FIDELITY ADVISOR SERIES VIII, 497, 1999-01-04

FIDELITY ADVISOR SERIES VIII
497, 1999-01-04

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Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.

To learn more about each fund and its investments, you can obtain a
copy of the Statement of Additional Information (SAI) dated December
14, 1998. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is available along with other related materials
on the SEC's Internet Web site (http://www.sec.gov). The SAI is
incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of the document, contact Fidelity
Distributors Corporation (FDC), 82 Devonshire Street, Boston, MA
02109, or your investment professional.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED
BY THE FDIC, FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

AINTINEW-PRO-1298
1.708837.101

FIDELITY ADVISOR
INTERNATIONAL EQUITY FUNDS
INSTITUTIONAL CLASS

FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL FUND
Fund 734 (Institutional Class)
FIDELITY ADVISOR EUROPE CAPITAL APPRECIATION FUND
Fund 739 (Institutional Class)
FIDELITY ADVISOR JAPAN FUND
Fund 744 (Institutional Class)
FIDELITY ADVISOR LATIN AMERICA FUND
Fund 749 (Institutional Class)
FIDELITY ADVISOR GLOBAL EQUITY FUND
Fund 754 (Institutional Class)
FUNDS OF FIDELITY ADVISOR SERIES VIII

PROSPECTUS
DECEMBER 14, 1998
(FIDELITY_LOGO_GRAPHIC)
82 DEVONSHIRE STREET, BOSTON, MA 02109

CONTENTS

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KEY FACTS 2 WHO MAY WANT TO INVEST

3 EXPENSES INSTITUTIONAL CLASS'S YEARLY OPERATING EXPENSES.

4 PERFORMANCE

5 PRIOR PERFORMANCE OF SIMILAR FUNDS

THE FUNDS IN DETAIL 6 CHARTER HOW EACH FUND IS ORGANIZED.

7 INVESTMENT PRINCIPLES AND RISKS EACH FUND'S OVERALL APPROACH
TO INVESTING.

9 BREAKDOWN OF EXPENSES HOW OPERATING COSTS ARE CALCULATED
AND WHAT THEY INCLUDE.

YOUR ACCOUNT 10 TYPES OF ACCOUNTS DIFFERENT WAYS TO SET UP YOUR ACCOUNT,
INCLUDING TAX-ADVANTAGED RETIREMENT PLANS.

10 HOW TO BUY SHARES OPENING AN ACCOUNT AND MAKING ADDITIONAL
INVESTMENTS.

13 HOW TO SELL SHARES TAKING MONEY OUT AND CLOSING YOUR ACCOUNT.

16 INVESTOR SERVICES SERVICES TO HELP YOU MANAGE YOUR ACCOUNT.

SHAREHOLDER AND ACCOUNT POLICIES 17 DIVIDENDS, CAPITAL GAINS, AND TAXES

18 TRANSACTION DETAILS SHARE PRICE CALCULATIONS AND THE TIMING OF
PURCHASES AND REDEMPTIONS.

18 EXCHANGE RESTRICTIONS

19 APPENDIX

</TABLE>

KEY FACTS

WHO MAY WANT TO INVEST
INSTITUTIONAL CLASS SHARES ARE OFFERED TO:
1. Broker-dealer managed account programs that (i) charge an
asset-based fee and (ii) will have at least $1 million invested in the
Institutional Class of the Advisor funds. In addition, employee
benefit plans must have at least $50 million in plan assets;
2. Registered investment advisor managed account programs, provided
the registered investment advisor is not part of an organization
primarily engaged in the brokerage business, and the program (i)
charges an asset-based fee and (ii) will have at least $1 million
invested in the Institutional Class of the Advisor funds. In addition,
non-employee benefit plan accounts in the program must be managed on a
discretionary basis;
3. Trust institution and bank trust department managed account
programs that (i) charge an asset-based fee and (ii) will have at
least $1 million invested in the Institutional Class of the Advisor
funds. Accounts managed by third parties are not eligible to purchase
Institutional Class shares;
4. Insurance company separate accounts that will have at least $1
million invested in the Institutional Class of the Advisor funds;
5. Fidelity Trustees and employees; and
6. Insurance company employee benefit plan programs that (i) charge an
asset-based fee and (ii) will have at least $1 million invested in the
Institutional Class of the Advisor funds. Insurance company employee
benefit plan programs include such programs offered by a broker-dealer
affiliate of an insurance company, provided that the affiliate is not
part of an organization primarily engaged in the brokerage business.
For purchases made by managed account programs, insurance company
separate accounts, or insurance company employee benefit plan
programs, FDC reserves the right to waive the requirement that $1
million be invested in the Institutional Class of the Advisor funds.
Employee benefit plan investors must meet additional requirements
specified in the funds' SAI.
The funds may be appropriate for investors who want to pursue their
investment goals in markets outside the United States. By including
international investments in your portfolio, you can achieve
additional diversification and participate in growth opportunities
around the world. However, it is important to note that investments in
foreign securities involve risks in addition to those of U.S.
investments.
Diversified International Fund and Global Equity Fund do not focus on
any one region or country. Instead, each fund spans the globe looking
for investments that fit its criteria. The funds may be appropriate
for investors first entering the international markets or those who
are interested in broad participation in multiple markets around the
world.
Europe Capital Appreciation Fund, Japan Fund, and Latin America Fund
are designed for investors looking to target a particular region,
country, or emerging market.
The value of each fund's investments varies from day to day, generally
reflecting changes in market conditions, interest rates, and other
company, political, and economic news. In the short term, stock prices
can fluctuate dramatically in response to these factors. The
securities of small, less well-known companies may be more volatile
than those of larger companies. Over time, however, stocks have shown
greater growth potential than other types of securities. Investments
in foreign securities may involve risks in addition to those of U.S.
investments, including increased political and economic risk, as well
as exposure to currency fluctuations.
Each fund is not in itself a balanced investment plan. You should
consider your investment objective and tolerance for risk when making
an investment decision. When you sell your fund shares, they may be
worth more or less than what you paid for them.
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio.
Class A and Class T shares have a front-end sales charge and pay a
distribution fee. Class A and Class T shares may be subject to a
contingent deferred sales charge (CDSC). Class B and Class C shares do
not have a front-end sales charge, but do have a CDSC, and pay a
distribution fee and a shareholder service fee. The performance of one
class of shares of a fund may be different from the performance of
another class of shares of the same fund because of different sales
charges and class expenses. For example, because Institutional Class
shares have no sales charge, and do not pay a distribution fee or a
shareholder service fee, Institutional Class shares are expected to
have a higher total return than Class A, Class T, Class B, or Class C
shares.
You may obtain more information about Class A, Class T, Class B, and
Class C shares, which are not offered through this prospectus, by
calling 1-800-522-7297 if you are investing through a broker-dealer or
insurance representative, or 1-800-843-3001 if you are investing
through a bank representative, or from your investment professional.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell Institutional Class shares of a fund. See "Transaction
Details," page , for an explanation of how and when these charges
apply.
SALES CHARGE ON PURCHASES AND REINVESTED DISTRIBUTIONS NONE

DEFERRED SALES CHARGE ON REDEMPTIONS NONE

ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to Fidelity Management & Research Company
(FMR). Each fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements
and financial reports.
Each class's expenses are factored into its share price or dividends
and are not charged directly to shareholder accounts (see "Breakdown
of Expenses" on page ).
The following figures are based on estimated expenses of Institutional
Class of each fund and are calculated as a percentage of average net
assets of Institutional Class of each fund.
EXPENSE TABLE EXAMPLE: You would pay the following amount in total
expenses on a $1,000 investment in Institutional Class shares of a
fund, assuming a 5% annual return and full redemption at the end of
each time period. Total expenses shown below include any shareholder
transaction expenses and Institutional Class's annual operating
expenses.

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OPERATING EXPENSES EXAMPLES
DIVERSIFIED INTERNATIONAL MANAGEMENT FEE 0.74%[A] 1 YEAR $ 16

12B-1 FEE (DISTRIBUTION FEE) NONE 3 YEARS $ 51

OTHER EXPENSES 0.87%[A]

TOTAL OPERATING EXPENSES 1.61%

EUROPE CAPITAL APPRECIATION MANAGEMENT FEE 0.74%[A] 1 YEAR $ 18

12B-1 FEE (DISTRIBUTION FEE) NONE 3 YEARS $ 55

OTHER EXPENSES (AFTER REIMBURSEMENT) 1.01%[A]

TOTAL OPERATING EXPENSES 1.75%

JAPAN MANAGEMENT FEE 0.74%[A] 1 YEAR $ 18

12B-1 FEE (DISTRIBUTION FEE) NONE 3 YEARS $ 55

OTHER EXPENSES (AFTER REIMBURSEMENT) 1.01%[A]

TOTAL OPERATING EXPENSES 1.75%

LATIN AMERICA MANAGEMENT FEE 0.74%[A] 1 YEAR $ 18

12B-1 FEE (DISTRIBUTION FEE) NONE 3 YEARS $ 55

OTHER EXPENSES (AFTER REIMBURSEMENT) 1.01%[A]

TOTAL OPERATING EXPENSES 1.75%

GLOBAL EQUITY MANAGEMENT FEE 0.74%[A] 1 YEAR $ 15

12B-1 FEE (DISTRIBUTION FEE) NONE 3 YEARS $ 46

OTHER EXPENSES 0.73%[A]

TOTAL OPERATING EXPENSES 1.47%

</TABLE>

[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED EXPENSES OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Institutional Class of each
fund to the extent that total operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses), as a
percentage of its average net assets, exceed the following rates:
EFFECTIVE DATE

DIVERSIFIED INTERNATIONAL 1.75% 12/18/98

EUROPE CAPITAL APPRECIATION 1.75% 12/18/98

JAPAN 1.75% 12/18/98

LATIN AMERICA 1.75% 12/22/98

GLOBAL EQUITY 1.75% 12/18/98

If these agreements were not in effect, other expenses and total
operating expenses, as a percentage of average net assets, would be
expected to be the following amounts:

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OTHER EXPENSES[A] TOTAL OPERATING EXPENSES[A]

DIVERSIFIED INTERNATIONAL (DAGGER) (DAGGER)

EUROPE CAPITAL APPRECIATION 1.77% 2.51%

JAPAN 16.41% 17.15%

LATIN AMERICA 16.81% 17.55%

GLOBAL EQUITY (DAGGER) (DAGGER)

</TABLE>

[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
(dagger) TOTAL OPERATING EXPENSES ARE EXPECTED TO BE LESS THAN THE
VOLUNTARY EXPENSE CAPS IN EFFECT DURING THE FISCAL YEAR ENDING OCTOBER
31, 1999.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN.
Performance history will be available for each fund after the funds
have been in operation for six months.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
Other illustrations of fund performance may show moving averages over
specified periods.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
PRIOR PERFORMANCE OF SIMILAR FUNDS
Because Advisor Diversified International, Advisor Europe Capital
Appreciation, Advisor Japan, Advisor Latin America, and Advisor Global
Equity (Corresponding Funds) were new when this prospectus was
printed, they have no previous operating history. However, Advisor
Diversified International, Advisor Europe Capital Appreciation,
Advisor Japan, and Advisor Latin America are modeled after the
following existing funds, respectively: Fidelity Diversified
International Fund, Fidelity Europe Capital Appreciation Fund,
Fidelity Japan Fund, and Fidelity Latin America Fund (Related Funds).
Advisor Diversified International, Advisor Europe Capital
Appreciation, Advisor Japan, and Advisor Latin America have investment
objectives and policies that are substantially identical in all
material respects to those of their respective Related Funds, which
are managed by FMR. Advisor Global Equity has an investment objective
and policies that are substantially similar in all material respects
to those of other accounts managed by FMR or an affiliate (Related
Accounts). The Related Funds and Accounts, however, have different
expenses and are sold through different distribution channels. FMR
also may manage other substantially similar funds and accounts
that may have better or worse performance than the Related Funds
and Accounts. Performance of other funds and accounts is not included
due to factors such as differences in their policies and/or portfolio
management strategies and/or because these accounts are not mutual
funds.
Below you will find information about the prior performance of the
Related Funds and Accounts, not the performance of the Corresponding
Funds offered through this prospectus. The performance data of the
Related Funds and Accounts is net of advisory fees and other expenses.
Although the Corresponding Funds have investment objectives and
policies that are substantially identical (or, in the case of Advisor
Global Equity, substantially similar) in all material respects to
those of the Related Funds and Accounts, you should not assume
that the Corresponding Funds will have the same performance as the
Related Funds and Accounts. For example, a Corresponding Fund's future
performance may be better or worse than the performance of its Related
Fund or Account due to, among other things, differences in sales
charges, expenses, asset sizes and cash flows between the
Corresponding Fund and its Related Fund or Account.
The Related Accounts include funds organized in foreign jurisdictions
that are not offered to U.S. investors. These funds have different
expense structures and are subject to different regulatory
requirements than U.S. mutual funds, which may affect their
performance.
Advisor Global Equity is subject to restrictions imposed by the
Investment Company Act of 1940 (1940 Act) and the Internal Revenue
Code of 1986, as amended (E.G., limits on the percentage of assets
invested in securities of issuers in a single industry and
requirements on distributing income to shareholders) that do not apply
to its Related Accounts. These differences may affect the performance
of Advisor Global Equity and cause it to differ from that of its
Related Accounts. Notwithstanding these differences, Advisor Global
Equity has an investment objective and policies that are substantially
similar in all material respects to those of its Related Accounts.
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical results of the
Related Funds and Accounts and do not reflect the effect of taxes. In
the case of Advisor Global Equity, the prior performance shown is for
a composite of non-mutual fund accounts with investment objectives
and policies that are substantially similar in all material respects
to those of Advisor Global Equity (Composite). The meth odology for
calculating the performance of the non-mutual fund accounts differs
from that required to be employed by mutual funds that are offered in
the United States.
The first table below shows the Related Funds or the Composite of
Advisor Diversified International, Advisor Europe Capital
Appreciation, Advisor Japan, Advisor Latin America, and Advisor Global
Equity; the date FMR began managing each Related Fund and the date of
the commencement of the Composite; and the asset size of each Related
Fund or the Composite as of September 30, 1998. The next table shows
the performance of each Related Fund or the Composite, as applicable,
over past periods. The charts in the Appendix, beginning on page ,
present calendar year performance for the Related Funds or the
Composite compared to different measures, including a competitive
funds average.

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CORRESPONDING FUNDS OFFERED THROUGH THIS PROSPECTUS RELATED FUND OR COMPOSITE (INCEPTION DATE) AND ASSET SIZE

FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL FUND FIDELITY DIVERSIFIED INTERNATIONAL FUND
(DECEMBER 27, 1991) $ 1,812,000,000

FIDELITY ADVISOR EUROPE CAPITAL APPRECIATION FUND FIDELITY EUROPE CAPITAL APPRECIATION FUND
(DECEMBER 21, 1993) $ 648,500,000

FIDELITY ADVISOR JAPAN FUND FIDELITY JAPAN FUND (SEPTEMBER 15, 1992) $ 243,900,000

FIDELITY ADVISOR LATIN AMERICA FUND FIDELITY LATIN AMERICA FUND (APRIL 19, 1993) $ 303,200,000

FIDELITY ADVISOR GLOBAL EQUITY FUND COMPOSITE OF NON-MUTUAL FUND ACCOUNTS MANAGED
BY FMR OR AN AFFILIATE (MARCH 31, 1993) $3,410,000,000
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TABLE WIDTH IS 171 CHARACTERS.

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RELATED FUNDS
AVERAGE ANNUAL TOTAL RETURN* CUMULATIVE TOTAL RETURN*

PAST 1 YEAR PAST 5 YEARS 10 YEARS/ PAST 1 YEAR PAST 5 YEARS 10 YEARS/
LIFE OF FUND+ LIFE OF FUND+

FIDELITY DIVERSIFIED
INTERNATIONAL FUND [A] -5.01% 11.30% 10.08% -5.01% 70.78% 91.46%

FIDELITY EUROPE CAPITAL
APPRECIATION FUND [A] 0.57% N/A 15.50% 0.57% N/A 99.08%

FIDELITY EUROPE CAPITAL
APPRECIATION FUND -2.45% N/A 14.77% -2.45% N/A 93.11%
(LOAD ADJUSTED) [A] [B]

FIDELITY JAPAN FUND [A] -21.71% -6.07% 0.07% -21.71% -26.88% 0.40%

FIDELITY JAPAN FUND
(LOAD ADJUSTED) [A] [B] -24.06% -6.64% -0.44% -24.06% -29.07% -2.62%

FIDELITY LATIN AMERICA
FUND [A] -48.62% -3.76% 0.33% -48.62% -17.44% 1.79%

FIDELITY LATIN AMERICA FUND
(LOAD ADJUSTED) [A] [B] -50.16% -4.35% -0.23% -50.16% -19.92% -1.26%

</TABLE>

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ANNUAL RETURN* CUMULATIVE RETURN*

PAST 1 YEAR PAST 5 YEARS LIFE OF PAST 1 YEAR PAST 5 YEARS LIFE OF
COMPOSITE+ COMPOSITE+

COMPOSITE -4.38% 11.28% 14.44% -4.38% 70.61% 109.96%

</TABLE>

(dagger) THE COMPOSITE IS THE ASSET-WEIGHTED COMPOSITE PERFORMANCE
OF THREE RELATED ACCOUNTS, WHICH ARE ALL THE NON-MUTUAL FUND ACCOUNTS
THAT HAVE INVESTMENT OBJECTIVES AND POLICIES THAT ARE SUBSTANTIALLY
SIMILAR IN ALL MATERIAL RESPECTS TO THOSE OF ADVISOR GLOBAL EQUITY.
THE COMPOSITE REFLECTS THE DEDUCTION OF FEES AND EXPENSES OF 1.75%,
WHICH MAY BE HIGHER OR LOWER THAN ANY PARTICULAR RELATED ACCOUNT.
COMPOSITE PERFORMANCE RESULTS ARE VALUED MONTHLY AND ARE
ASSET-WEIGHTED BY USING BEGINNING OF MONTH MARKET VALUES.
* ALL FIGURES ARE FOR PERIODS ENDING SEPTEMBER 30, 1998.
+ LIFE OF COMPOSITE FIGURES ARE FROM MARCH 31, 1993, WHEN THE OLDEST
ACCOUNT IN THE COMPOSITE BEGAN REPORTING ITS PERFORMANCE IN U.S.
DOLLARS.
THE FUNDS IN DETAIL

CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business
trust on September 22, 1983.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. The transfer agent will mail proxy
materials in advance, including a voting card and information about
the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust,
respectively.
FMR AND ITS AFFILIATES
Fidelity Investments(registered trademark) is one of the largest
investment management organizations in the United States and has its
principal business address at 82 Devonshire Street, Boston,
Massachusetts 02109. It includes a number of different subsidiaries
and divisions which provide a variety of financial services and
products. The funds employ various Fidelity companies to perform
activities required for their operation.
The funds are managed by FMR, which chooses the funds' investments and
handles their business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA (U.K.) L), in London, England, serves as a sub-adviser
for each fund.
(small solid bullet) Fidelity Investments Japan Ltd. (FIJ), in Tokyo,
Japan, serves as a sub-adviser for Diversified International Fund,
Japan Fund, and Global Equity Fund. Currently, FIJ is primarily
responsible for choosing investments for Japan Fund.
As of October 31, 1998, FMR advised funds having approximately 39
million shareholder accounts with a total value of more than $594
billion.
Greg Fraser is Vice President and manager of Advisor Diversified
International, which he has managed since December 1998. He also
manages other Fidelity funds. Mr. Fraser joined Fidelity in 1986.
Kevin McCarey is Vice President and manager of Advisor Europe Capital
Appreciation, which he has managed since December 1998. He also
manages other Fidelity funds. Since joining Fidelity in 1986, Mr.
McCarey has worked as an analyst and manager.
Brenda Reed is Vice President and manager of Advisor Japan, which she
has managed since December 1998. She also manages other Fidelity
funds. Since joining Fidelity in 1992, Ms. Reed has worked as an
analyst and manager. Previously, she was an analyst for Putnam
Investments from 1990 to 1991, and an analyst and portfolio manager
for New England Research & Management from 1984 to 1990.
Patricia Satterthwaite is Vice President and lead manager of Advisor
Latin America, which she has managed since December 1998. She also
manages other Fidelity funds. Since joining Fidelity in 1986, Ms.
Satterthwaite has worked as an analyst and manager.
Margaret Reynolds is associate manager of Advisor Latin America, which
she has managed since December 1998. Since joining Fidelity in 1995,
Ms. Reynolds has worked as an analyst and manager.
Dick Habermann is Vice President and lead manager of Advisor Global
Equity, which he has managed since December 1998. He also manages
other Fidelity funds. Mr. Habermann is a Senior Vice President of FMR
Co. Previously, he was Division Head for International Equities and
Director of International Research from 1993 to 1996, and Joint Chief
Strategist for Portfolio Advisory ServicesSM from 1996 to 1997. Mr.
Habermann joined Fidelity in 1968.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
performs transfer agent servicing functions for the Institutional
Class of each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant
owners of a class of shares of common stock representing approximately
49% of the voting power of FMR Corp. Under the Investment Company Act
of 1940 (the 1940 Act), control of a company is presumed where one
individual or group of individuals owns more than 25% of the voting
stock of that company; therefore, the Johnson family may be deemed
under the 1940 Act to form a controlling group with respect to FMR
Corp.
Fidelity International Limited (FIL) is the parent company of FIIA,
FIJ, and FIIA (U.K.) L. The Johnson family group also owns, directly
or indirectly, more than 25% of the voting common stock of FIL.
FMR may allocate brokerage transactions to its broker-dealer
affiliates and in a manner that takes into account the sale of shares
of Fidelity Advisor funds, provided that the fund receives brokerage
services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
Diversified International Fund and Global Equity Fund offer the
potential for diversification by spreading investments among
securities of both developed and emerging markets, different countries
and geographic regions.
Europe Capital Appreciation Fund, Japan Fund, and Latin America Fund
offer investors the ability to concentrate an investment in a
particular country or group of countries that they believe to offer
strong long-term growth potential. The country or group of countries
in which each fund focuses is the fund's "focal area." Each fund's
performance is expected to be closely tied to economic and political
conditions within its focal area. Because each fund invests in one
country or group of related countries, each fund's performance is
expected to be more volatile than more geographically diversified
funds. Changes in regulatory, tax, or economic policy in a country
could significantly affect the market in that country, and therefore a
fund's performance. Many foreign stock markets are more concentrated
than the U.S. market, with a small number of companies making up a
large percentage of the local market. As a result, the performance of
one company or a small number of companies could have a relatively
large effect on a fund's performance.
FMR determines where an issuer or its principal activities are located
by looking at such factors as its country of organization, the primary
trading market for its securities, and the location of its assets,
personnel, sales, and earnings.
The funds may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The funds, however, expect to invest primarily in
equity securities, but may also invest in debt securities of any
quality.
The value of the funds' investments varies in response to many
factors. Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions.
International funds have increased economic and political risks as
they are exposed to events and factors in the various world markets.
These risks may be greater for funds that invest in emerging markets.
Also, because many of the funds' investments are denominated in
foreign currencies, changes in the value of currencies can
significantly affect a fund's share price. FMR may use a variety of
techniques to either increase or decrease a fund's exposure to any
currency.
FMR may use various investment techniques to hedge a portion of a
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. When you sell your shares of a fund, they may be
worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. The funds may invest in short-term debt securities and money
market instruments for cash management purposes. Each fund also
reserves the right to invest without limitation in preferred stocks
and investment-grade debt instruments for temporary, defensive
purposes.
DIVERSIFIED INTERNATIONAL FUND seeks capital growth by investing
primarily in equity securities of companies located anywhere outside
the United States. FMR normally invests at least 65% of the fund's
total assets in foreign securities. The fund may also invest in U.S.
issuers.
The fund normally diversifies its investments across different
countries and regions. In allocating the fund's assets across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
The disciplined approach involves computer-aided, quantitative
analysis supported by fundamental research. FMR's computer model
systematically reviews thousands of stocks, using historical earnings,
dividend yield, earnings per share, and many other factors. Then,
potential investments are analyzed further using fundamental criteria,
such as the company's growth potential and estimates of current
earnings.
EUROPE CAPITAL APPRECIATION FUND seeks capital appreciation over the
long term by investing in securities of issuers that have their
principal activities in Europe. FMR normally invests at least 65% of
the fund's total assets in these securities.
The fund normally diversifies its investments across different
countries. In allocating the fund's assets across countries, FMR will
consider the size of the market in each country relative to the size
of the markets in Europe as a whole.
The fund's performance is closely tied to economic and political
conditions within Europe and the European Economic Area (formerly the
Common Market). Some European countries, particularly those in eastern
Europe, have less stable economies than those in western Europe. A
majority of the European economies continue to be weak, and business
and consumer confidence remains low. The movement of many eastern
European countries toward market economies, and the movement toward a
unified common market may significantly affect European economies and
markets. Eastern European countries are considered emerging markets.
JAPAN FUND seeks long-term growth of capital by investing in
securities of Japanese issuers. FMR normally invests at least 65% of
the fund's total assets in these securities. The fund may also invest
in securities of other Southeast Asian issuers.
Japan's economic growth has declined significantly since 1990. The
general government position has deteriorated as a result of weakening
economic growth and unsuccessful stimulus measures taken to support
economic activity and to restore financial stability. Although the
decline in interest rates and fiscal stimulus packages have helped to
contain recessionary forces, uncertainties remain. Japan is also
heavily dependent upon international trade, so its economy is
especially sensitive to trade barriers. In addition, Japan's banking
industry is undergoing problems related to bad loans and declining
values of real estate.
LATIN AMERICA FUND seeks high total investment return by investing in
securities of Latin American issuers. FMR normally invests at least
65% of the fund's total assets in these securities. Latin America
includes Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru,
Panama, and Venezuela.
The fund normally diversifies its investments across different
countries. In allocating the fund's assets across countries, FMR will
consider the size of the market in each country relative to the size
of the markets in Latin America as a whole.
Although there has been significant improvement in some Latin American
economies, others continue to struggle with high interest and
inflation rates. Recovery will depend on stability of the Brazilian
Real, economic conditions in other countries and on world commodity
prices. This region is vulnerable to political instability. The North
American Free Trade Agreement will also continue to have a significant
impact on the region.
GLOBAL EQUITY FUND seeks long-term growth of capital by investing
primarily in equity securities of issuers located anywhere in the
world. FMR normally invests at least 65% of the fund's total assets in
equity securities.
The fund normally diversifies its investments across different
countries and regions, including the United States. In allocating the
fund's assets across countries and regions, FMR will consider the size
of the market in each country and region relative to the size of the
world market as a whole.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
your investment professional.
EQUITY SECURITIES may include common stocks, preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest in more than 10% of the outstanding voting securities of a
single issuer. This limitation does not apply to securities of other
investment companies.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already
be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general or regional economic difficulty.
RESTRICTIONS: Purchase of a debt security is consistent with a fund's
debt quality policy if it is rated at or above the stated level by
Moody's Investors Service (Moody's) or rated in the equivalent
categories by Standard & Poor's (S&P) or is unrated but judged to be
of equivalent quality by FMR. Each fund currently intends to limit its
investments in lower than Baa-quality debt securities (sometimes
called "junk bonds") to less than 35% of its assets.

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DEBT RATINGS
Moody's
Investors Service Standard & Poor's
Rating Rating

INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa AA
Upper-medium grade A A
Medium grade Baa BBB
LOWER QUALITY
Moderately speculative Ba BB
Speculative B B
Highly speculative Caa CCC
Poor quality Ca CC
Lowest quality, no interest C C
In default, in arrears -- D

REFER TO THE FUNDS' SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
EACH FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P
TO DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign currencies;
withholding or other taxes; trading, settlement, custodial, and other
operational risks; and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to
pay interest and repay principal when due and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments.
EXPOSURE TO EMERGING MARKETS. Investing in emerging markets involves
risks in addition to and greater than those generally associated with
investing in more developed foreign markets. The extent of economic
development; political stability; market depth, infrastructure, and
capitalization; and regulatory oversight is generally less than in
more developed markets. Emerging market economies may be subject to
greater social, economic, regulatory, and political uncertainties. All
of these factors generally make emerging market securities more
volatile and potentially less liquid than securities issued in more
developed markets.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S.
repurchase agreements, and may be denominated in foreign currencies.
They also may involve greater risk of loss if the counterparty
defaults. Some counterparties in these transactions may be less
creditworthy than those in U.S. markets.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for a fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not invest more than 15% of its assets in
illiquid securities.
WARRANTS are instruments which entitle the holder to buy an equity
security at a specific price for a specific period of time. The price
of a warrant tends to be more volatile than the price of its
underlying security, and a warrant ceases to have value if it is not
exercised prior to its expiration date. In addition, changes in the
value of a warrant do not necessarily correspond to changes in the
value of its underlying security.
OTHER INSTRUMENTS may include securities of closed-end investment
companies and real estate-related instruments.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest more than 5% in the securities of any one issuer. This
limitation does not apply to U.S. Government securities or to
securities of other investment companies.
Each fund may not invest more than 25% of its total assets in any one
industry, except that Latin America Fund may invest up to 35% of its
total assets in any industry that accounts for more than 20% of the
Latin American market as a whole, although it does not currently
intend to do so. This limitation does not apply to U.S. Government
securities.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33 1/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33 1/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
DIVERSIFIED INTERNATIONAL FUND seeks capital growth by investing
primarily in equity securities of companies located anywhere outside
the U.S.
EUROPE CAPITAL APPRECIATION FUND seeks long-term capital appreciation.
JAPAN FUND seeks long-term growth of capital.
LATIN AMERICA FUND seeks high total investment return.
GLOBAL EQUITY FUND seeks long-term growth of capital.
With respect to 75% of its total assets, each fund may not invest more
than 5% in the securities of any one issuer and may not invest in more
than 10% of the outstanding voting securities of a single issuer.
These limitations do not apply to U.S. Government securities or to
securities of other investment companies.
Each fund may not invest more than 25% of its total assets in any one
industry, except that Latin America Fund may invest up to 35% of its
total assets in any industry that accounts for more than 20% of the
Latin American market as a whole. This limitation does not apply to
U.S. Government securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 33 1/3% of its total assets.
Loans, in the aggregate, may not exceed 33 1/3% of a fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, each fund pays fees related to its daily
operations. Expenses paid out of each class's assets are reflected in
that class's share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. Each fund also pays OTHER EXPENSES,
which are explained on page .
FMR may, from time to time, agree to reimburse each class for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a class if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated at any time without notice, can
decrease a class's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee
is calculated by adding a group fee rate to an individual fund fee
rate, multiplying the result by the fund's monthly average net assets,
and dividing by twelve.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52%, and it
drops as total assets under management increase.
For October 1998, the group fee rate was 0.2910%. The individual fund
fee rate is 0.45% for each fund.
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR
Far East, FIJ and FIIA. FIIA in turn has a sub-advisory agreement with
FIIA (U.K.) L. These sub-advisers are compensated for providing FMR
with investment research and advice on issuers based outside the
United States. FMR pays FMR U.K. and FMR Far East fees equal to 110%
and 105%, respectively, of the costs of providing these services. FMR
pays FIJ and FIIA a fee equal to 30% of its management fee rate
associated with investments for which the sub-adviser provided
investment advice.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to
50% of its management fee rate with respect to a fund's investments
that the sub-adviser manages on a discretionary basis. FIIA pays FIIA
(U.K.) L a fee equal to 110% of the cost of providing these services.
OTHER EXPENSES
While the management fee is a significant component of each fund's
annual operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for the Institutional Class of each fund. Fidelity
Service Company, Inc. (FSC) calculates the net asset value per share
(NAV) and dividends for the Institutional Class of each fund,
maintains the general accounting records for each fund, and
administers the securities lending program for each fund.
Each fund also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by a fund to
reduce that fund's custodian or transfer agent fees.
The Institutional Class of each fund has adopted a DISTRIBUTION AND
SERVICE PLAN. Each plan recognizes that FMR may use its management fee
revenues, as well as its past profits or its resources from any other
source, to pay FDC for expenses incurred in connection with the
distribution of Institutional Class shares. FMR, directly or through
FDC, may make payments to third parties, such as banks or
broker-dealers, that engage in the sale of, or provide shareholder
support services for, Institutional Class shares. Currently, the Board
of Trustees of each fund has authorized such payments.
The funds' portfolio turnover rates will vary from year to year. High
turnover rates increase transaction costs and may increase taxable
capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT

HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of Institutional Class is the class's net
asset value per share (NAV). Institutional Class shares are sold
without a sales charge.
Your shares will be purchased at the next NAV calculated after your
order is received in proper form. Institutional Class's NAV is
normally calculated each business day at 4:00 p.m. Eastern time.
Short-term or excessive trading into and out of a fund may harm fund
performance by disrupting portfolio management strategies and by
increasing fund expenses. Accordingly, each fund may reject any
purchase orders, including exchanges, particularly from market timers
or investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
the fund. For these purposes, FMR may consider an investor's trading
history in a fund or other Fidelity funds, and accounts under common
ownership or control.
It is the responsibility of your investment professional to transmit
your order to buy shares to the transfer agent before the close of
business on the day you place your order.
Fidelity must receive payment within three business days after an
order for shares is placed; otherwise your purchase order may be
canceled and you could be held liable for resulting fees and/or
losses.
Share certificates are not available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an
account application and mail it along with your check. You may also
open your account by wire as described on page . If there is no
account application accompanying this prospectus, call your investment
professional or, if you are investing through a broker-dealer or
insurance representative, call 1-800-522-7297 or, if you are investing
through a bank representative, call 1-800-843-3001.
If you are investing through a tax-advantaged retirement plan, such as
an IRA, for the first time, you will need a special application.
Contact your investment professional for more information and a
retirement account application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you
can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same
class of another Fidelity Advisor fund or from another Fidelity fund,
or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity Advisor retirement accounts(dagger) $500
Through regular investment plans* $100
TO ADD TO AN ACCOUNT $100
MINIMUM BALANCE $1,000
For certain Fidelity Advisor retirement accounts(dagger) None
(dagger) THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH
IRA, ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
* AN ACCOUNT MAY BE OPENED WITH A MINIMUM OF $100, PROVIDED THAT A
REGULAR INVESTMENT PLAN IS ESTABLISHED AT THE TIME THE ACCOUNT IS
OPENED. FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE
REFER TO "INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for certain Fidelity retirement accounts funded
through salary deduction, or accounts opened with the proceeds of
distributions from such retirement accounts. Refer to the program
materials for details. In addition, each fund reserves the right to
waive or lower investment minimums in other circumstances.
For further information on opening an account, please consult your
investment professional or refer to the account application.

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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (SMALL SOLID BULLET) EXCHANGE FROM THE (SMALL SOLID BULLET) EXCHANGE FROM THE
(SMALL SOLID BULLET) IF YOU ARE SAME CLASS OF ANOTHER SAME CLASS OF
INVESTING FIDELITY ADVISOR FUND OR ANOTHER FIDELITY
THROUGH A FROM ANOTHER FIDELITY ADVISOR FUND OR FROM
BROKER-DEALER OR FUND ACCOUNT WITH THE ANOTHER FIDELITY FUND
INSURANCE SAME REGISTRATION, ACCOUNT WITH THE
REPRESENTATIVE, INCLUDING NAME, SAME REGISTRATION,
CALL ADDRESS, AND TAXPAYER INCLUDING NAME,
1-800-522-729 ID NUMBER. ADDRESS, AND
7; IF YOU ARE TAXPAYER ID NUMBER.
INVESTING
THROUGH A BANK
REPRESENTATIVE,
CALL
1-800-843-300
1; OR CALL YOUR
INVESTMENT
PROFESSIONAL.
(PHONE_GRAPHIC)

MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND SIGN THE (SMALL SOLID BULLET) MAKE YOUR CHECK
ACCOUNT APPLICATION. PAYABLE TO THE
MAKE YOUR CHECK COMPLETE NAME OF
PAYABLE TO THE THE FUND OF YOUR
COMPLETE NAME OF THE CHOICE AND NOTE THE
FUND OF YOUR CHOICE APPLICABLE CLASS.
AND NOTE THE INDICATE YOUR FUND
APPLICABLE CLASS. MAIL ACCOUNT NUMBER ON
TO THE ADDRESS YOUR CHECK AND MAIL
INDICATED ON THE TO THE ADDRESS
APPLICATION. PRINTED ON YOUR
ACCOUNT STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY MAIL: IF
YOU ARE INVESTING
THROUGH A
BROKER-DEALER OR
INSURANCE
REPRESENTATIVE, CALL
1-800-522-7297; IF
YOU ARE INVESTING
THROUGH A BANK
REPRESENTATIVE, CALL
1-800-843-3001;
OR CALL YOUR
INVESTMENT
PROFESSIONAL FOR
INSTRUCTIONS.

IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR ACCOUNT (SMALL SOLID BULLET) BRING YOUR CHECK TO
APPLICATION AND CHECK YOUR INVESTMENT
TO YOUR INVESTMENT PROFESSIONAL.
PROFESSIONAL.

WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) IF YOU ARE INVESTING (SMALL SOLID BULLET) NOT AVAILABLE FOR
THROUGH A RETIREMENT ACCOUNTS.
BROKER-DEALER OR (SMALL SOLID BULLET) WIRE TO:
INSURANCE BANKER'S TRUST CO.
REPRESENTATIVE, CALL ROUTING #
1-800-522-7297 OR, 021001033
IF YOU ARE INVESTING FIDELITY DART
THROUGH A BANK DEPOSITORY
REPRESENTATIVE, CALL ACCOUNT #
1-800-843-3001 TO 00159759
SET UP YOUR ACCOUNT FBO: (ACCOUNT
AND ARRANGE A WIRE NAME)
TRANSACTION. NOT (ACCOUNT NUMBER)
AVAILABLE FOR SPECIFY THE COMPLETE
RETIREMENT ACCOUNTS. NAME OF THE FUND OF
(SMALL SOLID BULLET) WIRE TO: YOUR CHOICE, NOTE
BANKER'S TRUST CO. THE APPLICABLE CLASS
ROUTING # AND INCLUDE YOUR
021001033 ACCOUNT NUMBER AND
FIDELITY DART YOUR NAME.
DEPOSITORY
ACCOUNT #00159759
FBO: (ACCOUNT NAME)
(ACCOUNT NUMBER)
SPECIFY THE COMPLETE
NAME OF THE FUND OF
YOUR CHOICE, NOTE THE
APPLICABLE CLASS AND
INCLUDE YOUR NEW
ACCOUNT NUMBER AND
YOUR NAME.

AUTOMATICALLY (AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE (SMALL SOLID BULLET) USE FIDELITY ADVISOR
SYSTEMATIC
INVESTMENT PROGRAM.
SIGN UP FOR THIS
SERVICE WHEN
OPENING YOUR
ACCOUNT, OR CALL YOUR
INVESTMENT
PROFESSIONAL TO BEGIN
THE PROGRAM.

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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of Institutional Class is the class's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Institutional Class's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit
your order to sell shares to Fidelity before the close of business on
the day you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request
must be made in writing, except for exchanges to shares of the same
class of another Fidelity Advisor fund or shares of other Fidelity
funds, which can be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$1,000 worth of shares in the account to keep it open (account minimum
balances do not apply to retirement and Fidelity Defined Trust
accounts).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service
in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner,
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity Advisor account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union (if authorized under state law),
securities exchange or association, clearing agency, or savings
association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table on page .
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
Unless otherwise instructed, Fidelity will send a check to the record
address.

