plan pursuant to Rule 12b -1 between
the Registrant, on behalf of Fidelity Advisor Strategic Opportunities Fund,
and Fidelity Distributors Corporation dated April 1, 1987, is incorporated
herein by reference to Exhibit 15 to Post-Effective Amendment No. 8.
(b) Form of Services Plan for Fidelity Advisor Emerging Markets Income
Fund - Class B is filed
herein electronically as Exhibit 15(b).
(c) Form of Distribution and Service Plan pursuant to Rule 12b -1
between the Registrant, on behalf of Fidelity Emerging Markets Income Fund,
Class B, and Fidelity Distributors Corporation dated , is filed herein
electronically as Exhibit 15(c).
(d) Form of Services Plan for Fidelity Advisor Strategic Opportunities
Fund - Class B is filed
herein electronically as Exhibit 15(d).
(e) Form of Distribution and Service Plan pursuant to Rule 12b -1
between the Registrant, on behalf of Fidelity Strategic Opportunities Fund,
Class B, and Fidelity Distributors Corporation dated , is filed herein
electronically as Exhibit 15(e).
(16) (a) Schedule for computations of performance quotations for Fidelity
Advisor Strategic Opportunities Fund shares is incorporated herein by
reference to Exhibit 16(a) to Post-Effective Amendment No. 11.
(b) Schedule for computation of performance quotations for Fidelity
Strategic Opportunities Fund shares is incorporated herein by reference to
Exhibit 16(b) to Post-Effective Amendment No. 11.
(c) Schedule for computation of moving averages for Fidelity Advisor
Strategic Opportunities Fund and Fidelity Strategic Opportunities Fund is
elecronically filed herein as Exhibit 16(c).
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of the Registrant is the same as the boards of other
funds in the Fidelity family of funds, each of which has Fidelity
Management & Research Company as its investment adviser. In addition
the officers of these funds are substantially identical. Nonetheless, the
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards and
officers arises as the result of an official position with the respective
funds.
Item 26. Number of Holders of Securities
December 31, 1993
Title of Class Number of Record Holders
Fidelity Strategic Opportunities Fund 1,644
Fidelity Advisor Strategic Opportunities Fund - Class A 23,507
Fidelity Advisor Strategic Opportunities Fund - Class B 0
Fidelity Emerging Markets Income Fund 0
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee, or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President and
Chief Executive Officer of FMR Corp.; Chairman of the Board
and a Director of FMR, FMR Corp., FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.; President and
Trustee of funds advised by FMR;
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.; President
and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc. and Fidelity Management & Research
(Far East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised by FMR.
Stephan Campbell Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR; Corporate
Preferred Group Leader.
Will Danof Vice President of FMR (1993) and of a fund advised by FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by FMR.
Charles F. Dornbush Senior Vice President of FMR; Chief Financial Officer of the
Fidelity funds; Treasurer of FMR Texas Inc., Fidelity Management
& Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised by
FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised by
FMR. Prior to assuming the position as Treasurer he was Senior
Vice President, Fund Accounting - Fidelity Accounting &
Custody Services Co.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Income/Growth Group Leader and
International Group Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
John Hickling Vice President of FMR (1993) and of funds advised by FMR.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical Research.
Stephan Jonas Vice President of FMR (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income Group
Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Brian Posner Vice President of FMR (1993) and of a fund advised by FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised by
FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income Division
Head.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Donald Taylor Vice President of FMR (1993) and of funds advised by FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised by
FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds advised by
FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised by
FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of FMR;
Vice President, Legal of FMR Corp.; and Secretary of funds
advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the Executive
Committee of FMR; Chief Executive Officer of FMR Corp.;
Chairman of the Board and a Director of FMR, FMR Corp., FMR
Texas Inc., and Fidelity Management & Research (Far East)
Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR; Managing
Director of FMR Corp.; President and a Director of FMR Texas Inc.
and Fidelity Management & Research (Far East) Inc.; Senior
Vice President and Trustee of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.
Charles F. Dornbush Treasurer of FMR U.K.; Treasurer of Fidelity Management &
Research (Far East) Inc.; Treasurer of FMR Texas Inc., Senior Vice
President and Chief Financial Officer of the Fidelity funds.
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of FMR,
FMR Corp., FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; President and Trustee of funds advised by
FMR.
J. Gary Burkhead President and Director of FMR Far East; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research
(U.K.) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice President
of Fidelity Management & Research (U.K.) Inc.; Director
of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Charles F. Dornbush Treasurer of FMR Far East; Treasurer of Fidelity Management
& Research (U.K.) Inc.; Treasurer of FMR Texas Inc.;
Senior Vice President and Chief Financial Officer of the
Fidelity funds.
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(4) FIDELITY INTERNATIONAL INVESTMENT ADVISORS
Pembroke Hall, 42 Crow Lane, Pembroke, Bermuda
The directors and officers of Fidelity International Investment Advisors
(FIIA) have held, during the past two fiscal years, the following positions
of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Anthony Bolton Director of FIIA and FIIAL (U.K.); Director of Fidelity
International Management Holdings Limited.
Martin P. Cambridge Director of FIIAand FIIAL (U.K.); Chief Financial Officer of
Fidelity International Ltd. and Fidelity Investment Services
Ltd..
Kirk Caza Vice President of FIIA.
Charles T. M. Collis Director and Secretary of FIIA; Partner in Conyers, Dill
& Pearman, Hamilton, Bermuda; Secretary to many
companies in the Fidelity international group of companies.
Stephen A. DeSilva Treasurer of FIIA and Fidelity International Limited.
Geoffrey J. Mansfield Director of FIIA.
Frank Mutch Assistant Secretary of FIIA.
David J. Saul President, Director, and Controller of FIIA; Director of
Fidelity International Limited.
Michael Sommerville Vice President of FIIA; Vice President of Fidelity
International Limited.
Toshiaki Wakabayashi Director of FIIA.
</TABLE>
(5) FIDELITY INTERNATIONAL INVESTMENT ADVISORS (U.K.) LIMITED
27-28 Lovat Lane, London, England
The directors and officers of Fidelity International Investment Advisors
(U.K.) Limited (FIIAL (U.K.)) have held, during the past two fiscal years,
the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Anthony Bolton Director of FIIAL (U.K.) and FIIA; Director of Fidelity
International Management Holdings Limited.
Martin P. Cambridge Director and Secretary of FIIAL (U.K.) and FIIA; Chief
Financial Officer of Fidelity International Ltd. and Fidelity
Investment Services Ltd..
C. Bruce Johnstone Director of FIIAL (U.K.).
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
The Victory Funds
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Co., 82 Devonshire Street, Boston, MA 02109, or Strategic
Opportunities' custodian Brown Brothers Harriman & Co., 40 Water
Street, Boston, MA, or Emerging Markets Income's custodian The Chase
Manhattan Bank, 1211 Avenue of the Americas, New York, NY.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Advisor Emerging Markets Income Fund,
which need not be certified, within six months of the Fund's effectiveness.
The Registrant undertakes for the Fund (1) to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees, when requested to do so by record holders of not less
than 10% of its outstanding shares; and (2) to assist in communications
with other shareholders pursuant to Section 16(c)(1) and (2), whenever
shareholders meeting the qualifications set forth in Section 16(c) seek the
opportunity to communicate with other shareholders with a view toward
requesting a meeting.
The Registrant, on behalf of Fidelity Strategic Opportunities Fund,
Fidelity Advisor Strategic Opportunities Fund undertakes, provided the
information required by Item 5A is contained in the annual report, to
furnish each person to whom a prospectus has been delivered, upon their
request and without charge, a copy of the Registrant's latest annual report
to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 26 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the day of February
1994.
Fidelity Advisor Series VIII
By /s/ Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
/s/ Edward C. Johnson 3d (dagger) President & Trustee February , 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/ Gary L. French Treasurer February , 1994
Gary L. French
/s/ J. Gary Burkhead Trustee February , 1994
J. Gary Burkhead
/s/ Ralph F. Cox * Trustee February , 1994
Ralph F. Cox
/s/ Pyllis Burke Davis * Trustee February , 1994
Phyllis Burke Davis
/s/ Richard J. Flynn * Trustee February , 1994
Richard J. Flynn
/s/ E. Bradley Jones * Trustee February , 1994
E. Bradley Jones
/s/ Donald J. Kirk * Trustee February , 1994
Donald J. Kirk
/s/ Peter S. Lynch * Trustee February , 1994
Peter S. Lynch
/s/ Edward H. Malone * Trustee February , 1994
Edward H. Malone
/s/ Marvin L. Mann * Trustee February , 1994
Marvin L. Mann
/s/ Gerald C. McDonough * Trustee February , 1994
Gerald C. McDonough
/s/ Thomas R. Williams * Trustee February , 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity, all
Pre-Effective Amendments to any Registration Statements of the Funds, any
and all subsequent Post-Effective Amendments to said Registration
Statements, any Registration Statements on Form N-14, and any supplements
or other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Special Situations Fund
Fidelity Advisor Series IV Fidelity Sterling Performance Portfolio, L.P.
Fidelity Advisor Series VI Fidelity Trend Fund
Fidelity Advisor Series VII Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Advisor Series VIII Fidelity U.S. Investments-Government Securities
Fidelity Contrafund Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P.
Portfolio, L.P. Spartan U.S. Treasury Money Market
Fidelity Fixed-Income Trust Fund
Fidelity Government Securities Fund Variable Insurance Products Fund
Fidelity Hastings Street Trust Variable Insurance Products Fund II
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Marvin L. Mann October 20, 1993
Marvin L. Mann
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series IV Fidelity School Street Trust
Fidelity Advisor Series VI Fidelity Select Portfolios
Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P.
Fidelity Beacon Street Trust Fidelity Trend Fund
Fidelity Capital Trust Fidelity Union Street Trust
Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Phyllis Burke Davis October 20, 1993
Phyllis Burke Davis
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
SECRETARY OF THE COMMONWEALTH
STATE HOUSE - BOSTON, MA
AMENDMENT TO DECLARATION OF TRUST
We, J. Gary Burkhead, Senior Vice President and Arthur S. Loring,
Secretary of
FIDELITY SPECIAL SITUATIONS FUND
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
do hereby certify that, in accordance with ARTICLE XII, SECTION 7 of the
Declaration of Trust of FIDELITY SPECIAL SITUATIONS FUND, the following
Supplement to said Declaration of Trust was duly adopted by a majority vote
of the Board of Trustees at a meeting duly called and held on July 15,
1993:
VOTED: That the Declaration of Trust dated October 1, 1986 be and it hereby
is, amended as follows:
That Article 1, Section 1 of the Declaration of Trust of this Trust shall
be amended to read as follows:
"This Trust shall be known as 'Fidelity Advisor Series VIII'."