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ACCOUNT TYPE SPECIAL
REQUIREMENTS

PHONE ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM CHECK
(SMALL SOLID BULLET) IF YOU ARE EXCEPT RETIREMENT REQUEST: $100,000.
INVESTING ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MAY EXCHANGE
THROUGH A TO THE SAME CLASS OF
BROKER-DEALER OR OTHER FIDELITY ADVISOR
INSURANCE FUNDS OR TO OTHER
REPRESENTATIVE, FIDELITY FUNDS IF BOTH
CALL ACCOUNTS ARE
1-800-522-729 REGISTERED WITH THE
7; IF YOU ARE SAME NAME(S),
INVESTING ADDRESS, AND
THROUGH A BANK TAXPAYER ID NUMBER.
REPRESENTATIVE,
CALL
1-800-843-300
1; OR CALL YOUR
INVESTMENT
PROFESSIONAL.
(PHONE_GRAPHIC)

MAIL OR IN PERSON (MAIL_GRAPHIC)(HAND_GRAPHIC) INDIVIDUAL, JOINT (SMALL SOLID BULLET) THE LETTER OF
TENANT, INSTRUCTION MUST BE
SOLE PROPRIETORSHIP, SIGNED BY ALL PERSONS
UGMA, UTMA REQUIRED TO SIGN FOR
TRANSACTIONS, EXACTLY
AS THEIR NAMES
RETIREMENT ACCOUNT APPEAR ON THE
ACCOUNT.
(SMALL SOLID BULLET) THE ACCOUNT OWNER
SHOULD COMPLETE A
RETIREMENT
DISTRIBUTION FORM. IF
YOU ARE INVESTING
THROUGH A
BROKER-DEALER OR
INSURANCE
REPRESENTATIVE, CALL
1-800-522-7297; IF
YOU ARE INVESTING
THROUGH A BANK
REPRESENTATIVE, CALL
1-800-843-3001;
OR CALL YOUR
INVESTMENT
PROFESSIONAL TO
REQUEST ONE.

TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST
SIGN THE LETTER
INDICATING CAPACITY
AS TRUSTEE. IF THE
TRUSTEE'S NAME IS NOT
IN THE ACCOUNT
REGISTRATION, PROVIDE
A COPY OF THE TRUST
DOCUMENT CERTIFIED
WITHIN THE LAST 60
DAYS.

BUSINESS OR (SMALL SOLID BULLET) AT LEAST ONE PERSON
ORGANIZATION AUTHORIZED BY
CORPORATE RESOLUTION
TO ACT ON THE
ACCOUNT MUST SIGN
THE LETTER.

EXECUTOR, (SMALL SOLID BULLET) IF YOU ARE INVESTING
ADMINISTRATOR, THROUGH A
CONSERVATOR/GUARDIAN BROKER-DEALER OR
INSURANCE
REPRESENTATIVE, CALL
1-800-522-7297; IF
YOU ARE INVESTING
THROUGH A BANK
REPRESENTATIVE, CALL
1-800-843-3001;
OR CALL YOUR
INVESTMENT
PROFESSIONAL FOR
INSTRUCTIONS.

WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MUST SIGN UP FOR
EXCEPT RETIREMENT THE WIRE FEATURE
BEFORE USING IT. TO
VERIFY THAT IT IS IN
PLACE, IF YOU ARE
INVESTING THROUGH A
BROKER-DEALER OR
INSURANCE
REPRESENTATIVE, CALL
1-800-522-7297; IF
YOU ARE INVESTING
THROUGH A BANK
REPRESENTATIVE, CALL
1-800-843-3001;
OR CALL YOUR
INVESTMENT
PROFESSIONAL.
MINIMUM WIRE:
$500.
(SMALL SOLID BULLET) YOUR WIRE
REDEMPTION REQUEST
MUST BE RECEIVED IN
PROPER FORM BY THE
TRANSFER AGENT BEFORE
4:00 P.M. EASTERN
TIME FOR MONEY TO
BE WIRED ON THE NEXT
BUSINESS DAY.

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND

MINIMUM MINIMUM
INITIAL ADDITIONAL FREQUENCY SETTING UP OR CHANGING
$100 $100 Monthly, bimonthly, quarterly, (small solid bullet) For a new account, complete the appropriate
section on the application.
or semi-annually (small solid bullet) For existing accounts, call your investment
professional for an application.
(small solid bullet) To change the amount or frequency of your
investment, contact your investment
professional directly
or, if you purchased your shares through a
broker-dealer or insurance representative,
call 1-800-522-7297. If you purchased your
shares through a bank representative, call
1-800-843-3001. Call at least 10 business days
prior to your next scheduled investment date (20
business days if you purchased your shares through
a bank).

</TABLE>

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Normally, dividends and
capital gains are distributed in December and each fund may pay
additional capital gains after the close of its fiscal year.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you
want to receive your distributions. The funds offer four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the same
class of the fund. If you do not indicate a choice on your
application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(Registered trademark) PROGRAM. Your dividend
distributions will be automatically invested in the same class of
shares of another identically registered Fidelity Advisor fund. You
will be sent a check for your capital gain distributions or your
capital gain distributions will be automatically reinvested in
additional shares of the same class of the fund.
If you select distribution option 2, 3 or 4 and the U.S. Postal
Service does not deliver your checks, your election may be converted
to the Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call your investment professional directly or, if
you purchased your shares through a broker-dealer or insurance
representative, call 1-800-522-7297. If you purchased your shares
through a bank representative, call 1-800-843-3001.
When Institutional Class deducts a distribution from its NAV, the
reinvestment price is the class's NAV at the close of business that
day. Distribution checks will be mailed within seven days.
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax-advantaged retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains.
Every January, Fidelity will send you and the IRS a statement showing
the tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges - are
subject to capital gains tax. A capital gain or loss is the difference
between the cost of your shares and the price you receive when you
sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of
tax to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount
of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a class has realized but
not yet distributed income or capital gains, you will pay the full
price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
CURRENCY CONSIDERATIONS. If a fund's dividends exceed its taxable
income in any year, which is sometimes the result of currency-related
losses, all or a portion of the fund's dividends may be treated as a
return of capital to shareholders for tax purposes. To minimize the
risk of a return of capital, a fund may adjust its dividends to take
currency fluctuation into account, which may cause the dividends to
vary. Any return of capital will reduce the cost basis of your shares,
which will result in a higher reported capital gain or a lower report
capital loss when you sell your shares. The statement you receive in
January will specify if any distributions included a return of
capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce a
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares, an offsetting tax
credit may be available to you. If you do not meet such holding period
requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more
taxable income or capital gains than were actually distributed by the
fund, but will also show the amount of the available offsetting credit
or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates Institutional Class's NAV as
of the close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting
that class's pro rata share of the value of the applicable fund's
liabilities, subtracting the liabilities allocated to that class, and
dividing the result by the number of shares of that class that are
outstanding.
Each fund's assets are valued primarily on the basis of market
quotations. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
on the basis of amortized cost. This method minimizes the effect of
changes in a security's market value. Foreign securities are valued on
the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars
using current exchange rates. In addition, if quotations are not
readily available, or if the values have been materially affected by
events occurring after the closing of a foreign market, assets may be
valued by another method that the Board of Trustees believes
accurately reflects fair value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. 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. Additional
documentation may be required from corporations, associations, and
certain fiduciaries.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your order is received in proper
form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
Fidelity has incurred.
AUTOMATED PURCHASE ORDERS. Institutional Class shares can be purchased
or sold through investment professionals utilizing an automated order
placement and settlement system that guarantees payment for orders on
a specified date.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on
behalf of customers by phone, with payment to follow no later than
close of business on the next business day. If payment is not received
by the next business day, the order will be canceled and the financial
institution will be liable for any losses.
TO AVOID THE COLLECTION PERIOD associated with check purchases,
consider buying shares by bank wire, U.S. Postal money order, U.S.
Treasury check, Federal Reserve check, or automatic investment plans.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form.
Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check have been
collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
Each fund reserves the right to impose a trading fee on redemptions
and exchanges from the fund.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be
given 30 days' notice to reestablish the minimum balance. If you do
not increase your balance, Fidelity reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at
the NAV on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the
sale of shares of the funds. In some instances, these incentives will
be offered only to certain types of investment professionals, such as
bank-affiliated or non-bank affiliated broker-dealers, or to
investment professionals whose representatives provide services in
connection with the sale or expected sale of significant amounts of
shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging your
Institutional Class shares for Institutional Class shares of other
Fidelity Advisor funds or for shares of other Fidelity funds. However,
you should note the following:
(small solid bullet) The fund or class you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund or class, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage difference between that fund's sales charge and
any sales charge you may have previously paid in connection with the
shares you are exchanging. For example, if you had already paid a
sales charge of 2% on your shares and you exchange them into a fund
with a 3% sales charge, you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes
more than four exchanges out of a fund per calendar year. Accounts
under common ownership or control, including accounts with the same
taxpayer identification number, will be counted together for purposes
of the four exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify these
exchange privileges in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related SAI,
in connection with the offer contained in this Prospectus. If given or
made, such other information or representations must not be relied
upon as having been authorized by the funds or FDC. This Prospectus
and the related SAI do not constitute an offer by the funds or by FDC
to sell or to buy shares of the funds to any person to whom it is
unlawful to make such offer.
Fidelity, Fidelity Investments, Fidelity Investments & (Pyramid)
Design, and Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services is a servicemark of FMR Corp.
APPENDIX
CALENDAR YEAR PERFORMANCE FOR RELATED FUNDS
Set forth below are charts presenting the calendar year performance of
each Related Fund or the Composite, as applicable, for the past 10
years or since its inception. You should not assume that Advisor
Diversified International, Advisor Europe Capital Appreciation,
Advisor Japan, Advisor Latin America, or Advisor Global Equity will
have the same future performance as the Related Funds or the
Composite. The Related Funds have different cost structures than the
funds offered through this prospectus. The performance of each Related
Fund and the Composite does not represent the historical performance
of the funds offered through this prospectus and should not be
interpreted as indicative of the future performance of the funds
offered through this prospectus or the Related Funds.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY DIVERSIFIED INTERNATIONAL FUND
Calendar year total returns 1992 1993 1994 1995 1996 1997

FIDELITY DIVERSIFIED INTERNATIONAL FUND -13.81% 36.67% 1.09% 17.97% 20.02% 13.72%

Morgan Stanley Capital International -9.65% 33.56% 7.81% 11.16% 7.63% 6.06%
GDP-Weighted EAFE Index

Morgan Stanley Capital International -12.17% 32.56% 7.78% 11.21% 6.05% 2.01%
EAFE Index

Lipper International Funds Average -4.77% 39.40% -0.71% 9.41% 11.78% 5.44%

Consumer Price Index 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%

</TABLE>

PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: NIL
ROW: 2, COL: 1, VALUE: NIL
ROW: 3, COL: 1, VALUE: NIL
ROW: 4, COL: 1, VALUE: NIL
ROW: 5, COL: 1, VALUE: NIL
ROW: 6, COL: 1, VALUE: -13.81
ROW: 7, COL: 1, VALUE: 36.67
ROW: 8, COL: 1, VALUE: 1.09
ROW: 9, COL: 1, VALUE: 17.97
ROW: 10, COL: 1, VALUE: 20.02
ROW: 11, COL: 1, VALUE: 13.72
(LARGE SOLID BOX) FIDELITY DIVERSIFIED
INTERNATIONAL FUND

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY EUROPE CAPITAL APPRECIATION FUND
Calendar year total returns+ 1994 1995 1996 1997

FIDELITY EUROPE CAPITAL 6.88% 14.69% 25.89% 24.96%
APPRECIATION FUND

Morgan Stanley Capital International 2.28% 21.62% 21.09% 24.17%
Europe Index

Lipper European Region Funds Average 1.22% 16.85% 23.88% 15.78%

Consumer Price Index 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: 6.88
Row: 9, Col: 1, Value: 14.69
Row: 10, Col: 1, Value: 25.89
Row: 11, Col: 1, Value: 24.96
(LARGE SOLID BOX) FIDELITY EUROPE CAPITAL
APPRECIATION FUND
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING THE FUND'S MAXIMUM
FRONT-END SALES CHARGE OF 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY JAPAN FUND
Calendar year total returns+ 1993 1994 1995 1996 1997

FIDELITY JAPAN FUND 20.45% 16.46% -2.13% -11.19% -10.73%

Tokyo Stock Price Index 24.14% 22.06% -1.62% -16.26% -28.09%

Lipper Japanese Funds Average 22.94% 15.39% -1.85% -11.98% -14.07%

Consumer Price Index 2.75% 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 20.45
Row: 8, Col: 1, Value: 16.46
Row: 9, Col: 1, Value: -2.13
Row: 10, Col: 1, Value: -11.19
Row: 11, Col: 1, Value: -10.73
(LARGE SOLID BOX) FIDELITY JAPAN FUND
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING THE FUND'S MAXIMUM
FRONT-END SALES CHARGE OF 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY LATIN AMERICA FUND
Calendar year total returns+ 1994 1995 1996 1997

FIDELITY LATIN AMERICA FUND -23.17% -16.46% 30.72% 32.89%

Morgan Stanley Capital International 0.64% -12.83% 22.21% 31.64%
Emerging Markets Free -
Latin America Index

Lipper Latin America Region -14.24% -20.56% 27.40% 25.27%
Funds Average

Consumer Price Index 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: -23.17
Row: 9, Col: 1, Value: -16.46
Row: 10, Col: 1, Value: 30.72
Row: 11, Col: 1, Value: 32.89
(LARGE SOLID BOX) FIDELITY LATIN AMERICA FUND
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING THE FUND'S MAXIMUM
FRONT-END SALES CHARGE OF 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPOSITE(DAGGER)
Calendar year total returns 1994 1995 1996 1997

COMPOSITE 1.80% 18.94% 17.08% 19.31%

Morgan Stanley Capital International 5.08% 20.72% 13.48% 15.76%
World Index

Lipper Global Funds Average -3.03% 16.05% 16.51% 13.04%

Consumer Price Index 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: 1.8
Row: 7, Col: 1, Value: 18.94
Row: 8, Col: 1, Value: 17.08
Row: 9, Col: 1, Value: 19.31
(LARGE SOLID BOX) GLOBAL COMPOSITE
(dagger)THE METHODOLOGY FOR CALCULATING THE PERFORMANCE OF THE
NON-MUTUAL FUND ACCOUNTS IN THE COMPOSITE DIFFERS FROM THAT REQUIRED
TO BE EMPLOYED BY MUTUAL FUNDS THAT ARE OFFERED IN THE UNITED STATES.
THE COMPETITIVE FUNDS AVERAGE is each fund's Lipper Funds Average
which reflects the performance of mutual funds with similar investment
objectives. These averages, published by Lipper Analytical Services,
Inc., exclude the effect of sales loads.
The competitive funds averages are the Lipper International Funds
Average for Fidelity Diversified International Fund, the Lipper
European Region Funds Average for Fidelity Europe Capital Appreciation
Fund, the Lipper Japanese Funds Average for Fidelity Japan Fund, and
the Lipper Latin America Region Funds Average for Fidelity Latin
America Fund.
As of September 30, 1998, the Lipper International Funds Average
reflected the performance of 289 mutual funds with similar investment
objectives; the Lipper European Region Funds Average reflected the
performance of 87 mutual funds with similar investment objectives; the
Lipper Japanese Funds Average reflected the performance of 31 mutual
funds with similar investment objectives; and the Lipper Latin America
Region Funds Average reflected the performance of 41 mutual funds with
similar investment objectives.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST
(EAFE) INDEX is an unmanaged index that is designed to represent the
performance of developed stock markets outside of the United States
and Canada. The index may be compiled in two ways: a market
capitalization weighted (cap-weighted) and a gross domestic product
weighted (GDP-weighted) version. As of September 30, 1998, the
cap-weighted index included over 1,100 equity securities of companies
domiciled in 21 countries, and the GDP-weighted index included over
1,100 equity securities of companies domiciled in 21 countries.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is an unmanaged,
market capitalization weighted index that is designed to represent the
performance of developed stock markets in Europe. As of September 30,
1998, the index included over 592 equity securities of companies
domiciled in 15 European countries.
TOKYO STOCK PRICE INDEX (TOPIX) is a market capitalization weighted
index of over 1,100 stocks traded in the Japanese market.
MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE - LATIN
AMERICA INDEX is a market capitalization weighted index of
approximately 190 stocks traded in seven Latin American markets.
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an unmanaged,
market capitalization weighted index that is designed to represent the
performance of developed stock markets throughout the world. As of
September 30, 1998, the index included over 1,559 equity securities of
companies domiciled in 23 countries.
Unlike each fund's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.

Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.

AINTNEW-PRO-1298
1.708835.101

FIDELITY ADVISOR
INTERNATIONAL EQUITY FUNDS
CLASS A, CLASS T, CLASS B, AND
CLASS C

FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL FUND
Fund 731 (Class A), Fund 735 (Class T), Fund 732 (Class B), Fund 733
(Class C)
FIDELITY ADVISOR EUROPE CAPITAL APPRECIATION FUND
Fund 736 (Class A), Fund 740 (Class T), Fund 737 (Class B), Fund 738
(Class C)
FIDELITY ADVISOR JAPAN FUND
Fund 741 (Class A), Fund 745 (Class T), Fund 742 (Class B), Fund 743
(Class C)
FIDELITY ADVISOR LATIN AMERICA FUND
Fund 746 (Class A), Fund 750 (Class T), Fund 747 (Class B), Fund 748
(Class C)
FIDELITY ADVISOR GLOBAL EQUITY FUND
Fund 751 (Class A), Fund 755 (Class T), Fund 752 (Class B), Fund 753
(Class C)
FUNDS OF FIDELITY ADVISOR SERIES VIII

PROSPECTUS
DECEMBER 14, 1998

(FIDELITY_LOGO_GRAPHIC)
82 DEVONSHIRE STREET, BOSTON, MA 02109

CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS 2 WHO MAY WANT TO INVEST

3 EXPENSES EACH CLASS'S SALES CHARGE (LOAD) AND ITS YEARLY
OPERATING EXPENSES.

6 PERFORMANCE

7 PRIOR PERFORMANCE OF SIMILAR FUNDS

THE FUNDS IN DETAIL 8 CHARTER HOW EACH FUND IS ORGANIZED.

9 INVESTMENT PRINCIPLES AND RISKS EACH FUND'S OVERALL APPROACH
TO INVESTING.

11 BREAKDOWN OF EXPENSES HOW OPERATING COSTS ARE CALCULATED
AND WHAT THEY INCLUDE.

YOUR ACCOUNT 13 TYPES OF ACCOUNTS DIFFERENT WAYS TO SET UP YOUR ACCOUNT,
INCLUDING TAX-ADVANTAGED RETIREMENT PLANS.

14 HOW TO BUY SHARES OPENING AN ACCOUNT AND MAKING ADDITIONAL
INVESTMENTS.

16 HOW TO SELL SHARES TAKING MONEY OUT AND CLOSING YOUR ACCOUNT.

19 INVESTOR SERVICES SERVICES TO HELP YOU MANAGE YOUR ACCOUNT.

SHAREHOLDER AND ACCOUNT POLICIES 20 DIVIDENDS, CAPITAL GAINS, AND TAXES

20 TRANSACTION DETAILS SHARE PRICE CALCULATIONS AND THE TIMING OF
PURCHASES AND REDEMPTIONS.

23 EXCHANGE RESTRICTIONS

24 SALES CHARGE REDUCTIONS AND WAIVERS

26 APPENDIX

</TABLE>

KEY FACTS

WHO MAY WANT TO INVEST
Class A, Class T, Class B, and Class C shares are offered to investors
who engage an investment professional for investment advice.
The funds may be appropriate for investors who want to pursue their
investment goals in markets outside the United States. By including
international investments in your portfolio, you can achieve
additional diversification and participate in growth opportunities
around the world. However, it is important to note that investments in
foreign securities involve risks in addition to those of U.S.
investments.
Diversified International Fund and Global Equity Fund do not focus on
any one region or country. Instead, each fund spans the globe looking
for investments that fit its criteria. The funds may be appropriate
for investors first entering the international markets or those who
are interested in broad participation in multiple markets around the
world.
Europe Capital Appreciation Fund, Japan Fund, and Latin America Fund
are designed for investors looking to target a particular region,
country, or emerging market.
The value of each fund's investments varies from day to day, generally
reflecting changes in market conditions, interest rates, and other
company, political, and economic news. In the short term, stock prices
can fluctuate dramatically in response to these factors. The
securities of small, less well-known companies may be more volatile
than those of larger companies. Over time, however, stocks have shown
greater growth potential than other types of securities. Investments
in foreign securities may involve risks in addition to those of U.S.
investments, including increased political and economic risk, as well
as exposure to currency fluctuations.
Each fund is not in itself a balanced investment plan. You should
consider your investment objective and tolerance for risk when making
an investment decision. When you sell your fund shares, they may be
worth more or less than what you paid for them.
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio.
Class A and Class T shares have a front-end sales charge and pay a
12b-1 fee. Class A and Class T shares may be subject to a contingent
deferred sales charge (CDSC). Class B and Class C shares do not have a
front-end sales charge, but do have a CDSC, and pay a 12b-1 fee.
Institutional Class shares have no sales charge and do not pay a 12b-1
fee, but are available only to certain types of investors. See "Sales
Charge Reductions and Waivers," page , for Institutional Class
eligibility information. You may obtain more information about
Institutional Class shares, which are not offered through this
prospectus, by calling 1-800-522-7297 if you are investing through a
broker-dealer or insurance representative, or 1-800-843-3001 if you
are investing through a bank representative, or from your investment
professional.
The performance of one class of shares of a fund may be different from
the performance of another class of shares of the same fund because of
different sales charges and class expenses. Contact your investment
professional to discuss which class is appropriate for you.
In determining which class of shares is appropriate for you, you
should consider, among other factors, the amount you plan to invest,
the length of time you intend to hold your shares, your eligibility
for a sales charge waiver or reduction, and the package of services
provided to you by your investment professional and the overall costs
of those services. In general, Class A shares have higher costs than
Class T shares over a short holding period because Class A shares have
a higher front-end sales charge, and Class A shares have lower costs
than Class T shares over a longer holding period because Class A
shares have lower 12b-1 fees. If you are planning to invest a
significant amount either at one time or through a regular investment
program, you should consider the reduced front-end sales charges
available on Class A and Class T shares. If you are eligible for a
front-end sales charge waiver on a purchase of both Class A and Class
T shares, Class A shares generally will have lower costs than Class T
shares because Class A shares have lower 12b-1 fees. However, you
should evaluate the overall costs of purchasing Class A shares or
Class T shares in the context of the package of services provided to
you by your investment professional. See "Transaction Details," page ,
and "Sales Charge Reductions and Waivers," page , for sales charge
reduction and waiver information.
If you prefer not to pay a front-end sales charge, you should consider
Class B or Class C shares. While Class B and Class C shares are
subject to higher ongoing costs than Class A or Class T shares, in
general because of their higher 12b-1 fees, Class B and Class C shares
are sold with a CDSC instead of a front-end sales charge so your
entire purchase amount is immediately invested. In general, Class B
shares have higher costs than Class C shares over a short holding
period because Class B shares have a higher CDSC that declines over a
maximum of six years, and Class B shares have lower costs than Class C
shares over a longer period because Class B shares convert to Class A
shares after a maximum of seven years. Please note that purchase
amounts of more than $250,000 will not be accepted for Class B shares,
that purchase amounts of more than $1,000,000 generally will not be
accepted for Class C shares, and that Class A or Class T shares may
have lower costs for investments that qualify for a front-end sales
charge reduction or waiver. See "How to Buy Shares," page , for more
information on the maximum purchase amount for Class C shares. If you
sell your Class B shares within six years, you will normally pay a
CDSC that varies depending on how long you have held your shares. If
you sell your Class C shares within one year, you will normally pay a
1.00% CDSC. See "Transaction Details," page , for CDSC schedules and
related information. Class B shares will automatically convert to
Class A shares after a holding period of seven years. Class C shares
do not convert to another class of shares. See "Transaction Details,"
page , for conversion information.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of a fund. Lower front-end sales charges may be
available with purchases of $50,000 or more. See "Transaction
Details," page , for an explanation of how and when these charges
apply.
A CDSC is imposed on Class B shares only if you redeem Class B shares
within six years of purchase. A CDSC is imposed on Class C shares only
if you redeem Class C shares within one year of purchase. See
"Transaction Details," page , for information about the CDSC.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS T CLASS B CLASS C

MAXIMUM SALES CHARGE ON PURCHASES 5.75% 3.50% NONE NONE
(AS A % OF OFFERING PRICE)

MAXIMUM CDSC (AS A % OF THE LESSER OF ORIGINAL
PURCHASE PRICE OR REDEMPTION PROCEEDS) NONE[A] NONE[A] 5.00%[B] 1.00%[C]

SALES CHARGE ON REINVESTED DISTRIBUTIONS NONE NONE NONE NONE

</TABLE>

[A] A CONTINGENT DEFERRED SALES CHARGE OF 0.25% IS ASSESSED ON CERTAIN
REDEMPTIONS OF CLASS A AND CLASS T SHARES ON WHICH A FINDER'S FEE WAS
PAID. SEE "TRANSACTION DETAILS," PAGE .
[B] DECLINES OVER 6 YEARS FROM 5.00% TO 0%.
[C] ON CLASS C SHARES REDEEMED WITHIN 1 YEAR OF PURCHASE.
ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to Fidelity Management & Research Company
(FMR). Each fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements
and financial reports.
12b-1 fees for Class A, Class T, Class B, and Class C include a
distribution fee and, for Class B and Class C, a shareholder service
fee. Distribution fees are paid by each class to FDC for services and
expenses in connection with the distribution of the applicable class's
shares. Shareholder service fees are paid by Class B and Class C of
the funds to FDC for services and expenses incurred in connection with
providing personal service to and/or maintenance of Class B and Class
C shareholder accounts. Long-term shareholders may pay more than the
economic equivalent of the maximum sales charges permitted by the
National Association of Securities Dealers, Inc., due to 12b-1 fees.
Each class's expenses are factored into its share price or dividends
and are not charged directly to shareholder accounts (see "Breakdown
of Expenses" on page ).
The following figures are based on estimated expenses of Class A,
Class T, Class B, and Class C of each fund and are calculated as a
percentage of average net assets of Class A, Class T, Class B, and
Class C of each fund.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES CLASS A CLASS T CLASS B CLASS C

DIVERSIFIED MANAGEMENT FEE 0.74%[A] 0.74%[A] 0.74%[A] 0.74%[A]
INTERNATIONAL

12B-1 FEE (INCLUDING 0.25% SHAREHOLDER SERVICE
FEE FOR CLASS B AND CLASS C SHARES) 0.25% 0.50% 1.00% 1.00%

OTHER EXPENSES (AFTER REIMBURSEMENT FOR CLASS A
AND CLASS B SHARES) 1.01%[A] 0.94%[A] 1.01%[A] 0.98%[A]

TOTAL OPERATING EXPENSES 2.00% 2.18% 2.75% 2.72%

EUROPE CAPITAL MANAGEMENT FEE 0.74%[A] 0.74%[A] 0.74%[A] 0.74%[A]
APPRECIATION

12B-1 FEE (INCLUDING 0.25% SHAREHOLDER SERVICE
FEE FOR CLASS B AND CLASS C SHARES) 0.25% 0.50% 1.00% 1.00%

OTHER EXPENSES (AFTER REIMBURSEMENT) 1.01%[A] 1.01%[A] 1.01%[A] 1.01%[A]

TOTAL OPERATING EXPENSES 2.00% 2.25% 2.75% 2.75%

JAPAN MANAGEMENT FEE 0.74%[A] 0.74%[A] 0.74%[A] 0.74%[A]

12B-1 FEE (INCLUDING 0.25% SHAREHOLDER SERVICE
FEE FOR CLASS B AND CLASS C SHARES) 0.25% 0.50% 1.00% 1.00%

OTHER EXPENSES (AFTER REIMBURSEMENT) 1.01%[A] 1.01%[A] 1.01%[A] 1.01%[A]

TOTAL OPERATING EXPENSES 2.00% 2.25% 2.75% 2.75%

LATIN AMERICA MANAGEMENT FEE 0.74%[A] 0.74%[A] 0.74%[A] 0.74%[A]

12B-1 FEE (INCLUDING 0.25% SHAREHOLDER SERVICE
FEE FOR CLASS B AND CLASS C SHARES) 0.25% 0.50% 1.00% 1.00%

OTHER EXPENSES (AFTER REIMBURSEMENT) 1.01%[A] 1.01%[A] 1.01%[A] 1.01%[A]

TOTAL OPERATING EXPENSES 2.00% 2.25% 2.75% 2.75%

GLOBAL EQUITY MANAGEMENT FEE 0.74%[A] 0.74%[A] 0.74%[A] 0.74%[A]

12B-1 FEE (INCLUDING 0.25% SHAREHOLDER SERVICE
FEE FOR CLASS B AND CLASS C SHARES) 0.25% 0.50% 1.00% 1.00%

OTHER EXPENSES 0.91%[A] 0.80%[A] 0.91%[A] 0.84%[A]

TOTAL OPERATING EXPENSES 1.90% 2.04% 2.65% 2.58%

</TABLE>

[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
EXPENSE TABLE EXAMPLE: You would pay the following amount in total
expenses on a $1,000 investment, assuming a 5% annual return and
either (1) full redemption or (2) no redemption at the end of each
time period. Total expenses shown below include your shareholder
transaction expenses, such as the maximum front-end sales charge or
CDSC, as applicable, and a class's annual operating expenses.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAMPLES

FULL REDEMPTION NO REDEMPTION

CLASS A CLASS T CLASS B CLASS C CLASS A CLASS T CLASS B CLASS C

DIVERSIFIED INTERNATIONAL 1 YEAR $77 $56 $78[A] $38[A] $77 $56 $28 $28

3 YEARS $117 $101 $115[A] $84 $117 $101 $85 $84

EUROPE CAPITAL APPRECIATION 1 YEAR $77 $57 $78[A] $38[A] $77 $57 $28 $28

3 YEARS $117 $103 $115[A] $85 $117 $103 $85 $85

JAPAN 1 YEAR $77 $57 $78[A] $38[A] $77 $57 $28 $28

3 YEARS $117 $103 $115[A] $85 $117 $103 $85 $85

LATIN AMERICA 1 YEAR $77 $57 $78[A] $38[A] $77 $57 $28 $28

3 YEARS $117 $103 $115[A] $85 $117 $103 $85 $85

GLOBAL EQUITY 1 YEAR $76 $55 $77[A] $36[A] $76 $55 $27 $26

3 YEARS $114 $97 $112[A] $80 $114 $97 $82 $80

</TABLE>

[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED EXPENSES OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A, Class T, Class B, and
Class C of each fund to the extent that total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses), as a percentage of their respective average net assets,
exceed the following rates:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A EFFECTIVE DATE CLASS T EFFECTIVE DATE CLASS B EFFECTIVE DATE CLASS C EFFECTIVE DATE

DIVERSIFIED INTERNATIONAL 2.00% 12/18/98 2.25% 12/18/98 2.75% 12/18/98 2.75% 12/18/98

EUROPE CAPITAL APPRECIATION 2.00% 12/18/98 2.25% 12/18/98 2.75% 12/18/98 2.75% 12/18/98

JAPAN 2.00% 12/18/98 2.25% 12/18/98 2.75% 12/18/98 2.75% 12/18/98

LATIN AMERICA 2.00% 12/22/98 2.25% 12/22/98 2.75% 12/22/98 2.75% 12/22/98

GLOBAL EQUITY 2.00% 12/18/98 2.25% 12/18/98 2.75% 12/18/98 2.75% 12/18/98
</TABLE>

If these agreements were not in effect, other expenses and total
operating expenses, as a percentage of average net assets, would be
expected to be the following amounts:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER EXPENSES[A] TOTAL OPERATING EXPENSES[A]
CLASS A CLASS T CLASS B CLASS C CLASS A CLASS T CLASS B CLASS C

DIVERSIFIED INTERNATIONAL 1.05% (DAGGER) 1.04% (DAGGER) 2.04% (DAGGER) 2.78% (DAGGER)

EUROPE CAPITAL APPRECIATION 2.00% 1.90% 1.90% 1.95% 2.99% 3.14% 3.64% 3.69%

JAPAN 16.64% 16.54% 16.55% 16.59% 17.63% 17.78% 18.29% 18.33%

LATIN AMERICA 17.04% 16.94% 16.95% 16.99% 18.03% 18.18% 18.69% 18.73%

GLOBAL EQUITY (DAGGER) (DAGGER) (DAGGER) (DAGGER) (DAGGER) (DAGGER) (DAGGER) (DAGGER)

</TABLE>

[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
(dagger) TOTAL OPERATING EXPENSES ARE EXPECTED TO BE LESS THAN THE
VOLUNTARY EXPENSE CAPS IN EFFECT DURING THE FISCAL YEAR ENDING OCTOBER
31, 1999.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN.
Performance history will be available for each fund after the funds
have been in operation for six months.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
Average annual and cumulative total returns usually will include the
effect of paying the maximum applicable sales charge.
Other illustrations of fund performance may show moving averages over
specified periods.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
PRIOR PERFORMANCE OF SIMILAR FUNDS
Because Advisor Diversified International, Advisor Europe Capital
Appreciation, Advisor Japan, Advisor Latin America, and Advisor Global
Equity (Corresponding Funds) were new when this prospectus was
printed, they have no previous operating history. However, Advisor
Diversified International, Advisor Europe Capital Appreciation,
Advisor Japan, and Advisor Latin America are modeled after the
following existing funds, respectively: Fidelity Diversified
International Fund, Fidelity Europe Capital Appreciation Fund,
Fidelity Japan Fund, and Fidelity Latin America Fund (Related Funds).
Advisor Diversified International, Advisor Europe Capital
Appreciation, Advisor Japan, and Advisor Latin America have investment
objectives and policies that are substantially identical in all
material respects to those of their respective Related Funds, which
are managed by FMR. Advisor Global Equity has an investment objective
and policies that are substantially similar in all material respects
to those of other accounts managed by FMR or an affiliate (Related
Accounts). The Related Funds and Accounts, however, have different
expenses and are sold through different distribution channels. FMR
also may manage other substantially similar funds and accounts
that may have better or worse performance than the Related Funds
and Accounts. Performance of other funds and accounts is not included
due to factors such as differences in their policies and/or portfolio
management strategies and/or because these accounts are not mutual
funds.
Below you will find information about the prior performance of the
Related Funds and Accounts, not the performance of the Corresponding
Funds offered through this prospectus. The performance data of the
Related Funds and Accounts is net of advisory fees and other expenses.
Although the Corresponding Funds have investment objectives and
policies that are substantially identical (or, in the case of Advisor
Global Equity, substantially similar) in all material respects to
those of the Related Funds and Accounts, you should not assume
that the Corresponding Funds will have the same performance as the
Related Funds and Accounts. For example, a Corresponding Fund's future
performance may be better or worse than the performance of its Related
Fund or Account due to, among other things, differences in sales
charges, expenses, asset sizes and cash flows between the
Corresponding Fund and its Related Fund or Account. Class A, Class T,
Class B, and Class C shares of the Corresponding Funds may have higher
sales charges and may have higher total expenses than the Related
Funds and Accounts, which would have resulted in lower performance if
each Corresponding Fund's current sales charges and expenses had been
applied to the performance of the Related Funds and Accounts. Certain
investors may be eligible for sales charge waivers. See "Sales Charge
Reductions and Waivers," page , for more information.
The Related Accounts include funds organized in foreign jurisdictions
that are not offered to U.S. investors. These funds have different
expense structures and are subject to different regulatory
requirements than U.S. mutual funds, which may affect their
performance.
Advisor Global Equity is subject to restrictions imposed by the
Investment Company Act of 1940 (1940 Act) and the Internal Revenue
Code of 1986, as amended (E.G., limits on the percentage of assets
invested in securities of issuers in a single industry and
requirements on distributing income to shareholders) that do not apply
to its Related Accounts. These differences may affect the performance
of Advisor Global Equity and cause it to differ from that of its
Related Accounts. Notwithstanding these differences, Advisor Global
Equity has an investment objective and policies that are substantially
similar in all material respects to those of its Related Accounts.
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical results of the
Related Funds and Accounts and do not reflect the effect of taxes. In
the case of Advisor Global Equity, the prior performance shown is
for a composite of non-mutual fund accounts with investment objectives
and policies that are substantially similar in all material respects
to those of Advisor Global Equity (Composite). The meth odology for
calculating the performance of the non-mutual fund accounts differs
from that required to be employed by mutual funds that are offered in
the United States.
The first table below shows the Related Funds or the Composite of
Advisor Diversified International, Advisor Europe Capital
Appreciation, Advisor Japan, Advisor Latin America, and Advisor Global
Equity; the date FMR began managing each Related Fund and the date of
the commencement of the Composite; and the asset size of each Related
Fund or the Composite as of September 30, 1998. The next table shows
the performance of each Related Fund or the Composite, as applicable,
over past periods. The charts in the Appendix, beginning on page ,
present calendar year performance for the Related Funds or the
Composite compared to different measures, including a competitive
funds average.