That Article 1, Section 2(b) of the Declaration of Trust of this Trust
shall be amended to read as follows:
The 'Trust' refers to 'Fidelity Advisor Series VIII' and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series.
The foregoing supplement to the Declaration of Trust became effective July
15, 1993 so long as this Supplement is filed in accordance with Chapter
182, Section 2, of the General Laws.
IN WITNESS whereof and under the penalties of perjury, we have hereunto
signed our names this 26th day of July, 1993.
/s/J. Gary Burkhead__________________ _/s/Arthur S. Loring_______________
J. Gary Burkhead Arthur S. Loring
Senior Vice President Secretary
SUB-ADVISORY AGREEMENT
between
Fidelity Management & Research (Far East) Inc.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 29th of November, 1990, by and between Fidelity
Management & Research (Far East) Inc., a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Sub-Adviser") and Fidelity Management &
Research Company, a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
Special Situations Fund, a Massachusetts business trust which may issue one
or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Special Situations Fund its single existing
series of shares] (hereinafter called the "Portfolio"), pursuant to which
the Adviser is to act as investment adviser to the Portfolio, and
WHEREAS the Sub-Adviser has personnel in Asia and the Pacific Basin and
was formed for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries and
issuers located outside of North America, principally in Asia and the
Pacific Basin.
NOW THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. The Sub-Adviser shall act as an investment consultant to the Adviser
and shall furnish the Adviser factual information, research reports and
investment recommendations relating to non-U.S. issuers of securities
located in, and the economies of, various countries outside the U.S., all
as the Adviser may reasonably require. Such information shall include
written and oral reports and analyses.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 105% of the Sub-Adviser's costs
incurred in connection with the Agreement, said costs to be determined in
relation to the assets of the Portfolio that benefit from the services of
the Sub-Adviser.
3. It is understood that Trustees, officers and shareholders of the Fund
are or may be or become interested in the Adviser and the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser and the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. The Sub-Adviser shall for all purposes be an independent contractor and
not an agent or employee of the Adviser or the Fund. The Sub-Adviser shall
have no authority to act for, represent, bind or obligate the Adviser or
the Fund, and shall in no event have discretion to invest or reinvest
assets held by the Portfolio.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the
Sub-Adviser, the Sub-Adviser shall not be subject to liability to the
Adviser, the Fund or to any shareholder of the Portfolio for any act or
omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of
any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until July 31,
1991 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust of the Fund
and agrees that any obligations of the Fund or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Adviser shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Adviser seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized all as of the date written above.
Fidelity Management & Research (Far East) Inc.
By /s/ Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
SUB-ADVISORY AGREEMENT
between
Fidelity Management & Research (Far East) Inc.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 29th of November, 1990, by and between Fidelity
Management & Research (Far East) Inc., a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Sub-Adviser") and Fidelity Management &
Research Company, a Massachusetts corporation with principal offices at 82
Devonshire Street, Boston, Massachusetts (hereinafter called the
"Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
Special Situations Fund, a Massachusetts business trust which may issue one
or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Special Situations Fund its single existing
series of shares] (hereinafter called the "Portfolio"), pursuant to which
the Adviser is to act as investment adviser to the Portfolio, and
WHEREAS the Sub-Adviser has personnel in Asia and the Pacific Basin and
was formed for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries and
issuers located outside of North America, principally in Asia and the
Pacific Basin.
NOW THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. The Sub-Adviser shall act as an investment consultant to the Adviser
and shall furnish the Adviser factual information, research reports and
investment recommendations relating to non-U.S. issuers of securities
located in, and the economies of, various countries outside the U.S., all
as the Adviser may reasonably require. Such information shall include
written and oral reports and analyses.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 105% of the Sub-Adviser's costs
incurred in connection with the Agreement, said costs to be determined in
relation to the assets of the Portfolio that benefit from the services of
the Sub-Adviser.
3. It is understood that Trustees, officers and shareholders of the Fund
are or may be or become interested in the Adviser and the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser and the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. The Sub-Adviser shall for all purposes be an independent contractor and
not an agent or employee of the Adviser or the Fund. The Sub-Adviser shall
have no authority to act for, represent, bind or obligate the Adviser or
the Fund, and shall in no event have discretion to invest or reinvest
assets held by the Portfolio.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the
Sub-Adviser, the Sub-Adviser shall not be subject to liability to the
Adviser, the Fund or to any shareholder of the Portfolio for any act or
omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of
any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until July 31,
1991 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust of the Fund
and agrees that any obligations of the Fund or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Adviser shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Adviser seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized all as of the date written above.
Fidelity Management & Research (Far East) Inc.
By /s/ Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
Dated as of July 1, 1991
Fidelity Special Situations Fund
Fidelity Special Situations Fund: Initial Class
Fidelity Special Situations Fund: Advisor Class
Plymouth Class
SCHEDULE B: AGENT TO PERFORM PORTFOLIO PRICING AND BOOKKEEPING
I. Services To Be Performed. Fidelity Service Company, a division of FMR
Corp. (Service) shall be responsible for:
A. Accounting relating to the Portfolio and portfolio transactions of the
Portfolio.
B. The determination of net asset value per share of the outstanding
shares of the Portfolio and the offering price, if any, at which shares
are to be sold, at the times and in the manner described in the
Declaration of Trust or Partnership Agreement, as amended, and
the Prospectus of the Portfolio (pricing).
C. The determination of distributions, if any.
D. The timely communication of information determined in B and C above, to
the person or
persons designated by the Portfolio.
E. Maintaining the books of account of the Portfolio.
F. In conjunction with the Custodian, receiving information and keeping
records about all corporate actions, including, but not limited to, cash
and stock distributions or dividends,
stock splits and reverse stock splits, taken by companies whose
securities are held by the
Portfolio.
G. Monitoring foreign corporate actions and foreign trades and entering
orders to convert foreign currency or establish contracts for future
settlement of foreign currency.
H. Processing and monitoring the settlement of Variable Rate Demand Notes
and GNMA's.
I. Monitoring and accounting for futures and options.
II. Compensation. For the performance of its obligations hereunder, the
Portfolio shall pay Service an annual fee based on average daily net assets
for each month. The fee schedule is as follows:
Portfolio's Average Daily Net Assets Fee Rate
$500 million and under .06%
Over $500 million .03% .10%
provided, however, that the minimum total annual fee payable by the
Portfolio to Service shall be $45,000 and the maximum total annual fee
payable by the Portfolio to Service shall be $750,000. Service shall be
reimbursed for out-of-pocket expenses for pricing, dividend and interest
quotation services and related communications and telephone charges.
FMR Corp.
By: /s/ Denis M. McCarthy____
Name: ______________________
Title: ______________________
Fidelity Service Company
By: /s/ F. J. Knapp_____________
Name: ______________________
Title: ______________________
Fidelity Special Situations Fund, on behalf of
Fidelity Special Situations Fund: Initial Class
Fidelity Special Situations Fund: Advisor Class
By: /s/ John E. Ferris___________
Name: ______________________
Title: Treasurer
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Statement of
Additional Information in Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A (the "Registration Statement") of
Fidelity Advisor Series VIII (formerly Fidelity Special Situations Fund):
Fidelity Strategic Opportunities Fund (formerly Fidelity Special Situations
Fund) of our report dated November 4, 1993, relating to the financial
statements and financial highlights which is incorporated by reference in
said Statement of Additional Information.
We further consent to the references to our Firm in the Prospectus and
Statements of Additional Information of Fidelity Advisor Series VIII under
the headings "Financial Highlights" and "Auditor."
/s/COOPERS & LYBRAND
COOPERS & LYBRAND
Boston, Massachusetts
February 28, 1994
FIDELITY ADVISOR FUNDS
INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL AGREEMENT
DISCLOSURE STATEMENT
UNDER SECTION 408(a)
OF THE INTERNAL REVENUE CODE
The Depositor whose name appears on the attached Application is
establishing an
individual retirement account (under Section 408(a) of the Internal Revenue
Code) to provide for his or her retirement and for the support of his or
her
beneficiaries after death.
The Custodian named on the attached Application has given the Depositor the
Disclosure Statement required under the Income Tax Regulations under
Section
408(i) of the Code.
The Depositor has deposited with the Custodian an initial contribution in
cash,
as set forth in the attached Application.
The Depositor and the Custodian make the following Agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) of the Code (but only after
December
31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to
a
Simplified Employee Pension plan as described in Section 408(k). Rollover
contributions before January 1, 1993, include rollovers described in
Section
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a Simplified Employee Pension Plan as described in
Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts,
nor may the assets of the Custodial Account be commingled with other
property
except in a common trust fund or common investment fund (within the meaning
of
Section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the
meaning of Section 408(m) of the Code) except as otherwise permitted by
Section
408(m)(3), which provides an exception for certain gold and silver coins
and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the Custodial Account shall be
made
in accordance with the following requirements and shall otherwise comply
with
Section 408(a)(6) and Proposed Regulations Section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations Section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the Custodial Account must be, or
begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By
that date, the Depositor may elect, in a manner acceptable to the
Custodian, to
have the balance in the Custodial Account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated Beneficiary.
(d) Equal or substantially equal annual payments over a specified
period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified
period
that may not be longer than the joint life and last survivor expectancy of
the
Depositor and his or her designated Beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest
has begun, distribution must continue to be made in accordance with
paragraph
3.
(b) If the Depositor dies before distribution of his or her interest
has
begun, the entire remaining interest will, at the election of the Depositor
or,
if the Depositor has not so elected, at the election of the Beneficiary or
Beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over
the
life or life expectancy of the designated Beneficiary or Beneficiaries
starting
by December 31 of the year following the year of the Depositor's death. If,
however, the Beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in
which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the Beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the
account.
5. In the case of distribution over life expectancy in equal or
substantially
equal annual payments, to determine the minimum annual payment for each
year,
divide the Depositor's entire interest in the Custodial Account as of the
close
of business on December 31 of the preceding year by the life expectancy of
the
Depositor (or the joint life and last survivor expectancy of the Depositor
and
the Depositor's designated Beneficiary, or the life expectancy of the
designated Beneficiary, whichever applies). In the case of distributions
under
paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and
designated
Beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2.
In the case of a distribution in accordance with paragraph 4(b)(ii),
determine
life expectancy using the attained age of the designated Beneficiary as of
the
Beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for
the Custodian to prepare any reports required under Section 408(i) of the
Code
and Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any
additional articles that are not consistent with Section 408(a) of the Code
and
the related regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the
provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and the Custodian.