<TABLE>
<CAPTION>
<S> <C>
CORRESPONDING FUNDS OFFERED THROUGH THIS PROSPECTUS RELATED FUND OR COMPOSITE (INCEPTION DATE) AND ASSET SIZE

FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL FUND FIDELITY DIVERSIFIED INTERNATIONAL FUND
(DECEMBER 27, 1991) $ 1,812,000,000

FIDELITY ADVISOR EUROPE CAPITAL APPRECIATION FUND FIDELITY EUROPE CAPITAL APPRECIATION FUND (DECEMBER 21,
1993) $ 648,500,000

FIDELITY ADVISOR JAPAN FUND FIDELITY JAPAN FUND (SEPTEMBER 15, 1992) $ 243,900,000

FIDELITY ADVISOR LATIN AMERICA FUND FIDELITY LATIN AMERICA FUND (APRIL 19, 1993) $ 303,200,000

FIDELITY ADVISOR GLOBAL EQUITY FUND COMPOSITE OF NON-MUTUAL FUND ACCOUNTS MANAGED BY FMR OR
AN AFFILIATE
(MARCH 31, 1993) $3,410,000,000

</TABLE>

TABLE WIDTH IS 134 CHARACTERS.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
RELATED FUNDS[A]
AVERAGE ANNUAL TOTAL RETURN* CUMULATIVE TOTAL RETURN*

PAST 1 YEAR PAST 5 YEARS 10 YEARS/ PAST 1 YEAR PAST 5 YEARS 10 YEARS/
LIFE OF FUND+ LIFE OF FUND+

FIDELITY DIVERSIFIED
INTERNATIONAL FUND [B] -5.01% 11.30% 10.08% -5.01% 70.78% 91.46%

FIDELITY EUROPE CAPITAL
APPRECIATION FUND [B] 0.57% N/A 15.50% 0.57% N/A 99.08%

FIDELITY EUROPE CAPITAL
APPRECIATION FUND -2.45% N/A 14.77% -2.45% N/A 93.11%
(LOAD ADJUSTED) [B] [C]

FIDELITY JAPAN FUND [B] -21.71% -6.07% 0.07% -21.71% -26.88% 0.40%

FIDELITY JAPAN FUND
(LOAD ADJUSTED) [B] [C] -24.06% -6.64% -0.44% -24.06% -29.07% -2.62%

FIDELITY LATIN AMERICA
FUND [B] -48.62% -3.76% 0.33% -48.62% -17.44% 1.79%

FIDELITY LATIN AMERICA FUND
(LOAD ADJUSTED) [B] [C] -50.16% -4.35% -0.23% -50.16% -19.92% -1.26%

</TABLE>

* ALL FIGURES ARE FOR PERIODS ENDING AT THE MOST RECENT CALENDAR
QUARTER END OF THE RELATED FUNDS (SEPTEMBER 30, 1998).
+ LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS FOR
FIDELITY DIVERSIFIED INTERNATIONAL FUND (DECEMBER 27, 1991), FIDELITY
EUROPE CAPITAL APPRECIATION FUND (DECEMBER 21, 1993), FIDELITY JAPAN
FUND (SEPTEMBER 15, 1992), AND FIDELITY LATIN AMERICA FUND (APRIL 19,
1993) THROUGH SEPTEMBER 30, 1998.
[A] THE FUNDS OFFERED THROUGH THIS PROSPECTUS ASSESS A 12B-1 FEE,
WHILE THE RELATED FUNDS DO NOT. THE FUNDS OFFERED THROUGH THIS
PROSPECTUS MAY SELL THEIR SHARES WITH A FRONT-END SALES CHARGE OR
CONTINGENT DEFERRED SALES CHARGE. CERTAIN INVESTORS MAY BE ELIGIBLE
FOR SALES CHARGE WAIVERS. SEE "SALES CHARGE REDUCTIONS AND WAIVERS,"
PAGE . FIDELITY EUROPE CAPITAL APPRECIATION FUND, FIDELITY JAPAN FUND,
AND FIDELITY LATIN AMERICA FUND SELL THEIR SHARES WITH A MAXIMUM
FRONT-END SALES CHARGE OF 3.0%, WHILE FIDELITY DIVERSIFIED
INTERNATIONAL FUND DOES NOT CHARGE A SALES CHARGE. THE INCLUSION OF
ANY APPLICABLE SALES CHARGE AND/OR 12B-1 FEE IN A PERFORMANCE
CALCULATION PRODUCES A LOWER RETURN.
[B] FOR THE SEMI-ANNUAL PERIOD ENDED APRIL 30, 1998, THE TOTAL
ANNUALIZED OPERATING EXPENSES WERE 1.21% FOR FIDELITY DIVERSIFIED
INTERNATIONAL FUND, 1.10% FOR FIDELITY EUROPE CAPITAL APPRECIATION
FUND, 1.54% FOR FIDELITY JAPAN FUND, AND 1.35% FOR FIDELITY LATIN
AMERICA FUND (INCLUDING ANY APPLICABLE EXPENSE REDUCTIONS). IF FMR HAD
NOT REIMBURSED CERTAIN EXPENSES DURING THESE PERIODS, FIDELITY
DIVERSIFIED INTERNATIONAL FUND'S AND FIDELITY JAPAN FUND'S TOTAL
RETURNS WOULD HAVE BEEN LOWER.
[C] LOAD ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING THE MAXIMUM
FRONT-END SALES CHARGE OF 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
COMPOSITE(DAGGER)

ANNUAL RETURN* CUMULATIVE RETURN*
PAST 1 YEAR PAST 5 YEARS LIFE OF COMPOSITE+ PAST 1 YEAR PAST 5 YEARS LIFE OF COMPOSITE+

COMPOSITE -5.34% 10.18% 13.29% -5.34% 62.35% 98.67%

</TABLE>

(dagger) THE COMPOSITE IS THE ASSET-WEIGHTED COMPOSITE PERFORMANCE OF
THREE RELATED ACCOUNTS, WHICH ARE ALL THE NON-MUTUAL FUND ACCOUNTS
THAT HAVE INVESTMENT OBJECTIVES AND POLICIES THAT ARE SUBSTANTIALLY
SIMILAR IN ALL MATERIAL RESPECTS TO THOSE OF ADVISOR GLOBAL EQUITY.
THE COMPOSITE REFLECTS THE DEDUCTION OF FEES AND EXPENSES OF 2.75%,
WHICH MAY BE HIGHER OR LOWER THAN ANY PARTICULAR RELATED ACCOUNT.
COMPOSITE PERFORMANCE RESULTS ARE VALUED MONTHLY AND ARE
ASSET-WEIGHTED BY USING BEGINNING OF MONTH MARKET VALUES.
(asterisk) ALL FIGURES ARE FOR PERIODS ENDING SEPTEMBER 30, 1998.
(plus sign) LIFE OF COMPOSITE FIGURES ARE FROM MARCH 31, 1993, WHEN
THE OLDEST ACCOUNT IN THE COMPOSITE BEGAN REPORTING ITS PERFORMANCE IN
U.S. DOLLARS.
THE FUNDS IN DETAIL

CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business
trust on September 22, 1983.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. The transfer agent will mail proxy
materials in advance, including a voting card and information about
the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust,
respectively.
FMR AND ITS AFFILIATES
Fidelity Investments(registered trademark) is one of the largest
investment management organizations in the United States and has
its principal business address at 82 Devonshire Street, Boston,
Massachusetts 02109. It includes a number of different subsidiaries
and divisions which provide a variety of financial services and
products. The funds employ various Fidelity companies to perform
activities required for their operation.
The funds are managed by FMR, which chooses the funds' investments and
handles their business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for each fund.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA (U.K.) L), in London, England, serves as a sub-adviser
for each fund.
(small solid bullet) Fidelity Investments Japan Ltd. (FIJ), in Tokyo,
Japan, serves as a sub-adviser for Diversified International Fund,
Japan Fund, and Global Equity Fund. Currently, FIJ is primarily
responsible for choosing investments for Japan Fund.
As of October 31, 1998, FMR advised funds having approximately 39
million shareholder accounts with a total value of more than $594
billion.
Greg Fraser is Vice President and manager of Advisor Diversified
International, which he has managed since December 1998. He also
manages other Fidelity funds. Mr. Fraser joined Fidelity in 1986.
Kevin McCarey is Vice President and manager of Advisor Europe Capital
Appreciation, which he has managed since December 1998. He also
manages other Fidelity funds. Since joining Fidelity in 1986, Mr.
McCarey has worked as an analyst and manager.
Brenda Reed is Vice President and manager of Advisor Japan, which she
has managed since December 1998. She also manages other Fidelity
funds. Since joining Fidelity in 1992, Ms. Reed has worked as an
analyst and manager. Previously, she was an analyst for Putnam
Investments from 1990 to 1991, and an analyst and portfolio manager
for New England Research & Management from 1984 to 1990.
Patricia Satterthwaite is Vice President and lead manager of Advisor
Latin America, which she has managed since December 1998. She also
manages other Fidelity funds. Since joining Fidelity in 1986, Ms.
Satterthwaite has worked as an analyst and manager.
Margaret Reynolds is associate manager of Advisor Latin America, which
she has managed since December 1998. Since joining Fidelity in 1995,
Ms. Reynolds has worked as an analyst and manager.
Dick Habermann is Vice President and lead manager of Advisor Global
Equity, which he has managed since December 1998. He also manages
other Fidelity funds. Mr. Habermann is a Senior Vice President of FMR
Co. Previously, he was Division Head for International Equities and
Director of International Research from 1993 to 1996, and Joint Chief
Strategist for Portfolio Advisory ServicesSM from 1996 to 1997. Mr.
Habermann joined Fidelity in 1968.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
performs transfer agent servicing functions for each class of each
fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant
owners of a class of shares of common stock representing approximately
49% of the voting power of FMR Corp. Under the Investment Company Act
of 1940 (the 1940 Act), control of a company is presumed where one
individual or group of individuals owns more than 25% of the voting
stock of that company; therefore, the Johnson family may be deemed
under the 1940 Act to form a controlling group with respect to FMR
Corp.
Fidelity International Limited (FIL) is the parent company of FIIA,
FIJ, and FIIA (U.K.) L. The Johnson family group also owns, directly
or indirectly, more than 25% of the voting common stock of FIL.
FMR may allocate brokerage transactions to its broker-dealer
affiliates and in a manner that takes into account the sale of shares
of Fidelity Advisor funds, provided that the fund receives brokerage
services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
Diversified International Fund and Global Equity Fund offer the
potential for diversification by spreading investments among
securities of both developed and emerging markets, different countries
and geographic regions.
Europe Capital Appreciation Fund, Japan Fund, and Latin America Fund
offer investors the ability to concentrate an investment in a
particular country or group of countries that they believe to offer
strong long-term growth potential. The country or group of countries
in which each fund focuses is the fund's "focal area." Each fund's
performance is expected to be closely tied to economic and political
conditions within its focal area. Because each fund invests in one
country or group of related countries, each fund's performance is
expected to be more volatile than more geographically diversified
funds. Changes in regulatory, tax, or economic policy in a country
could significantly affect the market in that country, and therefore a
fund's performance. Many foreign stock markets are more concentrated
than the U.S. market, with a small number of companies making up a
large percentage of the local market. As a result, the performance of
one company or a small number of companies could have a relatively
large effect on a fund's performance.
FMR determines where an issuer or its principal activities are located
by looking at such factors as its country of organization, the primary
trading market for its securities, and the location of its assets,
personnel, sales, and earnings.
The funds may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The funds, however, expect to invest primarily in
equity securities, but may also invest in debt securities of any
quality.
The value of the funds' investments varies in response to many
factors. Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions.
International funds have increased economic and political risks as
they are exposed to events and factors in the various world markets.
These risks may be greater for funds that invest in emerging markets.
Also, because many of the funds' investments are denominated in
foreign currencies, changes in the value of currencies can
significantly affect a fund's share price. FMR may use a variety of
investment techniques to either increase or decrease a fund's exposure
to any currency.
FMR may use various investment techniques to hedge a portion of a
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. When you sell your shares of a fund, they may be
worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. The funds may invest in short-term debt securities and money
market instruments for cash management purposes. Each fund also
reserves the right to invest without limitation in preferred stocks
and investment-grade debt instruments for temporary, defensive
purposes.
DIVERSIFIED INTERNATIONAL FUND seeks capital growth by investing
primarily in equity securities of companies located anywhere outside
the United States. FMR normally invests at least 65% of the fund's
total assets in foreign securities. The fund may also invest in U.S.
issuers.
The fund normally diversifies its investments across different
countries and regions. In allocating the fund's assets across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
The disciplined approach involves computer-aided, quantitative
analysis supported by fundamental research. FMR's computer model
systematically reviews thousands of stocks, using historical earnings,
dividend yield, earnings per share, and many other factors. Then,
potential investments are analyzed further using fundamental criteria,
such as the company's growth potential and estimates of current
earnings.
EUROPE CAPITAL APPRECIATION FUND seeks capital appreciation over the
long term by investing in securities of issuers that have their
principal activities in Europe. FMR normally invests at least 65% of
the fund's total assets in these securities.
The fund normally diversifies its investments across different
countries. In allocating the fund's assets across countries, FMR will
consider the size of the market in each country relative to the size
of the markets in Europe as a whole.
The fund's performance is closely tied to economic and political
conditions within Europe and the European Economic Area (formerly the
Common Market). Some European countries, particularly those in eastern
Europe, have less stable economies than those in western Europe. A
majority of the European economies continue to be weak, and business
and consumer confidence remains low. The movement of many eastern
European countries toward market economies, and the movement toward a
unified common market may significantly affect European economies and
markets. Eastern European countries are considered emerging markets.
JAPAN FUND seeks long-term growth of capital by investing in
securities of Japanese issuers. FMR normally invests at least 65% of
the fund's total assets in these securities. The fund may also invest
in securities of other Southeast Asian issuers.
Japan's economic growth has declined significantly since 1990. The
general government position has deteriorated as a result of weakening
economic growth and unsuccessful stimulus measures taken to support
economic activity and to restore financial stability. Although the
decline in interest rates and fiscal stimulus packages have helped to
contain recessionary forces, uncertainties remain. Japan is also
heavily dependent upon international trade, so its economy is
especially sensitive to trade barriers. In addition, Japan's banking
industry is undergoing problems related to bad loans and declining
values of real estate.
LATIN AMERICA FUND seeks high total investment return by investing in
securities of Latin American issuers. FMR normally invests at least
65% of the fund's total assets in these securities. Latin America
includes Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru,
Panama, and Venezuela.
The fund normally diversifies its investments across different
countries. In allocating the fund's assets across countries, FMR will
consider the size of the market in each country relative to the size
of the markets in Latin America as a whole.
Although there has been significant improvement in some Latin American
economies, others continue to struggle with high interest and
inflation rates. Recovery will depend on stability of the Brazilian
Real, economic conditions in other countries and on world commodity
prices. This region is vulnerable to political instability. The North
American Free Trade Agreement will also continue to have a significant
impact on the region.
GLOBAL EQUITY FUND seeks long-term growth of capital by investing
primarily in equity securities of issuers located anywhere in the
world. FMR normally invests at least 65% of the fund's total assets in
equity securities.
The fund normally diversifies its investments across different
countries and regions, including the United States. In allocating the
fund's assets across countries and regions, FMR will consider the size
of the market in each country and region relative to the size of the
world market as a whole.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
your investment professional.
EQUITY SECURITIES may include common stocks, preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest in more than 10% of the outstanding voting securities of a
single issuer. This limitation does not apply to securities of other
investment companies.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes
due to changes in the issuer's creditworthiness, or they may already
be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general or regional economic difficulty.
RESTRICTIONS: Purchase of a debt security is consistent with a fund's
debt quality policy if it is rated at or above the stated level by
Moody's Investors Service (Moody's) or rated in the equivalent
categories by Standard & Poor's (S&P) or is unrated but judged to be
of equivalent quality by FMR. Each fund currently intends to limit its
investments in lower than Baa-quality debt securities (sometimes
called "junk bonds") to less than 35% of its assets.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political, economic, or regulatory
conditions in foreign countries; fluctuations in foreign currencies;
withholding or other taxes; trading, settlement, custodial, and other
operational risks; and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to
pay interest and repay principal when due and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments.

<TABLE>
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DEBT RATINGS
Moody's
Investors Service Standard & Poor's
Rating Rating

REFER TO THE FUNDS' SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
EACH FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P
TO DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY.
EXPOSURE TO EMERGING MARKETS. Investing in emerging markets involves
risks in addition to and greater than those generally associated with
investing in more developed foreign markets. The extent of economic
development; political stability; market depth, infrastructure, and
capitalization; and regulatory oversight is generally less than in
more developed markets. Emerging market economies may be subject to
greater social, economic, regulatory, and political uncertainties. All
of these factors generally make emerging market securities more
volatile and potentially less liquid than securities issued in more
developed markets.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S.
repurchase agreements, and may be denominated in foreign currencies.
They also may involve greater risk of loss if the counterparty
defaults. Some counterparties in these transactions may be less
creditworthy than those in U.S. markets.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other
borrower. They have additional risks beyond conventional debt
securities because they may entail less legal protection for a fund,
or there may be a requirement that the fund supply additional cash to
a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by FMR, under the supervision of the Board of Trustees, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities, and some
other securities, may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not invest more than 15% of its assets in
illiquid securities.
WARRANTS are instruments which entitle the holder to buy an equity
security at a specific price for a specific period of time. The price
of a warrant tends to be more volatile than the price of its
underlying security, and a warrant ceases to have value if it is not
exercised prior to its expiration date. In addition, changes in the
value of a warrant do not necessarily correspond to changes in the
value of its underlying security.
OTHER INSTRUMENTS may include securities of closed-end investment
companies and real estate-related instruments.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not invest more than 5% in the securities of any one issuer. This
limitation does not apply to U.S. Government securities or to
securities of other investment companies.
Each fund may not invest more than 25% of its total assets in any one
industry, except that Latin America Fund may invest up to 35% of its
total assets in any industry that accounts for more than 20% of the
Latin American market as a whole, although it does not currently
intend to do so. This limitation does not apply to U.S. Government
securities.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
DIVERSIFIED INTERNATIONAL FUND seeks capital growth by investing
primarily in equity securities of companies located anywhere outside
the U.S.
EUROPE CAPITAL APPRECIATION FUND seeks long-term capital appreciation.
JAPAN FUND seeks long-term growth of capital.
LATIN AMERICA FUND seeks high total investment return.
GLOBAL EQUITY FUND seeks long-term growth of capital.
With respect to 75% of its total assets, each fund may not invest more
than 5% in the securities of any one issuer and may not invest in more
than 10% of the outstanding voting securities of a single issuer.
These limitations do not apply to U.S. Government securities or to
securities of other investment companies.
Each fund may not invest more than 25% of its total assets in any one
industry, except that Latin America Fund may invest up to 35% of its
total assets in any industry that accounts for more than 20% of the
Latin American market as a whole. This limitation does not apply to
U.S. Government securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of a fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, each fund pays fees related to its daily
operations. Expenses paid out of each class's assets are reflected in
that class's share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. Each fund also pays OTHER EXPENSES,
which are explained on page .
FMR may, from time to time, agree to reimburse each class for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a class if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated at any time without notice, can
decrease a class's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee
is calculated by adding a group fee rate to an individual fund fee
rate, multiplying the result by the fund's monthly average net assets,
and dividing by twelve.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.52%, and it
drops as total assets under management increase.
For October 1998, the group fee rate was 0.2910%. The individual fund
fee rate is 0.45% for each fund.
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR
Far East, FIJ and FIIA. FIIA in turn has a sub-advisory agreement with
FIIA (U.K.) L. These sub-advisers are compensated for providing FMR
with investment research and advice on issuers based outside the
United States. FMR pays FMR U.K. and FMR Far East fees equal to 110%
and 105%, respectively, of the costs of providing these services. FMR
pays FIJ and FIIA a fee equal to 30% of its management fee rate
associated with investments for which the sub-adviser provided
investment advice.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to
50% of its management fee rate with respect to a fund's investments
that the sub-adviser manages on a discretionary basis. FIIA pays FIIA
(U.K.) L a fee equal to 110% of the cost of providing these services.
OTHER EXPENSES
While the management fee is a significant component of each fund's
annual operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for each class of each fund. Fidelity Service
Company, Inc. (FSC) calculates the net asset value per share (NAV) and
dividends for each class of each fund, maintains the general
accounting records for each fund, and administers the securities
lending program for each fund.
Each fund also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by a fund to
reduce that fund's custodian or transfer agent fees.
Class A and Class T shares of each fund have adopted a DISTRIBUTION
AND SERVICE PLAN. Under the plans, Class A and Class T of each fund
are authorized to pay FDC a monthly distribution fee as compensation
for its services and expenses in connection with the distribution of
Class A and Class T shares. Class A and Class T of each fund may pay
FDC a distribution fee at an annual rate of 0.75% of its average net
assets, or such lesser amount as the Trustees may determine from time
to time. Class A and Class T of each fund currently pays FDC a monthly
distribution fee at an annual rate of 0.25% and 0.50%, respectively,
of its average net assets throughout the month. Class A and Class T
distribution fee rates may be increased only when the Trustees believe
that it is in the best interests of Class A and Class T shareholders
to do so.
Up to the full amount of the Class A and Class T distribution fees may
be reallowed to investment professionals, as compensation for their
services in connection with the distribution of Class A and Class T
shares and for providing support services to Class A and Class T
shareholders, based upon the level of such services provided. These
services may include, without limitation, answering investor inquiries
regarding the funds; providing assistance to investors in changing
dividend options, account designations, and addresses; performing
subaccounting and maintaining Class A and Class T shareholder
accounts; processing purchase and redemption transactions, including
automatic investment and redemption of investor account balances;
providing periodic statements showing an investor's account balance
and integrating other transactions into such statements; and
performing other administrative services in support of the
shareholder.
Class B shares of each fund have adopted a DISTRIBUTION AND SERVICE
PLAN. Under the plans, Class B of each fund is authorized to pay FDC a
monthly distribution fee as compensation for its services and expenses
in connection with the distribution of Class B shares. Class B of each
fund may pay FDC a distribution fee at an annual rate of 0.75% of its
average net assets, or such lesser amount as the Trustees may
determine from time to time. Class B of each fund currently pays FDC a
monthly distribution fee at an annual rate of 0.75% of its average net
assets throughout the month.
In addition, pursuant to each Class B plan, Class B of each fund pays
FDC a monthly service fee at an annual rate of 0.25% of Class B's
average net assets throughout the month. Up to the full amount of the
Class B service fee may be reallowed to investment professionals for
providing personal service to and/or maintenance of Class B
shareholder accounts.
Class C shares of each fund have adopted a DISTRIBUTION AND SERVICE
PLAN. Under the plans, Class C of each fund is authorized to pay FDC a
monthly distribution fee as compensation for its services and expenses
in connection with the distribution of Class C shares. Class C of each
fund may pay FDC a distribution fee at an annual rate of 0.75% of its
average net assets, or such lesser amount as the Trustees may
determine from time to time. Class C of each fund currently pays FDC a
monthly distribution fee at an annual rate of 0.75% of its average net
assets throughout the month. Normally, after the first year of
investment, up to the full amount of the Class C distribution fee may
be reallowed to investment professionals as compensation for their
services in connection with the distribution of Class C shares.
In addition, pursuant to each Class C plan, Class C of each fund pays
FDC a monthly service fee at an annual rate of 0.25% of Class C's
average net assets throughout the month. Normally, after the first
year of investment, up to the full amount of the Class C service fee
may be reallowed to investment professionals for providing personal
service to and/or maintenance of Class C shareholder accounts.
For purchases of Class C shares made for an employee benefit plan or
through reinvested dividends or capital gain distributions, during the
first year of investment and thereafter, up to the full amount of the
Class C distribution fee and Class C service fee paid by such shares
may be reallowed to investment professionals as compensation for their
services in connection with the distribution of Class C shares and for
providing personal service to and/or maintenance of Class C
shareholder accounts.
The Class A, Class T, Class B, and Class C plans specifically
recognize that FMR may make payments from its management fee revenue,
past profits, or other resources to FDC for expenses incurred in
connection with the distribution of the applicable class's shares,
including payments made to investment professionals that provide
shareholder support services or engage in the sale of the applicable
class's shares. Currently, the Board of Trustees of each fund has
authorized such payments.
The funds' portfolio turnover rates will vary from year to year. High
turnover rates increase transaction costs and may increase taxable
capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT

TYPES OF ACCOUNTS
When you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of
fund shares. Read your investment professional's program materials in
conjunction with this prospectus for additional service features or
fees that may apply. Certain features of the funds, such as minimum
initial or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers a fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, or call your retirement
benefits number or your investment professional directly, as
appropriate.
If you have selected Fidelity Advisor funds as an investment option
through an insurance company group pension program, please contact the
provider directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to save
for retirement, either with tax-deductible contributions or tax-free
growth. Retirement accounts require special applications and typically
have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 one-half(checkmark)(solid club) with
compensation to contribute up to $2,000 per tax year. Married couples
can contribute up to $4,000 per tax year, provided no more than $2,000
is contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Contributions may be tax-deductible,
subject to certain income limits.
(solid bullet) ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with assets held
in a Traditional IRA or Rollover IRA to convert those assets to a Roth
Conversion IRA. Eligibility is subject to certain income limits.
Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages for
certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) 401(K) PLANS, and certain other 401(a)-qualified plans,
are employer-sponsored retirement plans that allow employer
contributions and may allow employee after-tax contributions. In
addition, 401(k) plans allow employee pre-tax (tax-deferred)
contributions. Contributions to these plans may be tax-deductible to
the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or small
business owners to make tax-deductible contributions for themselves
and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow employees of
businesses with 25 or fewer employees to contribute a percentage of
their wages on a tax-deferred basis. These plans must have been
established by the employer prior to January 1, 1997.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA). Contact your
investment professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Contact your investment professional.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of Class A or Class T is the class's
offering price or the class's net asset value per share (NAV),
depending on whether you pay a front-end sales charge. If you pay a
front-end sales charge, your price will be Class A's or Class T's
offering price. When you buy Class A or Class T shares at the offering
price, Fidelity deducts the appropriate sales charge and invests the
rest in Class A or Class T shares of the fund. If you qualify for a
front-end sales charge waiver, your price will be Class A's or Class
T's NAV. See "Transaction Details," page , and "Sales Charge
Reductions and Waivers," page , for explanations of how and when the
sales charge and waivers apply.
For Class B and Class C, the PRICE TO BUY ONE SHARE is the class's
NAV. Class B and Class C shares are sold without a front-end sales
charge, but may be subject to a CDSC upon redemption. See "Transaction
Details," page , for information on how the CDSC is calculated.
Your shares will be purchased at the next offering price or NAV, as
applicable, calculated after your order is received in proper form.
Each class's offering price and NAV, as applicable, are normally
calculated each business day at 4:00 p.m. Eastern time.
Short-term or excessive trading into and out of a fund may harm fund
performance by disrupting portfolio management strategies and by
increasing fund expenses. Accordingly, each fund may reject any
purchase orders, including exchanges, particularly from market timers
or investors who, in FMR's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive to
the fund. For these purposes, FMR may consider an investor's trading
history in a fund or other Fidelity funds, and accounts under common
ownership or control.
It is the responsibility of your investment professional to transmit
your order to buy shares to the transfer agent before the close of
business on the day you place your order.
Fidelity must receive payment within three business days after an
order for shares is placed; otherwise your purchase order may be
canceled and you could be held liable for resulting fees and/or
losses.
Share certificates are not available for Class A, Class T, Class B, or
Class C shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an
account application and mail it along with your check. If there is no
account application accompanying this prospectus, call your investment
professional or, if you are investing through a broker-dealer or
insurance representative, call 1-800-522-7297 or, if you are investing
through a bank representative, call 1-800-843-3001.
If you are investing through a tax-advantaged retirement plan, such as
an IRA, for the first time, you will need a special application.
Contact your investment professional for more information and a
retirement account application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you
can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same
class of another Fidelity Advisor fund or from another Fidelity fund,
or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity Advisor retirement accounts(dagger) $500
Through regular investment plans* $100
TO ADD TO AN ACCOUNT $100
MINIMUM BALANCE $1,000
For certain Fidelity Advisor retirement accounts(dagger) None
(dagger) THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH
IRA, ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
* AN ACCOUNT MAY BE OPENED WITH A MINIMUM OF $100, PROVIDED THAT A
REGULAR INVESTMENT PLAN IS ESTABLISHED AT THE TIME THE ACCOUNT IS
OPENED. FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE
REFER TO "INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for certain Fidelity retirement accounts funded
through salary deduction, or accounts opened with the proceeds of
distributions from such retirement accounts. Refer to the program
materials for details. In addition, each fund reserves the right to
waive or lower investment minimums in other circumstances.
Investment and account minimums are waived for purchases of Class T
shares with distributions from a Fidelity Defined Trust account.
PURCHASE AMOUNTS OF MORE THAN $250,000 WILL NOT BE ACCEPTED FOR CLASS
B SHARES.
PURCHASE AMOUNTS OF MORE THAN $1 MILLION WILL NOT BE ACCEPTED FOR
CLASS C SHARES. THIS LIMIT DOES NOT APPLY TO PURCHASES OF CLASS C
SHARES MADE BY AN EMPLOYEE BENEFIT PLAN.
For further information on opening an account, please consult your
investment professional or refer to the account application.

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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (small solid bullet) Contact your (small solid bullet) Contact your
YOUR investment investment
INVESTMEN professional or, if you professional or, if
T are investing through you are investing
PROFESSION a broker-dealer or through a
AL insurance broker-dealer or
(phone_graphic) representative, call insurance
1-800-522-7297. If representative, call
you are investing 1-800-522-7297.
through a bank If you are investing
representative, call through a bank
1-800-843-3001. representative, call
(small solid bullet) Exchange from the 1-800-843-3001.
same class of another (small solid bullet) Exchange from the
Fidelity Advisor fund or same class of
from another Fidelity another Fidelity
fund account with the Advisor fund or from
same registration, another Fidelity
including name, fund account with
address, and taxpayer the same
ID number. registration,
including name,
address, and
taxpayer ID
number.

Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
account application. payable to the
Make your check complete name of
payable to the the fund of your
complete name of the choice and note the
fund of your choice applicable class.
and note the Indicate your fund
applicable class. Mail account number on
to the address your check and mail
indicated on the to the address
application. printed on your
account statement.
(small solid bullet) Exchange by mail:
call your investment
professional for
instructions.

In Person (hand_graphic) (small solid bullet) Bring your account (small solid bullet) Bring your check to
application and check your investment
to your investment professional.
professional.

Wire (wire_graphic) (small solid bullet) Not available (small solid bullet) Wire to:
Banker's Trust Co.
Routing #
021001033
Fidelity DART
Depository
Account
#00159759
FBO: (Account
name)
(Account number)
Specify the complete
name of the fund of
your choice, note the
applicable class, and
include your account
number and your
name.

Automatically (automatic_graphic) (small solid bullet) Not available (small solid bullet) Use Fidelity Advisor
Systematic
Investment
Program. Sign up
for this service
when opening your
account, or call
your investment
professional to
begin the program.

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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of Class A, Class T, Class B and Class C
is the class's NAV, minus any applicable CDSC.
Your shares will be sold at the next NAV calculated after your order
is received in proper form, minus any applicable CDSC. Each class's
NAV is normally calculated each business day at 4:00 p.m. Eastern
time.
It is the responsibility of your investment professional to transmit
your order to sell shares to Fidelity before the close of business on
the day you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request
must be made in writing, except for exchanges to shares of the same
class of another Fidelity Advisor fund or shares of other Fidelity
funds, which can be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$1,000 worth of shares in the account to keep it open (account minimum
balances do not apply to retirement and Fidelity Defined Trust
accounts).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service
in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner,
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity Advisor account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union (if authorized under state law),
securities exchange or association, clearing agency, or savings
association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table on page .
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
Unless otherwise instructed, Fidelity will send a check to the record
address.

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ACCOUNT TYPE SPECIAL
REQUIREMENTS

PHONE All account types except (small solid bullet) Maximum check
YOUR retirement request:
INVESTMEN All account types $100,000.
T (small solid bullet) You may exchange
PROFESSION to the same class of
AL other Fidelity
(phone_graphic) Advisor funds or to
other Fidelity funds
if both accounts are
registered with the
same name(s),
address, and
taxpayer ID
number.

Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of
Sole Proprietorship, instruction must be
UGMA, UTMA signed by all persons
required to sign for
transactions, exactly
Retirement account as their names
appear on the
account, and sent to
your investment
professional.
(small solid bullet) The account owner
should complete a
retirement
distribution form.
Contact your
investment
professional or, if
you purchased your
shares through a
broker-dealer or
insurance
representative, call
1-800-522-7297. If
you purchased your
shares through a
bank representative,
call
1-800-843-3001.

Trust (small solid bullet) The trustee must
sign the letter
indicating capacity
as trustee. If the
trustee's name is not
in the account
registration, provide
a copy of the trust
document certified
within the last 60
days.

Business or (small solid bullet) At least one person
Organization authorized by
corporate resolution
to act on the
account must sign
the letter.

Executor, (small solid bullet) For instructions,
Administrator, contact your
Conservator/Guardian investment
professional or, if
you purchased your
shares through a
broker-dealer or
insurance
representative, call
1-800-522-7297. If
you purchased your
shares through a
bank representative,
call
1-800-843-3001.

Wire (wire_graphic) All account types except (small solid bullet) You must sign up for
retirement the wire feature
before using it. To
verify that it is in
place, contact your
investment
professional or, if
you purchased your
shares through a
broker-dealer or
insurance
representative, call
1-800-522-7297. If
you purchased your
shares through a
bank representative,
call
1-800-843-3001.
Minimum wire:
$500
(small solid bullet) Your wire
redemption request
must be received in
proper form by the
transfer agent before
4:00 p.m. Eastern
time for money to
be wired on the next
business day.

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INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you
manage your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except a reinvestment, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed, even if you have more than one account in
a fund. Call your investment professional if you need additional
copies of financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Class A or Class T shares and
buy the same class of shares of other Fidelity Advisor funds or Daily
Money Class shares of Treasury Fund, Prime Fund, and Tax-Exempt Fund
by telephone or in writing. You may sell your Class B shares and buy
Class B shares of other Fidelity Advisor funds or Advisor B Class
shares of Treasury Fund by telephone or in writing. You may sell your
Class C shares and buy Class C shares of other Fidelity Advisor funds
or Advisor C Class shares of Treasury Fund by telephone or in writing.
The shares you exchange will carry credit for any front-end sales
charge you previously paid in connection with their purchase.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see "Exchange Restrictions," page .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up
periodic redemptions from your Class A, Class T, Class B and Class C
account. Accounts with a value of $10,000 or more in Class A, Class T,
Class B and Class C shares are eligible for this program. Aggregate
redemptions per 12-month period from your Class B account may not
exceed 10% of the account value and are not subject to a CDSC. Because
of Class A's and Class T's front-end sales charge, you may not want to
set up a systematic withdrawal plan during a period when you are
buying Class A or Class T shares on a regular basis.
One easy way to pursue your financial goals is to invest money
regularly. Fidelity Advisor funds offer convenient services that let
you transfer money into your fund account, or between fund accounts,
automatically. While regular investment plans do not guarantee a
profit and will not protect you against loss in a declining market,
they can be an excellent way to invest for retirement, a home,
educational expenses, and other long-term financial goals. Certain
restrictions apply for retirement accounts. Call your investment
professional for more information.
REGULAR INVESTMENT PLANS

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FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND

MINIMUM MINIMUM
INITIAL ADDITIONAL FREQUENCY SETTING UP OR CHANGING

$100 $100 MONTHLY, BIMONTHLY, QUARTERLY, (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE
SECTION ON THE APPLICATION.
OR SEMI-ANNUALLY (SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL YOUR INVESTMENT
PROFESSIONAL FOR AN APPLICATION.

(SMALL SOLID BULLET) TO CHANGE THE AMOUNT OR FREQUENCY OF YOUR
INVESTMENT, CONTACT YOUR INVESTMENT PROFESSIONAL
DIRECTLY OR, IF YOU PURCHASED YOUR SHARES THROUGH
A BROKER-DEALER OR INSURANCE REPRESENTATIVE, CALL
1-800-522-7297. IF YOU PURCHASED YOUR SHARES
THROUGH A BANK REPRESENTATIVE, CALL
1-800-843-3001.CALL AT LEAST 10 BUSINESS DAYS
PRIOR TO YOUR NEXT SCHEDULED INVESTMENT DATE
(20 BUSINESS DAYS IF YOU PURCHASED YOUR SHARES
THROUGH A BANK).

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TO DIRECT DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST TO CLASS T OF A
FIDELITY ADVISOR FUND

MINIMUM MINIMUM
INITIAL ADDITIONAL SETTING UP OR CHANGING

NOT APPLICABLE NOT APPLICABLE (SMALL SOLID BULLET) FOR A NEW OR EXISTING ACCOUNT, ASK YOUR INVESTMENT PROFESSIONAL FOR
THE APPROPRIATE ENROLLMENT FORM.
(SMALL SOLID BULLET) TO CHANGE THE FUND TO WHICH YOUR DISTRIBUTIONS ARE DIRECTED,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR INSTRUCTIONS.

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FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR
FUND TO ANOTHER FIDELITY ADVISOR FUND

MINIMUM FREQUENCY SETTING UP OR CHANGING

$100 Monthly, quarterly, semi-annually, (small solid bullet) To establish, call your investment professional after
both accounts are opened.
or annually (small solid bullet) To change the amount or frequency of your investment,
contact your investment professional directly
or, if you purchased your shares through a broker-dealer
or insurance representative, call 1-800-522-7297. If you
purchased your shares through a bank representative,
call 1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be processed
must have a minimum balance of
$10,000. The account into which the exchange is being
processed must have a minimum of $1,000.
(small solid bullet) Both accounts must have the same registrations and
taxpayer ID numbers.
(small solid bullet) Call at least 2 business days prior to your next
scheduled exchange date.

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SHAREHOLDER AND ACCOUNT POLICIES

SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A
Sales Charge Investment
Professional
Concession as a %
of Offering Price

As a % of As an
Offering approximate %
Price of Net Amount
Invested

Up to $49,999 5.75% 6.10% 5.00%

$50,000 to $99,999 4.50% 4.71% 3.75%

$100,000 to $249,999 3.50% 3.63% 2.75%

$250,000 to $499,999 2.50% 2.56% 2.00%

$500,000 to $999,999 2.00% 2.04% 1.75%

$1,000,000 to $24,999,999 1.00% 1.01% 0.75%

$25,000,000 or more None* None* *

* SEE SECTION ENTITLED FINDER'S FEE.

SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS T
Sales Charge

As a % of As an Investment
Offering approximate % Professional
Price of Net Amount Concession as a %
Invested of Offering Price

Up to $49,999 3.50% 3.63% 3.00%

$50,000 to $99,999 3.00% 3.09% 2.50%

$100,000 to $249,999 2.50% 2.56% 2.00%

$250,000 to $499,999 1.50% 1.52% 1.25%

$500,000 to $999,999 1.00% 1.01% 0.75%

$1,000,000 or more None* None* *

* SEE SECTION ENTITLED FINDER'S FEE.
FINDER'S FEE. On eligible purchases of (i) Class A shares in amounts
of $1 million or more that qualify for a Class A load waiver, (ii)
Class A shares in amounts of $25 million or more, and (iii) Class T
shares in amounts of $1 million or more, investment professionals will
be compensated with a fee at the rate of 0.25% of the purchase amount.
Except as provided below, any assets on which a finder's fee has been
paid will bear a contingent deferred sales charge (Class A or Class T
CDSC) if they do not remain in Class A or Class T shares of the
Fidelity Advisor funds, or Daily Money Class shares of Treasury Fund,
Prime Fund, or Tax-Exempt Fund, for a period of at least one
uninterrupted year. The Class A or Class T CDSC will be 0.25% of the
lesser of the cost of the Class A or Class T shares, as applicable, at
the initial date of purchase or the value of the Class A or Class T
shares, as applicable, at redemption, not including any reinvested
dividends or capital gains. Class A and Class T shares acquired
through distributions (dividends or capital gains) will not be subject
to a Class A or Class T CDSC. In determining the applicability and
rate of any Class A or Class T CDSC at redemption, Class A or Class T
shares representing reinvested dividends and capital gains, if any,
will be redeemed first, followed by those Class A or Class T shares
that have been held for the longest period of time.
Shares held by an insurance company separate account will be
aggregated at the client (e.g., the contract holder or plan sponsor)
level, not at the separate account level. Upon request, anyone
claiming eligibility for the 0.25% fee with respect to shares held by
an insurance company separate account must provide FDC access to
records detailing purchases at the client level.
With respect to shares held by an insurance company separate account,
the Class A or Class T CDSC does not apply.
With respect to employee benefit plans, the Class A or Class T CDSC
does not apply to the following types of redemptions: (i) plan loans
or distributions or (ii) exchanges to non-Advisor fund investment
options. With respect to Individual Retirement Accounts, the Class A
or Class T CDSC does not apply to redemptions made for disability,
payment of death benefits, or required partial distributions starting
at age 701/2. Your investment professional should advise Fidelity at
the time your redemption order is placed if you qualify for a waiver
of the Class A or Class T CDSC.
Investment professionals must notify FDC in advance of a purchase
eligible for a finder's fee, and may be required to enter into an
agreement with FDC in order to receive the finder's fee.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption,
be assessed a CDSC based on the following schedule:
From Date of Purchase Contingent Deferred
Sales Charge

Less than 1 year 5%

1 year to less than 2 years 4%

2 years to less than 3 years 3%

3 years to less than 4 years 3%

4 years to less than 5 years 2%

5 years to less than 6 years 1%

6 years to less than 7 years [A] 0%

[A] AFTER A HOLDING PERIOD OF SEVEN YEARS, CLASS B SHARES WILL CONVERT
AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND. SEE
"CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
When exchanging Class B shares of one fund for Class B shares of
another Fidelity Advisor fund or Advisor B Class shares of Treasury
Fund, your Class B shares retain the CDSC schedule in effect when they
were originally purchased.
Except as provided below, investment professionals with whom FDC has
agreements receive as compensation from FDC, at the time of the sale,
a concession equal to 4.00% of your purchase of Class B shares. For
purchases of Class B shares through reinvested dividends or capital
gain distributions, investment professionals do not receive a
concession at the time of sale.
Class C shares may, upon redemption within one year of purchase, be
assessed a CDSC of 1.00%.
Except as provided below, investment professionals with whom FDC has
agreements receive as compensation from FDC, at the time of the sale,
a concession equal to 1.00% of your purchase of Class C shares. For
purchases of Class C shares made for an employee benefit plan or
through reinvested dividends or capital gain distributions, investment
professionals do not receive a concession at the time of sale.
The CDSC for CLASS B and CLASS C shares will be calculated based on
the lesser of the cost of the Class B or Class C shares, as
applicable, at the initial date of purchase or the value of those
Class B or Class C shares, as applicable, at redemption, not including
any reinvested dividends or capital gains. Class B and Class C shares
acquired through distributions (dividends or capital gains) will not
be subject to a CDSC. In determining the applicability and rate of any
CDSC at redemption, Class B or Class C shares representing reinvested
dividends and capital gains, if any, will be redeemed first, followed
by those Class B or Class C shares that have been held for the longest
period of time.
CONVERSION FEATURE. After a holding period of seven years from the
initial date of purchase, Class B shares and any capital appreciation
associated with those shares convert automatically to Class A shares
of the same Fidelity Advisor fund. Conversion to Class A shares will
be made at NAV. At the time of conversion, a portion of the Class B
shares purchased through the reinvestment of dividends or capital
gains (Dividend Shares) will also convert to Class A shares. The
portion of Dividend Shares that will convert is determined by the
ratio of your converting Class B non-Dividend Shares to your total
Class B non-Dividend Shares.
For more information about the CDSC, including the conversion feature
and the permitted circumstances for CDSC waivers, contact your
investment professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A,
Class T, Class B, or Class C shares of a fund, you may reinvest an
amount equal to all or a portion of the redemption proceeds in the
same class of the fund or any of the other Fidelity Advisor funds, at
the NAV next determined after receipt in proper form of your
investment order, provided that such reinvestment is made within 90
days of redemption. Under these circumstances, the dollar amount of
the CDSC, if any, you paid on Class A, Class T, Class B, or Class C
shares will be reimbursed to you by reinvesting that amount in Class
A, Class T, Class B, or Class C shares, as applicable. You must
reinstate your shares into an account with the same registration. This
privilege may be exercised only once by a shareholder with respect to
a fund and certain restrictions may apply. For purposes of the CDSC
holding period schedule, the holding period of your Class A, Class T,
Class B, or Class C shares will continue as if the shares had not been
redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. 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. Additional
documentation may be required from corporations, associations, and
certain fiduciaries.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next offering price or NAV, as applicable, calculated after
your order is received in proper form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
Fidelity has incurred.
AUTOMATED PURCHASE ORDERS. Class A, Class T, Class B, and Class C
shares can be purchased or sold through investment professionals
utilizing an automated order placement and settlement system that
guarantees payment for orders on a specified date.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on
behalf of customers by phone, with payment to follow no later than
close of business on the next business day. If payment is not received
by the next business day, the order will be canceled and the financial
institution will be liable for any losses.
TO AVOID THE COLLECTION PERIOD associated with check purchases,
consider buying shares by bank wire, U.S. Postal money order, U.S.
Treasury check, Federal Reserve check, or automatic investment plans.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form,
minus any applicable CDSC. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check have been
collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
Each fund reserves the right to impose a trading fee on redemptions
and exchanges from the fund.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be
given 30 days' notice to reestablish the minimum balance. If you do
not increase your balance, Fidelity reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at
the NAV, minus any applicable CDSC, on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the
sale of shares of the funds. In some instances, these incentives will
be offered only to certain types of investment professionals, such as
bank-affiliated or non-bank affiliated broker-dealers, or to
investment professionals whose representatives provide services in
connection with the sale or expected sale of significant amounts of
shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Class A, Class
T, Class B, or Class C shares of a fund for the same class of shares
of other Fidelity Advisor funds at NAV; Class A or Class T shares for
Daily Money Class shares of Treasury Fund, Prime Fund, or Tax-Exempt
Fund; Class B shares for Advisor B Class shares of Treasury Fund; and
Class C shares for Advisor C Class shares of Treasury Fund. If you
purchased your Class T shares through certain investment professionals
that have signed an agreement with FDC, you also have the privilege of
exchanging your Class T shares for shares of Fidelity Capital
Appreciation Fund. However, you should note the following:
(small solid bullet) The fund or class you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund or class, read its
prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes
more than four exchanges out of a fund per calendar year. Accounts
under common ownership or control, including accounts with the same
taxpayer identification number, will be counted together for purposes
of the four exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Any exchanges of Class A, Class T, Class B, or
Class C shares are not subject to a CDSC.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify these
exchange privileges in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
trading fees of up to 1.00% of the amount exchanged. Check each fund's
prospectus for details.
SALES CHARGE REDUCTIONS AND WAIVERS
If your purchase qualifies for one of the following sales charge
reduction plans, the front-end sales charge will be reduced for
purchases of Class A and Class T shares according to the Sales Charge
schedule shown on page . Please refer to the funds' SAI for more
details about each plan or call your investment professional.
If you purchased your shares through a broker-dealer or insurance
representative, call 1-800-522-7297. If you purchased your shares
through a bank representative, call 1-800-843-3001.
Your purchases and existing balances of Class A, Class T, Class B, and
Class C shares may be included in the following programs for purposes
of qualifying for a Class A or Class T front-end sales charge
reduction.
QUANTITY DISCOUNTS apply to purchases of Class A or Class T shares of
a single Fidelity Advisor fund or to combined purchases of (i) Class
A, Class T, Class B, and Class C shares of any Fidelity Advisor fund,
(ii) Advisor B Class shares and Advisor C Class shares of Treasury
Fund, and (iii) Daily Money Class shares of Treasury Fund, Prime Fund,
and Tax-Exempt Fund acquired by exchange from any Fidelity Advisor
fund. The minimum investment eligible for a quantity discount is
$50,000.
To qualify for a quantity discount, investing in a fund's Class A,
Class T, Class B, and Class C shares for several accounts at the same
time will be considered a single transaction (Combined Purchase), as
long as shares are purchased through one investment professional and
the total is at least $50,000.
RIGHTS OF ACCUMULATION let you determine your front-end sales charge
on Class A and Class T shares by adding to your new purchase of Class
A and Class T shares the value of all of the Fidelity Advisor fund
Class A, Class T, Class B, and Class C shares held by you, your
spouse, and your children under age 21. You can also add the value of
Advisor B Class shares and Advisor C Class shares of Treasury Fund and
Daily Money Class shares of Treasury Fund, Prime Fund, and Tax-Exempt
Fund acquired by exchange from any Fidelity Advisor fund.
A LETTER OF INTENT (the Letter) lets you receive the same reduced
front-end sales charge on purchases of Class A and Class T shares made
during a 13-month period as if the total amount invested during the
period had been invested in a single lump sum. (See Quantity Discounts
above.) Purchases of Class B and Class C shares during the 13-month
period will count toward the completion of your Letter. You must file
your non-binding Letter with Fidelity within 90 days of the start of
your purchases. Your initial investment must be at least 5% of the
amount you plan to invest. Out of the initial investment, Class A or
Class T shares equal to 5% of the dollar amount specified in the
Letter will be registered in your name and held in escrow. You will
earn income dividends and capital gain distributions on escrowed Class
A and Class T shares. Reinvested income and capital gain distributions
do not count toward the completion of the Letter. The escrow will be
released when your purchase of the total amount has been completed.
You are not obligated to complete the Letter, and in such a case,
sufficient escrowed Class A or Class T shares will be redeemed to pay
any applicable front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A
SHARES:
1. Purchased for an employee benefit plan with at least $25 million or
more in plan assets;
2. Purchased for an employee benefit plan investing through an
insurance company separate account used to fund annuity contracts;
3. Purchased for an employee benefit plan investing through a trust
institution, bank trust department or insurance company, or any such
institution's broker-dealer affiliate that is not part of an
organization primarily engaged in the brokerage business. Employee
benefit plans that participate in the Advisor Retirement Connection do
not qualify for this waiver;
4. Purchased for an employee benefit plan investing through an
investment professional sponsored program that requires the
participating employee benefit plan to initially invest in Class C or
Class B shares and, upon meeting certain criteria, subsequently
requires the plan to invest in Class A shares;
5. Purchased by a trust institution or bank trust department for a
managed account that is charged an asset-based fee. Employee benefit
plans and accounts managed by third parties do not qualify for this
waiver;
6. Purchased by a broker-dealer for a managed account that is charged
an asset-based fee. Employee benefit plans do not qualify for this
waiver;
7. Purchased by a registered investment advisor that is not part of an
organization primarily engaged in the brokerage business for an
account that is managed on a discretionary basis and is charged an
asset-based fee. Employee benefit plans do not qualify for this
waiver;
8. Purchased by a bank trust officer, registered representative, or
other employee (or a member of one of their immediate families) of
investment professionals having agreements with FDC; or
9. Purchased prior to December 31, 1998 by shareholders who have
closed their Class A Municipal Bond, Class A California Municipal
Income, or Class A New York Municipal Income accounts prior to
December 31, 1997. This waiver is limited to purchases of up to
$10,000; shareholders are entitled to this waiver after the original
load waiver certificate is received in proper form by FIIOC.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS T
SHARES:
1. Purchased for an insurance company separate account used to fund
annuity contracts for employee benefit plans;
2. Purchased by a trust institution or bank trust department for a
managed account that is charged an asset-based fee. Accounts managed
by third parties do not qualify for this waiver;
3. Purchased by a broker-dealer for a managed account that is charged
an asset-based fee;
4. Purchased by a registered investment advisor that is not part of an
organization primarily engaged in the brokerage business for an
account that is managed on a discretionary basis and is charged an
asset-based fee;
5. Purchased for an employee benefit plan, except certain small
employer retirement plans;
6. Purchased for a Fidelity or Fidelity Advisor account with the
proceeds of a distribution from (i) an insurance company separate
account used to fund annuity contracts for employee benefit plans that
are invested in Fidelity Advisor or Fidelity funds, or (ii) an
employee benefit plan that is invested in Fidelity Advisor or Fidelity
funds. (Distributions other than those transferred to an IRA account
must be transferred directly into a Fidelity account.);
7. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. Purchased with redemption proceeds from other mutual fund complexes
on which you have previously paid a front-end sales charge or CDSC;
9. Purchased by a current or former trustee or officer of a Fidelity
fund or a current or retired officer, director or regular employee of
FMR Corp. or FIL or their 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;
10. Purchased by a charitable organization (as defined for purposes of
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or
more;
11. Purchased by a bank trust officer, registered representative, or
other employee (or a member of one of their immediate families) of
investment professionals having agreements with FDC;
12. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined
for purposes of Section 501(c)(3) of the Internal Revenue Code);
13. Purchased with distributions of income, principal, and capital
gains from Fidelity Defined Trusts; or
14. Purchased prior to December 31, 1998 by shareholders who have
closed their Class T Municipal Bond, Class T California Municipal
Income; or Class T New York Municipal Income accounts prior to
December 31, 1997. This waiver is limited to purchases of up to
$10,000; shareholders are entitled to this waiver after the original
load waiver certificate is received in proper form by FIIOC.
You must notify FDC in advance if you qualify for a front-end sales
charge waiver. Employee benefit plan investors must meet additional
requirements specified in the funds' SAI.
If you are investing through an insurance company separate account, if
you are investing through a trust department, if you are investing
through an account managed by a broker-dealer, or if you have
authorized an investment adviser to make investment decisions for you,
you may qualify to purchase Class A shares without a sales charge (as
described in (2), (5), (6) and (7) on page 24), Class T shares without
a sales charge (as described in (1), (2), (3) and (4) on page 24), or
Institutional Class shares. Because Institutional Class shares have no
sales charge, and do not pay a 12b-1 fee, Institutional Class shares
are expected to have a higher total return than Class A, Class T,
Class B, or Class C shares. Contact your investment professional to
discuss if you qualify.
THE CDSC ON CLASS B AND CLASS C SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that the shares are
redeemed within one year following the death or the initial
determination of disability;
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts at age 701/2 which are
permitted without penalty pursuant to the Internal Revenue Code;
3. In connection with redemptions through the Fidelity Advisor
Systematic Withdrawal Program; or
4. (APPLICABLE TO CLASS C ONLY) In connection with any redemptions
from an employee benefit plan. Employee benefit plan investors must
meet additional requirements specified in the funds' SAI.
Your investment professional should call Fidelity for more
information.
No dealer, sales representative, or any other person has been
authorized to give any information or to make any representations,
other than those contained in this Prospectus and in the related SAI,
in connection with the offer contained in this Prospectus. If given or
made, such other information or representations must not be relied
upon as having been authorized by the funds or FDC. This Prospectus
and the related SAI do not constitute an offer by the funds or by FDC
to sell or to buy shares of the funds to any person to whom it is
unlawful to make such offer.
Fidelity, Fidelity Investments, Fidelity Investments & (Pyramid)
Design, and Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services is a servicemark of FMR Corp.
APPENDIX
CALENDAR YEAR PERFORMANCE FOR RELATED FUNDS
Set forth below are charts presenting the calendar year performance of
each Related Fund or the Composite, as applicable, for the past 10
years or since its inception. You should not assume that Advisor
Diversified International, Advisor Europe Capital Appreciation,
Advisor Japan, Advisor Latin America, or Advisor Global Equity will
have the same future performance as the Related Funds or the
Composite. The Related Funds have different cost structures than the
funds offered through this prospectus. The performance of each Related
Fund and the Composite does not represent the historical performance
of the funds offered through this prospectus and should not be
interpreted as indicative of the future performance of the funds
offered through this prospectus or the Related Funds.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY DIVERSIFIED INTERNATIONAL FUND
Calendar year total returns 1992 1993 1994 1995 1996 1997

FIDELITY DIVERSIFIED INTERNATIONAL FUND -13.81% 36.67% 1.09% 17.97% 20.02% 13.72%

Morgan Stanley Capital International -9.65% 33.56% 7.81% 11.16% 7.63% 6.06%
GDP-Weighted EAFE Index

Morgan Stanley Capital International -12.17% 32.56% 7.78% 11.21% 6.05% 2.01%
EAFE Index

Lipper International Funds Average -4.77% 39.40% -0.71% 9.41% 11.78% 5.44%

Consumer Price Index 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%

</TABLE>

PERCENTAGE (%)
ROW: 1, COL: 1, VALUE: 14.33
ROW: 2, COL: 1, VALUE: NIL
ROW: 3, COL: 1, VALUE: NIL
ROW: 4, COL: 1, VALUE: NIL
ROW: 5, COL: 1, VALUE: NIL
ROW: 6, COL: 1, VALUE: -13.81
ROW: 7, COL: 1, VALUE: 36.67
ROW: 8, COL: 1, VALUE: 1.09
ROW: 9, COL: 1, VALUE: 17.97
ROW: 10, COL: 1, VALUE: 20.02
ROW: 11, COL: 1, VALUE: 13.72
(LARGE SOLID BOX) FIDELITY DIVERSIFIED
INTERNATIONAL FUND

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY EUROPE CAPITAL APPRECIATION FUND
Calendar year total returns+ 1994 1995 1996 1997

FIDELITY EUROPE CAPITAL 6.88% 14.69% 25.89% 24.96%
APPRECIATION FUND

Morgan Stanley Capital International 2.28% 21.62% 21.09% 24.17%
Europe Index

Lipper European Region Funds Average 1.22% 16.85% 23.88% 15.78%

Consumer Price Index 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: 6.88
Row: 9, Col: 1, Value: 14.96
Row: 10, Col: 1, Value: 25.89
Row: 11, Col: 1, Value: 24.96
(LARGE SOLID BOX) FIDELITY EUROPE CAPITAL
APPRECIATION FUND
+ Returns do not include the effect of paying the fund's maximum
front-end sales charge of 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY JAPAN FUND
Calendar year total returns+ 1993 1994 1995 1996 1997

FIDELITY JAPAN FUND 20.45% 16.46% -2.13% -11.19% -10.73%

Tokyo Stock Price Index 24.14% 22.06% -1.62% -16.26% -28.09%

Lipper Japanese Funds Average 22.94% 15.39% -1.85% -11.98% -14.07%

Consumer Price Index 2.75% 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: 20.45
Row: 8, Col: 1, Value: 16.46
Row: 9, Col: 1, Value: -2.13
Row: 10, Col: 1, Value: -11.19
Row: 11, Col: 1, Value: -10.73
(LARGE SOLID BOX) FIDELITY JAPAN FUND
+ Returns do not include the effect of paying the fund's maximum
front-end sales charge of 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY LATIN AMERICA FUND
Calendar year total returns+ 1994 1995 1996 1997

FIDELITY LATIN AMERICA FUND -23.17% -16.46% 30.72% 32.89%

Morgan Stanley Capital International 0.64% -12.83% 22.21% 31.64%
Emerging Markets Free-Latin
America Index

Lipper Latin America Region -14.24% -20.56% 27.40% 25.27%
Funds Average

Consumer Price Index 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: 14.33
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: -23.17
Row: 9, Col: 1, Value: -16.46
Row: 10, Col: 1, Value: 30.72
Row: 11, Col: 1, Value: 32.89
(LARGE SOLID BOX) FIDELITY LATIN AMERICA FUND
+ Returns do not include the effect of paying the fund's maximum
front-end sales charge of 3.0%.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPOSITE(DAGGER)
Calendar year total returns 1994 1995 1996 1997

COMPOSITE 0.79% 17.78% 15.93% 18.14%

Morgan Stanley Capital International 5.08% 20.72% 13.48% 15.76%
World Index

Lipper Global Funds Average -3.03% 16.05% 16.51% 13.04%

Consumer Price Index 2.67% 2.54% 3.32% 1.70%

</TABLE>

Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: 0.79
Row: 7, Col: 1, Value: 17.78
Row: 8, Col: 1, Value: 15.93
Row: 9, Col: 1, Value: 18.14
(LARGE SOLID BOX) GLOBAL COMPOSITE
(dagger) THE METHODOLOGY FOR CALCULATING THE PERFORMANCE OF THE
NON-MUTUAL FUND ACCOUNTS IN THE COMPOSITE DIFFERS FROM THAT REQUIRED
TO BE EMPLOYED BY MUTUAL FUNDS THAT ARE OFFERED IN THE UNITED STATES.
THE COMPETITIVE FUNDS AVERAGE is each fund's Lipper Funds Average
which reflects the performance of mutual funds with similar investment
objectives. These averages, published by Lipper Analytical Services,
Inc., exclude the effect of sales loads.
The competitive funds averages are the Lipper International Funds
Average for Fidelity Diversified International Fund, the Lipper
European Region Funds Average for Fidelity Europe Capital Appreciation
Fund, the Lipper Japanese Funds Average for Fidelity Japan Fund, and
the Lipper Latin America Region Funds Average for Fidelity Latin
America Fund.
As of September 30, 1998, the Lipper International Funds Average
reflected the performance of 289 mutual funds with similar investment
objectives; the Lipper European Region Funds Average reflected the
performance of 87 mutual funds with similar investment objectives; the
Lipper Japanese Funds Average reflected the performance of 31 mutual
funds with similar investment objectives; and the Lipper Latin America
Region Funds Average reflected the performance of 41 mutual funds with
similar investment objectives.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST
(EAFE) INDEX is an unmanaged index that is designed to represent the
performance of developed stock markets outside of the United States
and Canada. The index may be compiled in two ways: a market
capitalization weighted (cap-weighted) and a gross domestic product
weighted (GDP-weighted) version. As of September 30, 1998, the
cap-weighted index included over 1,100 equity securities of companies
domiciled in 21 countries, and the GDP-weighted index included over
1,100 equity securities of companies domiciled in 21 countries.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is an unmanaged,
market capitalization weighted index that is designed to represent the
performance of developed stock markets in Europe. As of September 30,
1998, the index included over 592 equity securities of companies
domiciled in 15 European countries.
TOKYO STOCK PRICE INDEX (TOPIX) is a market capitalization weighted
index of over 1,100 stocks traded in the Japanese market.
MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE - LATIN
AMERICA INDEX is a market capitalization weighted index of
approximately 190 stocks traded in seven Latin American markets.
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an unmanaged,
market capitalization weighted index that is designed to represent the
performance of developed stock markets throughout the world. As of
September 30, 1998, the index included over 1,559 equity securities of
companies domiciled in 23 countries.
Unlike each fund's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.