ARTICLE VIII
1. DEFINITIONS. The following definitions shall apply to terms used in this
Article VIII:
(a) "Account" or "Custodial Account" means the custodial account
established hereunder for the benefit of the Depositor.
(b) "Agreement" means the Fidelity Advisor Fund IRA Custodial
Agreement,
including the information and provisions set forth in any Account
Application
that goes with this Agreement. This Agreement, including the Account
Application and any designation of Beneficiary filed with the Custodian,
may be
proved either by an original copy or by a reproduced copy thereof,
including,
without limitation, a copy reproduced by photocopying, facsimile
transmission,
or electronic imaging.
(c) "Application" shall mean the Application by which this Agreement,
as
may be amended from time to time, is established between the Depositor and
the
Custodian. The statements contained therein shall be incorporated into this
Agreement.
(d) "Authorized Agent" means the person or persons authorized by the
Depositor, on a signed form acceptable to and filed with the Custodian, to
purchase or sell Shares in the Depositor's Account.
(e) "Beneficiary" means the person or persons (including a trust or
estate)
designated as such by the Depositor on a signed form acceptable to and
filed
with the Custodian pursuant to Article VIII, Section 8 of this Agreement.
(f) "Broker" shall mean either a securities broker-dealer registered as
such under the Securities Exchange Act of 1934, or a bank as defined in
Section
3(a)(6) of the Securities Exchange Act of 1934, which the Depositor has
designated as his or her Broker in the Account Application.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Company" shall mean FMR Corp., a Massachusetts corporation, or any
successor or affiliate thereof to which FMR Corp. may, from time to time,
delegate or assign any or all of its rights or responsibilities under this
Agreement.
(i) "Custodian" shall mean State Street Bank & Trust Company, a
Massachusetts Trust Company, or its successor, as specified in the Account
Application.
(j) "Depositor" means the person named in the Account Application.
(k) "Investment Company Shares" or "Shares" shall mean shares of stock,
trust certificates, or other evidences of interest (including fractional
shares) in any corporation, partnership, trust, or other entity registered
under the Investment Company Act of 1940 for which Fidelity Management
&
Research Company, a Massachusetts corporation, or its successors or
affiliates
(collectively, for purposes of this Agreement "FMR") serves as investment
advisor and which are designated by FMR as a Fidelity Advisor Fund.
(l) "Money Market Shares" shall mean any Investment Company Shares or
other
such shares issued by a money market mutual fund and which are permitted by
the
Custodian for investment under this Agreement.
2. BROKER. The Broker shall be appointed by the Depositor in the
Application as
his or her agent to execute such investment directions with respect to
Investment Company Shares as the Depositor may give under the terms of the
Custodial Account, including the execution of purchase and sale orders
through
the Company's proprietary remote trading system.
In all cases the Broker, and not the Custodian, shall have the
responsibility
for delivering to the Depositor all notices and prospectuses relating to
such
Investment Company Shares. To the extent that the Custodian delivers to the
Broker confirmations, statements and other notices with respect to the
Account,
any such communications delivered to the Broker shall be deemed to have
been
delivered to the Depositor. The Depositor agrees to hold the Custodian and
the
Company harmless from and against any losses, cost or expenses arising in
connection with the delivery or receipt of any such communication(s),
provided
the Custodian has acted in accordance with the above.
3. INVESTMENT OF CONTRIBUTIONS. Contributions to the Account may be
invested
only in Investment Company Shares, and shall be invested as follows:
(a) General. Contributions will be invested in accordance with the
Depositor's written instructions in the Application, and with subsequent
instructions given by the Depositor or the Authorized Agent appointed by
the
Depositor (or, following the death of the Depositor, his or her
Beneficiary)
through the Broker to the Custodian in a manner acceptable to the
Custodian. By
giving such instructions to the Custodian, such person will be deemed to
have
acknowledged receipt of the then-current prospectus, if any, for any
Investment
Company Shares in which the Depositor (or the Authorized Agent appointed by
the
Depositor), through the Broker directs the Custodian to invest assets in
his or
her Account. All charges incidental to carrying out such instructions shall
be
charged and collected in accordance with Article VIII, Section 18. All
Investment Company Shares in the Custodial Account shall be held in the
name of
the Custodian or its nominee or nominees.
(b) Initial Contribution. The Custodian will invest all contributions
promptly after their receipt, as set forth below; provided, however, that
the
Custodian shall not be obligated to invest the Depositor's initial
contribution
to his Custodial Account as indicated on the Application, until at least
seven
(7) calendar days have elapsed from the date of acceptance of the
Application
by or on behalf of the Custodian.
(c) Unclear Instructions. If the Depositor's Custodial Account at any
time
contains cash as to which investment instructions in accordance with this
Section 3 have not been received by the Custodian, or if the Custodian
receives
instructions as to investment selection or allocation which are, in the
opinion
of the Custodian, not clear, the Custodian may request instructions from
the
Depositor (or the Depositor's Authorized Agent, Beneficiary, executor or
administrator). Pending receipt of such instructions any cash may be
invested
in Money Market Shares, and any other investment may remain unchanged. The
Custodian shall not be liable to anyone for any loss resulting from delay
in
investing such cash or in implementing such instructions. Notwithstanding
the
above, the Custodian may, but need not, for administrative convenience
maintain
a balance of up to $100 of uninvested cash in the Depositor's Custodial
Account.
(d) Minimum Investment. Any other provision hereof to the contrary
notwithstanding, the Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) may not direct that any part or
all of
the Custodial Account be invested in Investment Company Shares unless the
aggregate amount to be invested is at least such amount as the Custodian
shall
establish from time to time.
(e) No Duty. The Custodian shall not have any duty to question the
directions of a Depositor (or the Depositor's Broker, Authorized Agent,
Beneficiary, executor, or administrator) in the investment of his or her
Custodial Account or to advise the Depositor or the Depositor's Broker
regarding the purchase, retention or sale of assets credited to the
Custodial
Account. The Custodian, or any of its affiliates, shall not be liable for
any
loss which results from the Depositor's (or the Depositor's Broker,
Authorized
Agent, Beneficiary, executor, or administrator) exercise of control
(whether by
his or her action or inaction) over the Custodial Account.
4. CONTRIBUTIONS BY DIVORCED OR SEPARATED SPOUSES. All alimony and separate
maintenance payments received by a divorced or separated spouse, and
taxable
under Section 71 of the Code, shall be considered compensation for purposes
of
computing the maximum annual contribution to the Custodial Account, and the
limitations for contributions by a divorced or separated spouse shall be
the
same as for any other individual.
5. TIMING OF CONTRIBUTIONS. A contribution is deemed to have been made on
the
last day of the preceding taxable year if the contribution is made by the
deadline for filing the Depositor's income tax return (not including
extensions), or such later date as may be determined by the Department of
the
Treasury or the IRS, provided the Depositor (or the Depositor's Broker or
Authorized Agent) designates, in a manner acceptable to the Custodian, the
contribution as a contribution for the preceding taxable year.
6. ROLLOVER CONTRIBUTIONS. The Custodian will accept for the Custodial
Account
all rollover contributions which consist of cash, and it may, but shall be
under no obligation to, accept all or any part of any other rollover
contribution. The Depositor shall designate each rollover contribution as
such
to the Custodian through the Broker, and by such designation shall confirm
to
the Custodian that a proposed rollover contribution qualifies as a rollover
contribution within the meaning of Sections 402(a)(5), 402(a)(6),
402(a)(7),
402(c), 403(a)(4), 403(b)(8), and/or 408(d)(3) of the Code. Submission by
or on
behalf of a Depositor of a rollover contribution consisting of assets other
than cash or property permitted as an investment under this Article VIII
shall
be deemed to be the instruction of the Depositor to the Custodian that, if
such
rollover contribution is accepted, the Custodian will use its best efforts
to
sell those assets for the Depositor's account, and to invest the proceeds
of
any such sale in accordance with Section 3. To the extent permitted by law,
the
Custodian shall not be liable to anyone for any loss resulting from such
sale
or delay in effecting such sale; or for any loss of income or appreciation
with
respect to the proceeds thereof after such sale and prior to investment
pursuant to Section 3; or for any failure to effect such sale if such
property
proves not readily marketable in the ordinary course of business. All
brokerage
and other costs incidental to the sale or attempted sale of such property
will
be charged to the Custodial Account in accordance with Article VIII,
Section
18.
7. REINVESTMENT OF EARNINGS. In the absence of other instructions pursuant
to
Section 3, distributions of every nature received in respect of the assets
in a
Depositor's Custodial Account shall be reinvested as follows:
(a) in the case of a distribution in respect of Investment Company
Shares
which may be received, at the election of the shareholder, in cash or in
additional Shares of such Investment Company, the Custodian shall elect to
receive such distribution in additional Investment Company Shares;
(b) in the case of a cash distribution which is received in respect of
Investment Company Shares, the Custodian shall reinvest such cash in
additional
Shares of that Investment Company;
(c) in the case of any other distribution of any nature received in
respect
of assets in the Custodial Account, the distribution shall be liquidated to
cash, if necessary, and shall be reinvested in accordance with the
Depositor's
instructions pursuant to Section 3.
8. DESIGNATION OF BENEFICIARY. A Depositor may designate a Beneficiary as
follows:
(a) General. A Depositor may designate a Beneficiary or Beneficiaries
at
any time, and any such designation may be changed or revoked at any time,
by
written designation signed by the Depositor on a form acceptable to, and
filed
with, the Custodian; provided, however, that such designation, or change or
revocation of a prior designation, shall not be effective unless it is
received
and accepted by the Custodian no later than thirty (30) days after the
death of
the Depositor, and provided further that the latest such designation or
change
or revocation shall control. If the Depositor had not by the date of his or
her
death properly designated a Beneficiary in accordance with the preceding
sentence, or if no designated Beneficiary survives the Depositor, the
Depositor's Beneficiary shall be his or her surviving spouse, but if he or
she
has no surviving spouse, his or her estate. Unless otherwise specified in
the
Depositor's designation of Beneficiary, if a Beneficiary dies before
receiving
his or her entire interest in the Custodial Account, his or her remaining
interest in the Custodial Account shall be paid to the Beneficiary's
estate.
(b) Minors. If a distribution upon the death of the Depositor is
payable to
a person known by the Custodian to be a minor or otherwise under a legal
disability, the Custodian may, in its absolute discretion, make all, or any
part of the distribution to (a) a parent of such person, (b) the guardian,
conservator, or other legal representative, wherever appointed, of such
person,
(c) a custodial account established under a Uniform Gifts to Minors Act,
Uniform Transfers to Minors Act, or similar act, (d) any person having
control
or custody of such person, or (e) to such person directly.
(c) QTIPs and QDOTs. A Depositor may designate as Beneficiary of his or
her
Account a trust for the benefit of his or her surviving spouse that is
intended
to satisfy the conditions of Sections 2056(b)(7) or 2056A of the Code (a
"Spousal Trust"). In that event, if the Depositor is survived by his or her
spouse, the following provisions shall apply to the Account, from and after
the
death of the Depositor until the death of the Depositor's surviving spouse:
(1)
all of the income of the Account shall be paid to the Spousal Trust
annually or
at more frequent intervals, and (2) no person shall have the power to
appoint
any part of the Account to any person other than the Spousal Trust. To the
extent permitted by Section 401(a)(9) of the Code, as determined by the
trustee(s) of the Spousal Trust, the surviving spouse of a Depositor who
has
designated a Spousal Trust as his or her Beneficiary may be treated as his
or
her "designated beneficiary" for purposes of the distribution requirements
of
that Code section. The Custodian shall have no responsibility to determine
whether such treatment is appropriate.
(d) Judicial Determination. Anything to the contrary herein
notwithstanding, in the event of reasonable doubt respecting the proper
course
of action to be taken, the Custodian may in its sole and absolute
discretion
resolve such doubt by judicial determination which shall be binding on all
parties claiming any interest in the Account. In such event all court
costs,
legal expenses, reasonable compensation of time expended by the Custodian
in
the performance of its duties, and other appropriate and pertinent expenses
and
costs shall be collected by the Custodian from the Custodial Account in
accordance with Article VIII, Section 18.
(e) No Duty. The Custodian shall not have any duty to question the
directions of a Depositor (or the Depositor's Authorized Agent,
Beneficiary,
executor or administrator) as to the time(s) and amount(s) of distributions
from the Custodial Account, or to advise him or her regarding the
compliance of
such distributions with Section 401(a)(9), Section 2056(b)(7) or Section
2056A
of the Code.
9. PAYROLL DEDUCTION. Subject to approval of the Custodian and the Broker,
a
Depositor may choose to have contributions to his or her Custodial Account
made
through payroll deduction if the Account is maintained as part of a program
sponsored by the Depositor's employer. In order to establish payroll
deduction,
the Depositor must authorize his or her employer to deduct a fixed amount
from
each pay period's salary up to a total amount of $2,000 per year, unless
such
contributions are being made pursuant to a Simplified Employee Pension Plan
described under Section 408(k) of the Code, in which case, contributions
can be
made up to 15% of the Depositor's earned income, up to $30,000 per year.
Contribution's to the Custodial Account of the Depositor's spouse may be
made
through payroll deduction if the employer authorizes the use of payroll
deductions for such contributions, but such contributions must be made to a
separate Account maintained for the benefit of the Depositor's spouse. The
payroll deduction authorization shall continue in force until such time as
written amendment or revocation is received by the Depositor's employer and
the
Custodian with reasonable advance notice.
10. TRANSFERS TO OR FROM THE ACCOUNT. Assets held on behalf of the
Depositor in
another IRA may be transferred by the trustee or custodian thereof directly
to
the Custodian, in a form and manner acceptable to the Custodian, to be held
in
the Custodial Account for the Depositor under this Agreement. The Custodian
will not be responsible for any losses the Depositor may incur as a result
of
the timing of any transfer from another trustee or custodian that are due
to
circumstances reasonably beyond the control of the Custodian.
Assets held on behalf of the Depositor in the Account may be transferred
directly to a trustee or custodian of another IRA established for the
Depositor, if so directed by the Depositor in a form and manner acceptable
to
the Custodian; provided, however, that it shall be the Depositor's
responsibility to ensure that any minimum distribution required by Section
401(a)(9) of the Code is made prior to giving the Custodian such transfer
instructions.
11. DISTRIBUTIONS FROM THE ACCOUNT. Subject to Section 13 below,
distributions
from the Account will be made only upon the request of the Depositor (or
the
Depositor's Authorized Agent, Beneficiary, executor, or administrator) to
the
Custodian through the Broker in such form and in such manner as is
acceptable
to the Custodian. For distributions requested pursuant to Article IV, life
expectancy and joint life and last survivor expectancy are calculated based
on
information provided by the Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) using the Expected Return
Multiples in
Section 1.72-9 of the Income Tax Regulations. The Custodian shall not incur
any
liability for errors in such calculations as a result of reliance on
information provided by the Depositor (or the Depositor's Authorized Agent,
Beneficiary, executor, or administrator) or the Depositor's Broker. Without
limiting the generality of the foregoing, the Custodian is not obligated to
make any distribution, including a minimum required distribution as
specified
in Article IV above, absent a specific written direction from the Depositor
(or
the Depositor's Authorized Agent, Beneficiary, executor, or administrator)
through the Broker to do so.
12. ACTIONS IN THE ABSENCE OF SPECIFIC INSTRUCTIONS. If the Custodian
receives
no response to communications sent to the Depositor (or the Depositor's
Authorized Agent, Beneficiary, executor, or administrator) at the
Depositor's
(or the Depositor's Authorized Agent, Beneficiary, executor, or
administrator's) last known address as shown in the records of the
Custodian,
or if the Custodian determines, on the basis of evidence satisfactory to
it,
that the Depositor is legally incompetent, the Custodian thereafter may
make
such determinations with respect to distributions, investments, and other
administrative matters arising under this Agreement as it considers
reasonable,
notwithstanding any prior instructions or directions given by or on behalf
of
the Depositor. Any determinations so made shall be binding on all persons
having or claiming any interest under the Custodial Account, and the
Custodian
shall not incur any obligation or liability for any such determination made
in
good faith, for any action taken in pursuance thereof, or for any
fluctuations
in the value of the Account in the event of a delay resulting from the
Custodian's good faith decision to await additional information or
evidence.
13. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS. The Custodian will
not
under any circumstances be responsible for the timing, purpose or propriety
of
any contribution or of any distribution made hereunder, nor shall the
Custodian
incur any liability or responsibility for any tax imposed on account of any
such contribution or distribution. Notwithstanding Section 11 above, the
Custodian is empowered to make a distribution absent such an instruction if
directed to do so pursuant to a court order of any kind and neither the
Custodian nor the Company shall in such event incur any liability for
acting in
accordance with such court order.
14. WRITTEN INSTRUCTIONS AND NOTICES. All written notices or communications
required to be given by the Custodian to the Depositor shall be deemed to
have
been given when sent by mail to either the Broker or to the last known
address
of the Depositor in the records of the Custodian. All written instructions,
notices, or communications required to be given by the Depositor to the
Custodian shall be mailed or delivered to the Custodian at its designated
mailing address as specified on the Application, and no such instruction,
notice, or communication shall be effective until the Custodian's actual
receipt thereof.
15. EFFECT OF WRITTEN INSTRUCTIONS AND NOTICES. The Custodian shall be
entitled
to rely conclusively upon, and shall be fully protected in any action or
non-action taken in good faith in reliance upon, any written instructions,
notices, communications or instruments believed to have been genuine and
properly executed. Any such notification may be proved by original copy or
reproduced copy thereof, including, without limitation, a copy produced by
photocopying, facsimile transmission, or electronic imaging. For this
purpose,
the Custodian may (but is not required to) give the same effect to a
telephonic
instruction as it gives to a written instruction, and the Custodian's
action in
doing so shall be protected to the same extent as if such telephonic
instructions were, in fact, a written instruction. Any such telephonic
instruction may be proved by audio recorded tape.
16. TAX MATTERS.
(a) General. The Custodian shall submit required reports to the IRS and
the
Depositor (or the Depositor's Authorized Agent, Beneficiary, executor, or
administrator); provided, however, that such individual shall prepare any
return or report required in connection with maintaining the Account, or as
a
result of liability incurred by the Account for tax on unrelated business
taxable income, or windfall profits tax.
(b) Annual Report. As soon as is practicable after the close of each
taxable year, and whenever required by the Code, the Custodian shall
deliver to
the Depositor a written report(s) reflecting receipts, disbursements and
other
transactions effected in the Custodial Account during such period and the
fair
market value of the assets and liabilities of the Custodial Account as of
the
close of such period in a manner prescribed by the Internal Revenue
Service.
Unless the Depositor sends the Custodian written objection to a report
within
ninety (90) days of receipt, the Depositor shall be deemed to have approved
of
such report, and the Custodian and the Company, and their officers,
employees
and agents shall be forever released and discharged from all liability and
accountability to anyone with respect to their acts, transactions, duties
and
responsibilities as shown on or reflected by such report(s). The Company
shall
not incur any liability in the event the Custodian does not satisfy its
obligations as described herein.
(c) Withholding. Any distributions from the Custodial Account may be
made
by the Custodian net of any required tax withholding.
17. SPENDTHRIFT PROVISION. The interest of a Depositor in the Account shall
not
be transferred or assigned by voluntary or involuntary act of the Depositor
or
by operation of law; nor shall it be subject to alienation, assignment,
garnishment, attachment, receivership, execution or levy of any kind.
However,
this Section 17 shall not in any way be construed to, and the Custodian is
in
no way obligated or expected to, commence or defend any legal action in
connection with this Agreement or the Custodial Account. Commencement of
legal
action or proceeding or defense of such legal action or proceeding shall be
the
sole responsibility of the Depositor unless agreed upon by the Custodian
and
the Depositor, and unless the Custodian is fully indemnified for doing so
to
the Custodian's satisfaction. Notwithstanding the foregoing, in the event
of a
property settlement between a Depositor and his or her former spouse
pursuant
to which the transfer of a Depositor's interest hereunder, or a portion
thereof, is incorporated in a divorce decree or in a written instrument
incident to such divorce or legal separation, then the interest so decreed
by a
Court to be the property of such former spouse shall be transferred to a
separate Custodial Account for the benefit of such former spouse, in
accordance
with Section 408(d)(6) of the Code.
18. FEES AND EXPENSES.
(a) General. The fees of the Custodian for performing its duties
hereunder
shall be in such amount as it shall establish from time to time. All such
fees,
as well as expenses (such as, without limitation, brokerage commissions
upon
the investment of funds, fees for special legal services, taxes levied or
assessed, or expenses in connection with the liquidation or retention of
all or
part of a rollover contribution), shall be collected by the Custodian from
cash
available in the Custodial Account, or if insufficient cash shall be
available,
by sale of sufficient assets in the Custodial Account and application of
the
sales proceeds to pay such fees and expenses. Alternatively, but only with
the
consent of the Custodian, fees and expenses may be paid directly to the
Custodian by the Depositor by separate check.
(b) Advisor Fees. The Custodian shall, upon direction from the
Depositor,
disburse from the Custodial Account payment to the Depositor's registered
investment advisor of any fees for financial advisory services rendered
with
regard to the assets held in the Account. Such direction must be provided
in a
form and manner acceptable to the Custodian, and the Custodian shall not
incur
any liability for executing such direction.
(c) Sale of Assets. Whenever it shall be necessary in accordance with
this
Section 18 to sell assets in order to pay fees or expenses, the Custodian
shall
request the Depositor (or the Depositor's Authorized Agent, Beneficiary,
executor, or administrator) to provide specific instructions. If such
instructions are not received by the Custodian within ten (10) business
days of
the Custodian's request, the Custodian may sell any or all of the assets
credited to the Custodial Account at that time, and shall invest the
portion of
the sales proceeds remaining after collection of the applicable fees and
expenses therefrom in accordance with Section 3. The Custodian shall not
incur
any liability on account of its sale or retention of assets under such
circumstances.
19. VOTING WITH RESPECT TO SECURITIES. The Custodian shall mail to the
Depositor all prospectuses and proxies that may come into the Custodian's
possession by reason of its holding of Investment Company Shares or other
securities in the Custodial Account. A Depositor may direct the Custodian
as to
the manner in which any securities or Investment Company Shares held in the
Custodial Account shall be voted with respect to any matters as to which
the
Custodian as holder of record is entitled to vote, coming before any
meeting of
shareholders of the corporation which issued such securities, or of holders
of
interest in the Investment Company which issued such Investment Company
Shares.
All such directions shall be in writing on a form approved by the Custodian
and
signed by the Depositor, and delivered to the Custodian within the time
prescribed by it. The Custodian shall vote only those securities and Shares
with respect to which it has received timely written directions from the
Depositor.
20. LIMITATIONS ON CUSTODIAL LIABILITY AND INDEMNIFICATION. The Depositor
and
the Custodian intend that the Custodian shall have and exercise no
discretion,
authority, or responsibility as to any investment in connection with the
Account and the Custodian shall not be responsible in any way for the
purpose,
propriety or tax treatment of any contribution, or of any distribution, or
any
other action or nonaction taken pursuant to the Depositor's direction or
that
of the Depositor's Authorized Agent, Beneficiary, executor or
administrator.
The Depositor who directs the investment of his or her Account shall bear
sole
responsibility for the suitability of any directed investment and for any
adverse consequences arising from such an investment, including, without
limitation, the inability of the Custodian to value or to sell an illiquid
investment, or the generation of unrelated business taxable income with
respect
to an investment. To the fullest extent permitted by law, the Depositor (or
the
Depositor's Authorized Agent, Beneficiary, executor or administrator, as
appropriate) shall at all times fully indemnify and save harmless the
Custodian, the Company and their agents, affiliates, successors and assigns
and
their officers, directors and employees, from any and all liability arising
from the Depositor's investment direction under this Account, or from the
Broker's execution of such direction, and from any and all other liability
whatsoever which may arise in connection with this Agreement except
liability
arising under applicable law or liability arising from gross negligence or
willful misconduct on the part of the indemnified person. Although the
Custodian shall have no responsibility to give effect to a direction from
anyone other than the Depositor (or the Depositor's Beneficiary, executor
or
administrator), the Custodian may, in its discretion, establish procedures
pursuant to which the Depositor may delegate to a third party any or all of
the
Depositor's powers and duties hereunder, provided, however, that in no
event
may anyone other than the Depositor execute the application by which this
Agreement is adopted or the form by which the Beneficiary is appointed, and
provided, further, that any such third party to whom the Depositor has so
delegated powers and duties shall be treated as the Depositor for purposes
of
applying the preceding sentences of this paragraph and the provisions of
Article VIII, Section 2.
21. DELEGATION TO AGENTS. The Custodian may delegate to one or more
corporations affiliated with the Custodian the performance of record
keeping
and other ministerial services in connection with the Custodial Account,
for a
reasonable fee to be borne by the Custodian and not by the Custodial
Account.
Any such agent's duties and responsibilities shall be confined solely to
the
performance of such services, and shall continue only for so long as the
Custodian named in the Application serves as Custodian.
22. AMENDMENT OF AGREEMENT. The Depositor, the Broker, and Custodian
authorize
and direct the Company to amend this Agreement in any respect at any time
(including retroactively), so that it may conform with applicable
provisions of
the Internal Revenue Code, or with any other applicable law as in effect
from
time to time, or to make such other changes to this Agreement as the
Company
deems advisable. Any such amendment shall be effected by delivery to the
Custodian and mailing to the Depositor at his or her last known address (as
shown in the records of the Custodian) a copy of such amendment or a
restatement of this Custodial Agreement, including any such amendment. The
Depositor shall be deemed to consent to any such amendment(s) if he or she
fails to object thereto by written notice received by the Custodian within
fifteen (15) calendar days from the date of the Company's mailing to the
Depositor a copy of such amendment(s) or restatement.
23. RESIGNATION OR REMOVAL OF CUSTODIAN. The Company may remove the
Custodian
at any time, and the Custodian may resign at any time, upon thirty (30)
days'
written notice to the Depositor and the Broker. Upon the removal or
resignation
of the Custodian, the Company may, but shall not be required to, appoint a
successor custodian under this Custodial Agreement; provided that any
successor
custodian shall satisfy the requirements of Section 408(a)(2) of the Code.
Upon
any such successor's acceptance of appointment, the Custodian shall
transfer
the assets of the Custodial Account, together with copies of relevant books
and
records, to such successor custodian; provided, however, that the Custodian
is
authorized to reserve such sum of money or property as it may deem
advisable
for payment of any liabilities constituting a charge on or against the
assets
of the Custodial Account, or on or against the Custodian or the Company.
The
Custodian shall not be liable for the acts or omissions of any successor to
it.
If no successor custodian is appointed by the Company, the Custodial
Account
shall be terminated, and the assets of the Account, reduced by the amount
of
any unpaid fees or expenses, will be distributed to the Depositor.
24. TERMINATION OF THE CUSTODIAL ACCOUNT. The Depositor may terminate the
Custodial Account at any time upon notice to the Custodian in a manner and
form
acceptable to the Custodian. Upon such termination, the Custodian shall
transfer the assets of the Custodial Account, reduced by the amount of any
unpaid fees or expenses, to the custodian or trustee of another individual
retirement account (within the meaning of Section 408 of the Code) or other
retirement plan designated by the Depositor, as described in Article VIII,
Section 10. The Custodian shall not be liable for losses arising from the
acts,
omissions, delays or other inaction of any such transferee custodian or
trustee. If notice of the Depositor's intention to terminate the Custodial
Account is received by the Custodian and the Depositor had not designated a
transferee custodian or trustee for the assets in the Account, then the
Account, reduced by any unpaid fees or expenses, will be distributed to the
Depositor.
25. GOVERNING LAW. THIS AGREEMENT, AND THE DUTIES AND OBLIGATIONS OF THE
COMPANY AND THE CUSTODIAN UNDER THE AGREEMENT, SHALL BE CONSTRUED,
ADMINISTERED
AND ENFORCED ACCORDING TO THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
EXCEPT
AS SUPERSEDED BY FEDERAL LAW OR STATUTE.
26. WHEN EFFECTIVE. This Agreement shall not become effective until
acceptance
of the Application by or on behalf of the Custodian at its principal
office, as
evidenced by a written notice to the Depositor.
NO-NAME
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and should be
reviewed
in conjunction with both the Custodial Agreement and the Application for
your
Individual Retirement Account ("IRA"). This information reflects the
provisions
of the Internal Revenue Code as are effective January 1, 1987, and
therefore
applies to contributions for years after, and to distributions taken after
1986.
RIGHT TO CANCEL
You may revoke this Account at any time within seven (7) calendar days
after it
is established by mailing or delivering a written request for revocation
to:
State Street Bank & Trust
P.O. Box 8302
Boston, Massachusetts 02266-8302
Upon revocation, you will receive a full refund of your initial
contribution,
including sales commissions (if any) and/or administrative fees. To
determine
where to send a revocation request, or if you have any questions relative
to
this procedure, please call our toll-free number, 1-800-522-7297.
TYPES OF IRAs
REGULAR IRA. You may make a Regular IRA contribution of $2,000 or 100% of
your
compensation, whichever is less. (To determine the amount of your income
tax
deduction for your IRA contribution, see "Limits on Deductible
Contributions"
below.)
SPOUSAL IRA. If you and your spouse file a joint federal income tax return,
you
may make a Spousal IRA contribution, even if your spouse has received
compensation during the tax year. Your contribution to a Spousal IRA must
not
exceed the lesser of (1) $2,000 or (2) the excess of $2,250 (or if less,
100%
of your compensation) over your contribution to your Regular IRA. Note: If
your
spouse has more than $250 in compensation for the tax year, the two of you
may
make a larger total contribution if you each contribute to a Regular IRA.
ROLLOVER IRA. If you retire or change jobs, you may be eligible for a
distribution from your employer's retirement plan. To avoid mandatory
withholding of 20% of your distribution for federal income tax, and to
preserve
the tax-deferred status of this distribution, you can transfer it directly
to a
Rollover IRA. If you choose to have the distribution paid directly to you,
you
will be subject to the 20% withholding rules. You may still reinvest up to
100%
of the total amount of your distribution which is eligible for rollover in
a
Rollover IRA by replacing the 20% which was withheld for taxes with other
assets you own. You must reinvest in a Rollover IRA within 60 days of
receipt
of your distribution. The amount invested in a Rollover IRA will not be
included in your taxable income for the year in which you receive the
qualified
plan distribution.
DESCRIPTION OF ACCOUNT
Your IRA is a custodial account created for your exclusive benefit. Your
interest in the account is nonforfeitable.
ELIGIBILITY
Employees and self-employed individuals are eligible to contribute to an
IRA
even if they are already covered under another tax-qualified plan.
Employers
may contribute to IRAs established by their employees, and employers may
contribute to IRAs used as part of a Simplified Employee Pension plan
("SEP,"
described below).
CONTRIBUTIONS
GENERAL. You may make annual cash contributions to an IRA in any amount up
to
100% of your compensation for the year or $2,000, whichever is less. Your
employer may make contributions to your account, but, except as noted below
under a SEP, the total contributions from you and your employer may not
exceed
this limitation. Contributions (other than rollover contributions described
below) must be made in "cash" and not in "kind." Therefore, securities or
other
assets already owned cannot be contributed to an IRA but can be converted
to
cash and then contributed. No part of your contribution may be invested in
life
insurance or be commingled with other property, except in a common trust
fund
or common investment fund.
SPOUSAL ACCOUNTS. If you are married and file a joint tax return, you may
make
cash contributions to a "spousal" IRA in addition to your own IRA (even if
your
spouse has compensation). The total amounts contributed to your own and to
your
spouse's IRA may not exceed 100% of your combined compensation or $2,250,
whichever is less. In no event, however, may the annual contribution to
either
your account or your spouse's account exceed $2,000.
COMPENSATION means wages, salaries, professional fees, or other amounts
derived
from or received for personal service actually rendered and includes the
earned
income of a self-employed individual, and any alimony or separate
maintenance
payment includible in the individual's gross income.
ADJUSTED GROSS INCOME is determined prior to adjustments for personal
exemptions and itemized deductions. For purposes of determining the IRA
deduction (see below), adjusted gross income is modified to take into
account
deductions for IRA contributions, taxable benefits under the Social
Security
Act and the Railroad Retirement Act, and passive loss limitations under
Code
Section 86.
TIME OF CONTRIBUTION. You may make contributions to your IRA anytime, up to
and
including the due date for filing your tax return for the year. You may
continue to make annual contributions to your IRA up to (but not including)
the
calendar year in which you reach age 70 1/2. You may continue to make
annual
contributions to your spouse's IRA up to (but not including) the calendar
year
in which your spouse reaches age 70 1/2.
ROLLOVER IRA CONTRIBUTIONS. Qualifying distributions from tax-qualified
plans
(for example, pension, profit-sharing, and Keogh plans) may be eligible for
rollover into your IRA. However, strict limitations apply to such rollovers
and
you should seek competent tax advice regarding these restrictions.
SIMPLIFIED EMPLOYEE PENSION PLAN CONTRIBUTIONS. A separate IRA may be
established for use by your employer as part of a SEP arrangement. Your
employer may contribute to your SEP-IRA up to a maximum of 15% of your
compensation or $30,000, whichever is less. If your SEP-IRA is used as part
of
a salary reduction SEP, you may elect to reduce your annual compensation,
up to
a maximum of 15% of your compensation or $7,000 (indexed to reflect
cost-of-living adjustments), whichever is less, and have your employer
contribute that amount to your SEP-IRA. If your employer maintains both a
salary reduction SEP and a regular SEP, the annual contribution limit to
both
SEPs together is 15% of your compensation or $30,000, whichever is less.
You
may contribute, in addition to the amount contributed by your employer to
your
SEP-IRA, an amount not in excess of the limits referred to under "General"
above. It is your and your employer's responsibility to see that
contributions
in excess of normal IRA limits are made under a valid SEP and are,
therefore,
proper.
EXCESS CONTRIBUTIONS. Contributions which exceed the allowable maximum per
year
are considered excess contributions. A nondeductible penalty tax of 6% of
the
excess amount contributed will be incurred for each year in which the
excess
contribution remains in your IRA. If you make a contribution (or your
employer
makes a SEP contribution, including a salary reduction contribution, on
your
behalf) in excess of your allowable maximum for any taxable year, you may
correct the excess contribution and avoid the 6% penalty tax for that year
by
withdrawing the excess contribution and its earnings on or before the date,
including extensions, for filing your tax return for that year.
The amount of the excess contribution withdrawn will not be considered a
premature distribution nor (except in the case of a salary reduction
contribution) be taxed as ordinary income, but the earnings withdrawn will
be
taxed as ordinary income to you. Alternatively, excess contributions for
one
year may be carried forward and reported in the next year to the extent
that
the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum amount for that year. The 6%
excise tax will be imposed on excess contributions in each year they are
neither returned nor carried forward.
DEDUCTIBLE IRA CONTRIBUTIONS
If you are not married and are not an active participant in an
employer-maintained retirement plan, you may make a fully deductible IRA
contribution in any amount up to 100% of your compensation for the year or
$2,000, whichever is less. The same limits apply if you are married and you
file a joint return with your spouse, and neither of you is an active
participant in an employer-maintained retirement plan. An
"employer-maintained
retirement plan" includes any of the following types of retirement plans:
o a qualified pension, profit-sharing, or stock bonus plan established in
accordance with IRC (Sec. Mk.)401(a) or 401(k).
o a Simplified Employee Pension Plan (SEP) (IRC (Sec. Mk.)408(k)).
o a deferred compensation plan maintained by a governmental unit or
agency.
o tax sheltered annuities and custodial accounts (IRC (Sec. Mk.)403(b) and
403(b)(7)).
o a qualified annuity plan under IRC (Sec. Mk.)403(a).
You are an active participant in an employer maintained retirement plan
even if
you do not have a vested right to any benefits under your employer's plan.
Whether you are an "active participant" depends on the type of plan
maintained
by your employer. Generally, you are considered an active participant in a
defined contribution plan if an employer contribution or forfeiture was
credited to your account under the plan during the year. You are considered
an
active participant in a defined benefit plan if you are eligible to
participate
in the plan, even though you elect not to participate. You are also treated
as
an active participant for a year during which you make a voluntary or
mandatory
contribution to any type of plan, even though your employer makes no
contribution to the plan.
If you (or your spouse, if you are filing a joint tax return) are covered
by an
employer-maintained retirement plan, your IRA contribution is tax
deductible
only to the extent that your adjusted gross income does not exceed the
deductibility limits discussed below.
LIMITS ON DEDUCTIBLE CONTRIBUTIONS
The deduction of your IRA contribution is reduced proportionately for
adjusted
gross income which exceeds the applicable dollar amount. The applicable
dollar
amount for an individual is $25,000 and $40,000 for married couples filing
a
joint tax return. The applicable dollar limit for married individuals
filing
separate returns is $0. If your adjusted gross income exceeds the
applicable
dollar amount by not more than $10,000, you may make a deductible IRA
contribution (but the deductible amount will be less than $2,000). To
determine
the amount of your deductible contribution, use the following calculation:
1. Subtract the applicable dollar amount from your adjusted gross income.
If
the result is $10,000 or more, stop; you can only make a nondeductible
contribution.
2. Subtract the above figure from $10,000.
3. Divide the above figure by $10,000.
4. Multiply $2,000 by the fraction resulting from the above steps. This is
your
maximum deductible contribution limit.
If the deduction limit is not a multiple of $10, then it is to be rounded
up to
the next highest $10. There is a $200 minimum floor on the deduction limit
if
your adjusted gross income does not exceed $35,000 (for a single taxpayer),
$50,000 (for married taxpayers filing jointly) or $10,000 (for a married
taxpayer filing separately).
Adjusted gross income for married couples filing a joint tax return is
calculated by aggregating the compensation of both spouses. The deduction
limitations on IRA contributions, as determined above, then apply to each
spouse.
NONDEDUCTIBLE IRA CONTRIBUTIONS
Even if your income exceeds the limits described above, you may make a
contribution to your IRA up to the lesser of $2,000 or 100% of your
compensation. To the extent that your contribution exceeds the deductible
limits, it will be nondeductible. Earnings on all IRA contributions are tax
deferred until distribution.
You are required to designate on your tax return the extent to which your
IRA
contribution is nondeductible. Therefore, your designation must be made by
the
due date (including extensions) for filing your tax return. If you
overstate
the amount of nondeductible contributions for a taxable year, a penalty of
$100
will be assessed for each overstatement unless you can show that the
overstatement was due to a reasonable cause.
INVESTMENT OF ACCOUNT
The assets in your IRA will be invested in accordance with your
instructions.
As with any investment, you should read any publicly available information
(e.g., prospectuses, annual reports, the terms and conditions of any
insurance
annuity contract, etc.) which would enable you to make an informed
investment
decision.
If no investment instructions are received from you, or if the instructions
received are, in the opinion of the Custodian, unclear, you may be
requested to
provide instructions. In the absence of such instructions, your investment
may
be invested in Money Market Shares, which strive to maintain a stable $1
per
share balance. Keep in mind that with respect to investments in regulated
investment company shares (i.e., mutual funds) held in your account, growth
in
the value of your account cannot be guaranteed or projected.
DISTRIBUTIONS
GENERAL. Distributions from your IRA should begin no earlier than the date
you
reach age 59 1/2 (except in cases of your earlier disability or death) and
no
later than the April 1 following the year in which you reach age 70 1/2.
Distributions from your account will be included in your gross income for
federal income tax purposes for the year in which you receive them.
PREMATURE DISTRIBUTIONS. To the extent they are included in income,
distributions from your IRA made before you reach age 59 1/2 will be
subject to
a 10% nondeductible penalty tax (in addition to being taxable as ordinary
income) unless the distribution is an exempt withdrawal of an excess
contribution, or the distribution is rolled over to another qualified
retirement plan, or the distribution is made on account of your death or
disability, or the distribution is one of a scheduled series of payments
over
your life or life expectancy or the joint life expectancies of yourself and
your Beneficiary.
LATEST TIME TO WITHDRAW. You must begin receiving distributions of the
assets
in your account by April 1 of the calendar year following the calendar year
in
which you reach age 70 1/2. Subsequent distributions must be made by
December
31 of each year. If you maintain more than one IRA, you may take from any
of
your IRAs the aggregate amount to be withdrawn.
MINIMUM DISTRIBUTIONS. Once distributions are required to begin, they must
not
be less than the amount each year (determined by actuarial tables) which
would
exhaust the value of the account over the required distribution period,
which
is generally your life expectancy or the joint life and last survivor
expectancy of you and an individual you have designated as your
Beneficiary.
You will be subject to a 50% excise tax on the amount by which the
distribution
you actually received in any year falls short of the minimum distribution
required for the year.
METHODS OF DISTRIBUTION. Assets may be distributed from your account
according
to one or more of the following methods selected by you:
(a) total distribution
(b) distribution over a certain period
(c) purchase of an annuity contract
(See Article IV of your IRA Custodial Agreement for a full description of
these
distribution methods.)
DISTRIBUTION UPON DEATH. The assets remaining in your Account will be
distributed upon your death to the beneficiary(ies) named by you on record
with
the Custodian. If there is no beneficiary designated for your Account in
the
Custodian's records, or if the beneficiary you had designated dies before
you
do, your Account will be paid to your surviving spouse, or if none, to your
estate.
If your spouse was your primary beneficiary and you had started to receive
distributions from your account, but die before receiving the balance of
your
account, your spouse has several options. Your spouse can either keep
receiving
distributions from your account at least as rapidly, or roll over all or
part
of your account into an IRA in his or her name. If distributions from your
account had not yet begun, your spouse may defer taking distributions until
April 1st of the year you would have turned 70 1/2, and then receive
distributions over his or her life expectancy, or roll over the account
into an
IRA in their name, and treat the IRA as his or her own.
If your beneficiary is not your spouse, and distributions had begun from
your
account, your beneficiary may continue to receive them at least as rapidly
as
the payment schedule you had established. If distributions had not yet
begun,
your beneficiary must deplete your account within 5 years of your death, or
start taking distributions from your account within one year of your death
over
their own life expectancy.
DISTRIBUTION OF NONDEDUCTIBLE CONTRIBUTIONS. To the extent that a
distribution
constitutes a return of your nondeductible contributions, it will not be
included in your income. The amount of any distribution excludable from
income
is the portion that bears the same ratio to the total distribution that
your
aggregate nondeductible contributions bear to the balance at the end of the
year (calculated after adding back distributions during the year) of your
IRA.
For this purpose, all of your IRAs are treated as a single IRA.
Furthermore,
all distributions from an IRA during a taxable year are to be treated as
one
distribution. The aggregate amount of distributions excludable from income
for
all years is not to exceed the aggregate nondeductible contributions for
all
calendar years. There is a 10% additional income tax assessed against
premature
distributions to the extent such distributions are includible in income
(see
"Premature Distributions" above).
EXCESS DISTRIBUTIONS. There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which
exceed
the greater of $150,000 or $112,500 (indexed to reflect cost-of-living
increases). To determine whether you have distributions in excess of this
limit, you must aggregate the amounts of all distributions received by you
during the calendar year from all retirement plans, including IRAs. Please
consult with your tax advisor for more complete information, including the
availability of favorable elections.
ROLLOVER TREATMENT. Distributions from your IRA representing all or any
part of
the assets in your IRA account are also eligible for rollover treatment.
You
may roll over all or any part of the same property from this distribution
of
assets, within 60 days of receipt, into another IRA or individual
retirement
annuity, and maintain the tax-deferred status of these assets. A 60-day
rollover can be made once every twelve months per IRA.
DIVORCE OR LEGAL SEPARATION
If all or any portion of your IRA is awarded to a former spouse pursuant to
divorce or legal separation, such portion can be transferred to an IRA in
the
receiving spouse's name. This transaction can be processed without any tax
implications to you provided a written instrument executed by a court
incident
to the divorce or legal separation in accordance with Section 408(d)(6) of
the
Code is received by the Custodian, and specifically directs such transfer.
In
addition, you must also provide the Custodian with a letter of instruction
and
an IRA application executed by the receiving spouse, if she or he doesn't
already maintain such IRA at Fidelity.
FEES AND EXPENSES
Fees and other expenses of maintaining your Fidelity IRA account are
described
in the Application and may be changed from time to time, as provided in the
Custodial Agreement.
PROHIBITED TRANSACTIONS
If any of the events prohibited by Section 4975 of the Code (such as any
sale,
exchange or leasing of any property between you and your IRA) occurs during
the
existence of your IRA, your account will be disqualified and the entire
balance
in your account will be treated as if distributed to you as of the first
day of
the year in which the prohibited event occurs. This "distribution" would be
subject to ordinary income tax and, if you were under age 59 1/2 at the
time,
to the 10% penalty tax on premature distributions.
If you or your Beneficiary use (pledge) all or any part of your IRA as
security
for a loan, then the portion so pledged will be treated as if distributed
to
you, and will be taxable to you as ordinary income and subject to the 10%
penalty during the year in which you make such a pledge.
OTHER TAX CONSIDERATIONS
NO SPECIAL TAX TREATMENT. No distribution to you or anyone else from your
account can qualify for capital gain treatment under the federal income tax
laws. It is taxed to the person receiving the distribution as ordinary
income.
(Similarly, you are not entitled to the five-year averaging rule for
lump-sum
distributions available to persons receiving distributions from certain
other
types of retirement plans.)
GIFT TAX. If you elect during your lifetime to have all or any part of your
account payable to a Beneficiary at or after your death, the election will
not
subject you to any gift tax liability.
TAX WITHHOLDING. Federal income tax will be withheld from distributions you
receive from an IRA unless you elect not to have tax withheld. However, if
IRA
distributions are to be delivered outside of the United States, this tax is
mandatory and you may not elect otherwise unless you certify to the
Custodian
that you are not a U.S. citizen residing overseas or a "tax-avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%.
REPORTING FOR TAX PURPOSES. Contributions to your IRA must be reported on
your
tax Form 1040 or 1040A for the taxable year contributed. You will be
required
to designate your IRA contribution as deductible or nondeductible. You are
also
required to attach a Form 8606 to your 1040 or 1040A form. Form 8606 is
used to
report nondeductible IRA contributions and to calculate the basis
(nontaxable
part) of your IRA. Other reporting will be required by you in the event
that
special taxes or penalties described herein are due. You must also file
Treasury Form 5329 with the IRS for each taxable year in which the
contribution
limits are exceeded, a premature distribution takes place, or less than the
required minimum amount is distributed from your IRA. The Tax Reform Act of
1986 also requires you to report the amount of all distributions you
received
from your IRA and the aggregate account balance of all IRAs as of the end
of
the calendar year.
IRS APPROVAL
The form of your Individual Retirement Account has been approved by the
Internal Revenue Service. The Internal Revenue Service approval is a
determination only as to the form and does not represent a determination of
the
merits of the Account. You may obtain further information with respect to
your
IRA from any district office of the Internal Revenue Service.
[logo]
Fidelity Distributors Corporation
82 Devonshire Street
Boston, MA 02109
I.BD-IRA CA-1193
February , 1994
Mr. William G. Englert
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, DC 20006
Dear Mr. Englert:
The purpose of this letter is to address NASD staff comments on
advertisements and sales literature received by Fidelity Distributors
Corporation between February 17, 1994 and February 23, 1994.
.
(1) LETTER - "FIDELITY INVESTMENTS: THE CHOICE FOR YOUR . . ." A-1
C: The material submitted appears consistent with applicable standards;
however, we have the following comment.
Your cover letter indicates the letter was filed pursuant to SEC Rule
134, but the sales literature states that "The folder you have includes . .
. a fund prospectus." Therefore the material was reviewed in accordance
with the provisions of Article III, Section 35 of the Rules of Fair
Practice, rather than SEC Rule 134 which is not applicable.
REFERENCE NUMBER: A94-0127-039
R: APM/PM/LG940590003
(2) SPECIAL REPORT REGARDING THE RETIREMENT RESERVES VARIABLE ANNUITY
"THE VALUE OF TAX DEFERRAL IN THE . . ." A-2
C: First of all, the report includes a projection of the future return
for the Retirement Reserves Variable Annuity, which exceeds the provisions
of Article III, Section 35(d)(2)(N) of the Rules of Fair Practice, which
prohibits the projection of investment results. Hypothetical illustrations
are allowed to show the mechanics of variable annuity contracts, but such
illustrations should not project the future values of specific annuities.
Secondly, a specific comparison between Retirement Reserves and a 100%
Taxable Investment and a No Load Mutual Fund may not be appropriate without
also mentioning that the latter two investments could be placed in a
qualified retirement plan and experience tax deferred benefits as well.
Please explain why these components were chosen for this illustration.
Also, please explain why the holding period for the mutual fund is only
four years.
REFERENCE NUMBER: A94-0127-006
R: APM/PM/LG940590004
(3) FLYER DEVELOPED FOR UNIVERSITY OF NEBRASKA - FIDELITY CASH
RESERVES - "PLEASE READ ME FIRST" A-3
C: The Flyer developed for the University of Nebraska appears to go
beyond the technical provisions of SEC Rule 134 because it includes the
statement, "For information on total returns . . .", The rule does not
provide for a reference to inquire about past performance of funds,
therefore the material was reviewed pursuant to SEC Rule 482, and appears
consistent with 482.
REFERENCE NUMBER: A94-0127-004
R: APM/PM/LG940590005
(4) LETTER - "FIDELITY BRINGS YOU A NEW GUIDE . . ." A-4
C: In your cover letter you indicate that the sales literature was filed
pursuant to SEC Rule 482, but since the material does not appear to be on
behalf of a specific fund, and the "Common Sense Guide, Investing in
International Stock Funds" is offered rather than a prospectus, the
material was reviewed in accordance with the standards set forth in Rule
135A.
REFERENCE NUMBER: A94-0127-037
R: APM/PM/LG940590006
(5) PAMPHLET - FIDELITY GROWTH & INCOME PORTFOLIO, "WHERE
WILL YOUR RETIREMENT COME FROM?" A-5
C: The 9% annual fixed rate of return used in the compounding
illustration entitled IRA vs. Taxable Investment appears excessive for use
in an illustration demonstrating compounding over a 10, 20 and 30 year
period, especially in light of today's economic environment. In future
printings, we recommend that you revise this illustration, or provide the
basis for this figure.
REFERENCE NUMBER: A94-0201-019
R: APM/PM/LG940590007
We hope that these responses and modifications address your areas of
concern. I am prepared to discuss any of our responses at any time; I may
be reached at (617) 570-6874.
Sincerely,
Patrick F. Fitzgerald
Legal Department
FIDELITY ADVISOR EMERGING MARKETS INCOME FUND - CLASS B
FORM OF
DISTRIBUTION AND SERVICE PLAN
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") of Fidelity Advisor Emerging Markest
Income Fund - Class B (the "Class", a class of Fidelity Advisor Emerging
Markets Income Fund (the "Fund"), a series of Advisor Series VIII (the
"Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor")
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or who engage in shareholder support services
("Investment Professionals"); and (6) providing training, marketing and
support to Investment Professionals with respect to the sale of Shares.
3. In accordance with such terms as the Trustees may, from time to time
establish, and in conjunction with its services under the General
Distribution Agreement with respect to Shares of the Class ("Class B
Shares"), the Distributor is hereby specifically authorized to make
payments to Investment Professionals in connection with the sale of the
Class B Shares. Such payments may be paid as a percentage of the dollar
amount of purchases of Class B Shares attributable to a particular
Investment Professional, or may take such other form as may be approved by
the Trustees.
4. In consideration for the services provided and the expenses incurred
by the Distributor pursuant to the General Distribution Agreement and to
paragraphs 2 and 3 hereof, all with respect to the Class:
(a) the Class shall pay to the Distributor a monthly fee at the annual
rate of .75% (or such lesser amount as the Trustees may, from time to time,
determine) of such Class' average daily net assets throughout the month.
The determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner specified
in the Fund's then current Prospectus for the determination of the net
asset value of the Class's shares, but excluding assets attributable to (i)
shares purchased more than 144 months prior to such date or (ii) any other
class of the Fund. The Distributor may , but shall not be required to, use
all or any portion of the fee received pursuant to the Plan to compensate
Investment Professionals who have engaged in the sale of Class B Shares or
in shareholder support services pursuant to agreements with the
Distributor, or to pay any of the expenses associated with other activities
authorized under paragraph 2 and 3 hereof; and
(b) In addition, the Plan recognizes that the Distributor may, in
accordance with such terms as the Trustees may from time to time establish,
receive all or a portion of any sales charges, including back-end sales
charges, which may be imposed upon the sale or redemption of Class B
Shares.
5. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management and Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of management
fees by the Fund (or any Portfolio or Class thereof) to the Adviser should
be deemed to be indirect financing of any activity primarily intended to
result in the sale of Shares within the meaning of Rule 12b-1, then such
payment shall be deemed to be authorized by this Plan.
6. This Plan shall become effective upon the first business day of the
month following approval by "a vote of at least a majority of the
outstanding voting securities" (as defined in the Act) of the Class, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related
to the Plan (the "independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
7. This Plan shall, unless terminated as hereinafter provided, remain in
effect until June 16, 1994 and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 4(a) hereof or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of the Class in the case of this Plan, or upon approval
by a vote of the majority of the outstanding voting securities of the Fund,
in the case of the Management Contract, and (b) any material amendment of
this Plan shall be effective only upon approval in the manner provided in
the first sentence of this paragraph 6.
8. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Class.
9. During the existence of this plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of shares of the Class (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
10. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Class.
11. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by the Class
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to the Class and its assets and shall not constitute
an obligation of any shareholder of the Trust or of any other Fund, series
or Class of the Trust.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall
not be affected thereby.
NOTE:!! Paragraph border is not supported. !!
NOTE:!! Text line numbering is not supported. !!
1440
FORM OF SERVICE PLAN
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS B
1. This Service Plan (the "Plan") shall cover payments of a Service Fee
out of the assets of Class B of Fidelity Strategic Opportunities Fund -
Class B (the "Portfolio"), a series of Fidelity Strategic Opportunities
Fund (the "Fund"). When effective in accordance with its terms, this plan
also shall be the written plan contemplated by Securities and Exchange
Commission Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Act") for any Shareholder Servicing Fees which would be deemed to
require such a Plan.
2. The Fund has entered into a General Distribution Agreement on behalf of
the Portfolio with Fidelity Distributors Corporation (the "Distributor"), a
wholly-owned subsidiary of Fidelity Management & Research Company (the
"Adviser"), under which the Distributor uses all reasonable efforts,
consistent with its other business, to secure purchasers of the Portfolio's
shares of beneficial interest (the "Shares"). Class B of the Portfolio has
adopted a Distribution and Service Plan and has entered into a Distribution
and Service Agreement with the Distributor, pursuant to which Class B shall
pay a distribution and service fee to Distributor.
3. Separate from any payments made as described in paragraph 2 hereof,
Class B shall also pay to the Distributor a Service Fee at the annual rate
of .25% of such Class' average daily net assets throughout the month, or
such lesser amount as may be established from time to time by the Trustees
of the Fund, as specified in paragraph 6 of this Plan. Such fee shall be
computed and paid monthly. The determination of daily net assets shall be
made at the close of business each day throughout the month and computed in
the manner specified in the Portfolio's then current Prospectus for the
determination of the net asset value of shares of Class B, but shall
exclude assets attributable to any other Class of the Portfolio.
Distributor shall use all or a portion of such Service Fee to compensate
securities dealers or other persons ("Investment Professionals") for
personal service and/or the maintenance of shareholder accounts.
4. Each Class of the Portfolio presently pays, and will continue to pay, a
management fee to the Adviser pursuant to a management agreement between
the Portfolio and the Adviser (the "Management Contract"). It is
recognized that the Adviser may use its management fee revenue, as well as
its past profits or its resources from any other source, to reimburse the
Distributor for expenses incurred in connection with the distribution of
Shares or servicing of accounts, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of management
fees by the Class to the Adviser should be deemed to be indirect financing
of any activity primarily intended to result in the sale of shares within
the meaning of Rule 12b-1, then such payment shall be deemed to be
authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities" (as defined in the Act) of Class B, this
Plan having been approved by a vote of a majority of the Trustees of the
Fund, including a majority of Trustees who are not "interested persons" of
the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to the Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until ________________, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the
maximum fee provided for in paragraph 3 hereof, or any amendment of the
Management Contract to increase the amount to be paid by the Portfolio
thereunder, shall be effective only upon approval by a vote of a majority
of the outstanding voting securities of Class B, in the case of the Plan,
or upon approval by a vote of a majority of the outstanding voting
securities of the Portfolio, in the case of the Management Contract, and
(b) any material amendment of this Plan shall be effective only upon
approval in the manner provided in the first sentence of this paragraph 6.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Class.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or the Distributor to provide the Fund, for review by the Fund's
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of Class B (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses (other than reallowance of the Service Fee received by
the Distributor as specified by the Fund's Trustees from time to time) for
activities primarily intended to result in the sale of Shares or the
servicing of accounts of Class B.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust, any obligation assumed by Class B
pursuant to this Plan or any agreement related to this Plan shall be
limited in all cases to Class B and its assets and shall not constitute an
obligation of any shareholder of the Fund or of any other series or Class
of the Fund.
11. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
FIDELITY ADVISOR STRATEGIC OPPORTUNITIES FUND - CLASS B
FORM OF
DISTRIBUTION AND SERVICE PLAN
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Securities and Exchange Commission Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "Act") of Fidelity Advisor Strategic
Opportunities Fund - Class B (the "Class", a class of Fidelity Strategic
Opportunities Fund (the "Fund"), a series of Advisor Series VIII (the
"Trust").
2. The Trust has entered into a General Distribution Agreement on behalf
of the Fund with Fidelity Distributors Corporation (the "Distributor")
under which the Distributor uses all reasonable efforts, consistent with
its other business, to secure purchasers of the Fund's shares of beneficial
interest (the "Shares"). Such efforts may include, but neither are
required to include nor are limited to, the following: (1) formulation and
implementation of marketing and promotional activities, such as mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (2) preparation, printing and distribution of sales
literature; (3) preparation, printing and distribution of prospectuses of
the Fund and reports to recipients other than existing shareholders of the
Fund; (4) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Distributor may, from time to
time, deem advisable; (5) making payments to securities dealers and others
engaged in the sale of Shares or who engage in shareholder support services
("Investment Professionals"); and (6) providing training, marketing and
support to Investment Professionals with respect to the sale of Shares.
3. In accordance with such terms as the Trustees may, from time to time
establish, and in conjunction with its services under the General
Distribution Agreement with respect to Shares of the Class ("Class B
Shares"), the Distributor is hereby specifically authorized to make
payments to Investment Professionals in connection with the sale of the
Class B Shares. Such payments may be paid as a percentage of the dollar
amount of purchases of Class B Shares attributable to a particular
Investment Professional, or may take such other form as may be approved by
the Trustees.
4. In consideration for the services provided and the expenses incurred
by the Distributor pursuant to the General Distribution Agreement and to
paragraphs 2 and 3 hereof, all with respect to the Class:
(a) the Class shall pay to the Distributor a monthly fee at the annual
rate of .75% (or such lesser amount as the Trustees may, from time to time,
determine) of such Class' average daily net assets throughout the month.
The determination of daily net assets shall be made at the close of
business each day throughout the month and computed in the manner specified
in the Fund's then current Prospectus for the determination of the net
asset value of the Class's shares, but excluding assets attributable to (i)
shares purchased more than 144 months prior to such date or (ii) any other
class of the Fund. The Distributor may , but shall not be required to, use
all or any portion of the fee received pursuant to the Plan to compensate
Investment Professionals who have engaged in the sale of Class B Shares or
in shareholder support services pursuant to agreements with the
Distributor, or to pay any of the expenses associated with other activities
authorized under paragraph 2 and 3 hereof; and
(b) In addition, the Plan recognizes that the Distributor may, in
accordance with such terms as the Trustees may from time to time establish,
receive all or a portion of any sales charges, including back-end sales
charges, which may be imposed upon the sale or redemption of Class B
Shares.
5. The Fund presently pays, and will continue to pay, a management fee to
Fidelity Management and Research Company (the "Adviser") pursuant to a
management agreement between the Fund and the Adviser (the "Management
Contract"). It is recognized that the Adviser may use its management fee
revenue, as well as its past profits or its resources from any other
source, to reimburse the Distributor for expenses incurred in connection
with the distribution of Shares, including the activities referred to in
paragraphs 2 and 3 hereof. To the extent that the payment of management
fees by the Fund (or any Portfolio or Class thereof) to the Adviser should
be deemed to be indirect financing of any activity primarily intended to
result in the sale of Shares within the meaning of Rule 12b-1, then such
payment shall be deemed to be authorized by this Plan.
6. This Plan shall become effective upon the first business day of the
month following approval by "a vote of at least a majority of the
outstanding voting securities" (as defined in the Act) of the Class, this
Plan having been approved by a vote of a majority of the Trustees of the
Trust, including a majority of Trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related
to the Plan (the "independent Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan.
7. This Plan shall, unless terminated as hereinafter provided, remain in
effect until July 21, 1994 and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Trust, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to increase materially the fee
provided for in paragraph 4(a) hereof or any amendment of the Management
Contract to increase the amount to be paid by the Fund thereunder shall be
effective only upon approval by a vote of a majority of the outstanding
voting securities of the Class in the case of this Plan, or upon approval
by a vote of the majority of the outstanding voting securities of the Fund,
in the case of the Management Contract, and (b) any material amendment of
this Plan shall be effective only upon approval in the manner provided in
the first sentence of this paragraph 6.
8. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Class.
9. During the existence of this plan, the Trust shall require the Adviser
and/or the Distributor to provide the Trust, for review by the Trustees,
and the Trustees shall review, at least quarterly, a written report of the
amounts expended in connection with financing any activity primarily
intended to result in the sale of shares of the Class (making estimates of
such costs where necessary or desirable) and the purposes for which such
expenditures were made.
10. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Class.
11. Consistent with the limitation of shareholder liability as set forth
in the Trust's Declaration of Trust, any obligation assumed by the Class
pursuant to this Plan and any agreement related to this Plan shall be
limited in all cases to the Class and its assets and shall not constitute
an obligation of any shareholder of the Trust or of any other Fund, series
or Class of the Trust.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall
not be affected thereby.