FIDELITY ADVISOR DIVIDEND GROWTH FUND, FIDELITY ADVISOR RETIREMENT
GROWTH FUND,
AND FIDELITY ADVISOR ASSET ALLOCATION FUND
FUNDS OF FIDELITY ADVISOR SERIES I
FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL FUND, FIDELITY ADVISOR
EUROPE CAPITAL APPRECIATION FUND, FIDELITY ADVISOR JAPAN FUND,
FIDELITY ADVISOR LATIN AMERICA FUND, AND FIDELITY ADVISOR GLOBAL
EQUITY FUND
FUNDS OF FIDELITY ADVISOR SERIES VIII
CLASS A, CLASS T, CLASS B, CLASS C, AND INSTITUTIONAL CLASS

STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 14, 1998

This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectuses
(dated December 14, 1998) for Class A, Class T, Class B, Class C, and
Institutional Class shares. Please retain this document for future
reference. To obtain a free additional copy of a Prospectus, please
call your investment professional.

TABLE OF CONTENTS PAGE

Investment Policies and Limitations 3

Special Considerations Regarding Africa 14

Special Considerations Regarding Canada 14

Special Considerations Regarding Europe 14

Special Considerations Regarding Asia 17

Special Considerations Regarding Latin America 24

Special Considerations Regarding the Russian Federation 26

Portfolio Transactions 26

Valuation 27

Performance 27

Prior Performance of Similar Funds 32

Additional Purchase, Exchange and Redemption Information 39

Distributions and Taxes 41

FMR 41

Trustees and Officers 42

Management Contracts 44

Distribution and Service Plans 46

Contracts with FMR Affiliates 47

Description of the Trusts 47

Appendix 48

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
(FIIA(U.K.)L)
Fidelity Investments Japan Ltd. (FIJ)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
For more information on any Fidelity fund, including charges and
expenses, call or write for a free prospectus. Read it carefully
before you invest or send money.

ACOMNEW-ptb-1298
1.708925.101

INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets that may
be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
A 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 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR DIVIDEND GROWTH FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR RETIREMENT GROWTH FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR ASSET ALLOCATION FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing and selling precious metals, or from
purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest more than 5% of its
total assets in precious metals.
(vii) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL
FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR EUROPE CAPITAL APPRECIATION
FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR JAPAN FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR LATIN AMERICA FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry, except that
the fund may purchase the securities of any issuer if, as a result, no
more than 35% of the fund's total assets would be invested in any
industry that accounts for more than 20% of the Latin American market
as a whole, as measured by an index determined by FMR to be an
appropriate measure of the Latin American market;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
(vii) The fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a
result, 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.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
INVESTMENT LIMITATIONS OF FIDELITY ADVISOR GLOBAL EQUITY FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. Government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (a) more
than 5% of the fund's total assets would be invested in the securities
of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except in connection with the insurance
program established by the fund pursuant to an exemptive order issued
by the Securities and Exchange Commission or as otherwise permitted
under the Investment Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(ii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
With respect to limitation (iv), 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 was invested in illiquid securities, it
would consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. FMR may not buy all of these instruments or use all of these
techniques unless it believes that doing so will help a fund achieve
its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
ASSET ALLOCATION (ASSET ALLOCATION FUND). The stock class includes
domestic and foreign equity securities of all types (other than
adjustable rate preferred stocks, which are included in the bond
class). FMR seeks to maximize total return within this asset class by
actively allocating assets to industry sectors expected to benefit
from major trends, and to individual stocks that FMR believes to have
superior investment potential. When FMR selects equity securities, it
considers both growth and anticipated dividend income. Securities in
the stock class may include common stocks, fixed-rate preferred stocks
(including convertible preferred stocks), warrants, rights, depositary
receipts, securities of closed-end investment companies, and other
equity securities issued by companies of any size, located anywhere in
the world.
The bond class includes all varieties of domestic and foreign
fixed-income securities maturing in more than one year. FMR will seek
to maximize total return within the bond class by adjusting the fund's
investments in securities with different credit qualities, maturities,
and coupon or dividend rates, and by seeking to take advantage of
yield differentials between securities. Securities in this class may
include bonds, notes, adjustable-rate preferred stocks, convertible
bonds, mortgage-related and asset-backed securities, domestic and
foreign government and government agency securities, zero coupon
bonds, and other intermediate and long-term securities. These
securities may be denominated in U.S. dollars or foreign currency.
The short-term/money market class includes all types of domestic and
foreign short-term and money market instruments. FMR will seek to
maximize total return within this asset class by taking advantage of
yield differentials between different instruments, issuers, and
currencies. Short-term and money market instruments may include
corporate debt securities, such as commercial paper and notes;
government securities issued by U.S. or foreign governments or their
agencies or instrumentalities; bank deposits and other financial
institution obligations; repurchase agreements involving any type of
security; and other similar short-term instruments. These instruments
may be denominated in U.S. dollars or foreign currency.
FMR may use its judgment to place a security in the most appropriate
class based on its investment characteristics. Fixed-income securities
may be classified in the bond or short-term/money market class
according to interest rate sensitivity as well as maturity. The fund
may also make other investments that do not fall within these classes.
In making asset allocation decisions, FMR will evaluate projections of
risk, market conditions, economic conditions, volatility, yields, and
returns. FMR's management will use database systems to help analyze
past situations and trends, research specialists in each of the asset
classes to help in securities selection, portfolio management
professionals to determine asset allocation and to select individual
securities, and its own credit analysis as well as credit analyses
provided by rating services.
ASSET-BACKED SECURITIES represent interests in pools of mortgages,
loans, receivables or other assets. Payment of interest and repayment
of principal may be largely dependent upon the cash flows generated by
the assets backing the securities and, in certain cases, supported by
letters of credit, surety bonds, or other credit enhancements.
Asset-backed security values may also be affected by the
creditworthiness of the servicing agent for the pool, the originator
of the loans or receivables, or the entities providing the credit
enhancement. In addition, these securities may be subject to
prepayment risk.
CLOSED-END INVESTMENT COMPANIES are investment companies that issue a
fixed number of shares which trade on a stock exchange or
over-the-counter. Closed-end investment companies are professionally
managed and may invest in any type of security. Shares of closed-end
investment companies may trade at a premium or a discount to their net
asset value. A fund may purchase shares of closed-end investment
companies to facilitate investment in certain foreign countries.
CONVERTIBLE SECURITIES are bonds, debentures, notes, preferred stocks
or other securities that may be converted or exchanged (by the holder
or by the issuer) into shares of the underlying common stock (or cash
or securities of equivalent value) at a stated exchange ratio. A
convertible security may also be called for redemption or conversion
by the issuer after a particular date and under certain circumstances
(including a specified price) established upon issue. If a convertible
security held by a fund is called for redemption or conversion, the
fund could be required to tender it for redemption, convert it into
the underlying common stock, or sell it to a third party.
Convertible securities generally have less potential for gain or loss
than common stocks. Convertible securities generally provide yields
higher than the underlying common stocks, but generally lower than
comparable non-convertible securities. Because of this higher yield,
convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the
underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the
same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and sold on a
delayed-delivery or when-issued basis. These transactions involve a
commitment to purchase or sell specific securities at a predetermined
price or yield, with payment and delivery taking place after the
customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. The
funds may receive fees or price concessions for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the purchaser
assumes the rights and risks of ownership, including the risks of
price and yield fluctuations and the risk that the security will not
be issued as anticipated. Because payment for the securities is not
required until the delivery date, these risks are in addition to the
risks associated with a fund's investments. If a fund remains
substantially fully invested at a time when delayed-delivery purchases
are outstanding, the delayed-delivery purchases may result in a form
of leverage. When delayed-delivery purchases are outstanding, a fund
will set aside appropriate liquid assets in a segregated custodial
account to cover the purchase obligations. When a fund has sold a
security on a delayed-delivery basis, the fund does not participate in
further gains or losses with respect to the security. If the other
party to a delayed-delivery transaction fails to deliver or pay for
the securities, a fund could miss a favorable price or yield
opportunity or suffer a loss.
A fund may renegotiate a delayed-delivery transaction and may sell the
underlying securities before delivery, which may result in capital
gains or losses for the fund.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve significant risks in addition to the risks
inherent in U.S. investments.
Foreign investments involve risks relating to local political,
economic, regulatory, or social instability, military action or
unrest, or adverse diplomatic developments, and may be affected by
actions of foreign governments adverse to the interests of U.S.
investors. Such actions may include expropriation or nationalization
of assets, confiscatory taxation, restrictions on U.S. investment or
on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There is no assurance that
FMR will be able to anticipate these potential events or counter their
effects. In addition, the value of securities denominated in foreign
currencies and of dividends and interest paid with respect to such
securities will fluctuate based on the relative strength of the U.S.
dollar.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
markets located outside of the United States. Foreign stock markets,
while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some
foreign issuers may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement and
custodial practices (including those involving securities settlement
where fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in
increased risk or substantial delays in the event of a failed trade or
the insolvency of, or breach of duty by, a foreign broker-dealer,
securities depository or foreign subcustodian. In addition, the costs
associated with foreign investments, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
with U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. 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.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be 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
holdings difficult or impossible at times.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by
entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge
a fee for such conversions, 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 at one rate, while offering a lesser rate of exchange should
the counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market 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 following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by FMR.
A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. 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 direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may
include agreements to purchase and sell foreign securities in exchange
for fixed U.S. dollar amounts, or in exchange for specified amounts of
foreign currency. Unlike typical U.S. repurchase agreements, foreign
repurchase agreements may not be fully collateralized at all times.
The value of a security purchased by a fund may be more or less than
the price at which the counterparty has agreed to repurchase the
security. In the event of 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 markets may involve issuers
or counterparties with lower credit ratings than typical U.S.
repurchase agreements.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however,
may exercise its rights as a shareholder and may communicate its views
on important matters of policy to management, the Board of Directors,
and shareholders of a company when FMR determines that such matters
could have a significant effect on the value of the fund's investment
in the company. The activities in which a fund may engage, either
individually or in conjunction with others, may include, among others,
supporting or opposing proposed changes in a company's corporate
structure or business activities; seeking changes in a company's
directors or management; seeking changes in a company's direction or
policies; seeking the sale or reorganization of the company or a
portion of its assets; or supporting or opposing third-party takeover
efforts. This area of corporate activity is increasingly prone to
litigation and it is possible that a fund could be involved in
lawsuits related to such activities. FMR will monitor such activities
with a view to mitigating, to the extent possible, the risk of
litigation against a fund and the risk of actual liability if a fund
is involved in litigation. No guarantee can be made, however, that
litigation against a fund will not be undertaken or liabilities
incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures
Margin Payments, Limitations on Futures and Options Transactions,
Liquidity of Options and Futures Contracts, Options and Futures
Relating to Foreign Currencies, OTC Options, Precious Metals,
Purchasing Put and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the SEC with respect to coverage
of options and futures strategies by mutual funds and, if the
guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a
large percentage of a fund's assets could impede portfolio management
or the fund's ability to meet redemption requests or other current
obligations.
COMBINED POSITIONS involve purchasing and writing 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, purchasing a put option and writing a
call option on the same underlying instrument would 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, to reduce the risk of the written call option
in the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund 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 a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter 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 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.
Futures may be based on foreign indexes such as the CAC 40 (France),
DAX 30 (Germany), EuroTop 100 (Europe), IBEX (Spain), FTSE 100 (United
Kingdom), All Ordinary (Australia), Hang Seng (Hong Kong), and Nikkei
225, Nikkei 300 and TOPIX (Japan).
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.
Although futures exchanges generally operate similarly in the United
States and abroad, foreign futures exchanges may follow trading,
settlement and margin procedures that are different from those for
U.S. exchanges. Futures contracts traded outside the United States may
involve greater risk of loss than U.S.-traded contracts, including
potentially greater risk of losses due to insolvency of a futures
broker, exchange member or other party that may owe initial or
variation margin to a fund. Because initial and variation margin
payments may be measured in foreign currency, a futures contract
traded outside the United States may also involve the risk of foreign
currency fluctuation.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each 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 funds
intend to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the funds can commit assets to initial
margin deposits and option premiums.
In addition, each fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of
the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options
if, as a result, the fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets under normal conditions; 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 funds' investments in futures contracts
and options, and the funds' policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible to enter into new positions or close out
existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could
prevent prompt liquidation of unfavorable positions, and potentially
could require a fund to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, a fund's
access to other assets held to cover its options or futures positions
could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. A fund may purchase and sell currency futures and may purchase
and write currency options to increase or decrease its exposure to
different foreign currencies. Currency options may also be purchased
or written in conjunction with each other or with currency futures or
forward contracts. Currency futures and options values can be expected
to correlate with exchange rates, but may not reflect other factors
that affect the value of a fund's investments. A currency hedge, for
example, should protect a Yen-denominated security from a decline in
the Yen, but will not protect a fund against a price decline resulting
from deterioration in the issuer's creditworthiness. Because the value
of a fund's foreign-denominated investments changes in response to
many factors other than exchange rates, it may not be possible to
match the amount of currency options and futures to the value of the
fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) 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 purchaser or writer 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.
PRECIOUS METALS. The prices of gold and other commodities can change
rapidly and generally do not move in tandem with the prices of equity
and debt securities.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
purchaser 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 purchaser 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 purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser 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, 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. The writer of a put or call option takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the writer 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. The writer may seek
to terminate a position in a put option 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, however, the writer
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. When writing an option on a
futures contract, a fund will be required to make margin payments to
an FCM as described above for futures contracts.
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 writer to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the
effects of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for
the strike price, even if its current value is greater, a call writer
gives up some ability to participate in security price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and
(5) the nature of the marketplace for trades (including the ability to
assign or offset the fund's rights and obligations relating to the
investment).
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days, over-the-counter
options, and non-government stripped fixed-rate mortgage-backed
securities. Also, FMR may determine some restricted securities,
government-stripped fixed-rate mortgage-backed securities, loans and
other direct debt instruments, emerging market securities, and swap
agreements to be illiquid. However, with respect to over-the-counter
options a fund writes, all or a portion of the value of the underlying
instrument may be illiquid depending on the assets held to cover the
option and the nature and terms of any agreement the fund may have to
close out the option before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees.
INDEXED SECURITIES are instruments 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 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.
Currency-indexed securities may be positively or negatively indexed;
that is, their maturity value may increase when the specified currency
value increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline
when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the
values of a number of different foreign currencies relative to each
other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes
in the United States and abroad. Indexed securities may be more
volatile than the underlying instruments. Indexed securities are also
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.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates. A fund will lend
through the program only when the returns are higher than those
available from an investment in repurchase agreements, and will borrow
through the program only when the costs are equal to or lower than the
cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. 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.
ISSUER LOCATION. FMR determines where an issuer or its principal
activities are located by looking at such factors as the issuer's
country of organization, the primary trading market for the issuer's
securities, and the location of the issuer's assets, personnel, sales,
and earnings. The issuer of a security is considered to be located in
a particular country if (1) the security is issued or guaranteed by
the government of the country or any of its agencies, political
subdivisions, or instrumentalities; (2) the security has its primary
trading market in that country; or (3) the issuer is organized under
the laws of that country, derives at least 50% of its revenues or
profits from goods sold, investments made, or services performed in
the country, or has at least 50% of its assets located in the country.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or
other receivables), or to other parties. Direct debt instruments are
subject to a 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
interest and repayment of principal. Direct debt instruments may not
be rated by any nationally recognized statistical rating service. If
scheduled interest or principal payments are not made, the value of
the instrument may be adversely affected. Loans that are fully secured
provide more protections than an unsecured loan in the event of
failure to make scheduled interest or principal payments. However,
there is no assurance that the liquidation of collateral from a
secured loan would satisfy the borrower's obligation, or that the
collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may
be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a
small fraction of the amount owed. Direct indebtedness of developing
countries also involves a risk that the governmental entities
responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional
risks. For example, if a loan is foreclosed, the purchaser 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, a purchaser 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
purchaser in the event of fraud or misrepresentation. In the absence
of definitive regulatory guidance, FMR uses its research to attempt to
avoid situations where fraud or misrepresentation could adversely
affect a 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 purchaser has direct recourse
against the borrower, the purchaser may have to rely on the agent to
apply appropriate credit remedies against a borrower. If assets held
by the agent for the benefit of a purchaser were determined to be
subject to the claims of the agent's general creditors, the purchaser
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 may include letters of credit, revolving credit
facilities, or other standby financing commitments that obligate
purchasers to make additional cash payments on demand. These
commitments may have the effect of requiring a purchaser to increase
its investment in a borrower at a time when it would not otherwise
have done so, even if the borrower's condition makes it unlikely that
the amount will ever be repaid. A fund will set aside appropriate
liquid assets in a segregated custodial account to cover its potential
obligations under standby financing commitments.
Each fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see each fund's
investment limitations). For purposes of these limitations, a fund
generally will treat the borrower as the "issuer" of indebtedness held
by the fund. In the case of loan participations where a bank or other
lending institution serves as financial intermediary between a fund
and the borrower, if the participation does not shift to the fund the
direct debtor-creditor relationship with the borrower, SEC
interpretations require a fund, in appropriate circumstances, to treat
both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an
issuer of indebtedness may restrict a fund's ability to invest in
indebtedness related to a single financial intermediary, or a group of
intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal, or may be in default. These securities are often considered
to be speculative and involve greater risk of loss or price changes
due to changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield 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 liquidity of lower-quality debt
securities and the ability of outside pricing services to value
lower-quality debt securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type. FMR will attempt to identify those
issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to
improve in the future. FMR's analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the
issuer.
A 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.
MORTGAGE-BACKED SECURITIES are issued by government and non-government
entities such as banks, mortgage lenders, or other institutions. A
mortgage-backed security is an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying
pool of mortgages. Some mortgage-backed securities, such as
collateralized mortgage obligations (or "CMOs"), make payments of both
principal and interest at a range of specified 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. Stripped
mortgage-backed securities are created when the interest and principal
components of a mortgage-backed security are separated and sold as
individual securities. In the case of a stripped mortgage-backed
security, the holder of the "principal-only" security (PO) receives
the principal payments made by the underlying mortgage, while the
holder of the "interest-only" security (IO) receives interest payments
from the same underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest rates. In
addition, regulatory or tax changes may adversely affect the
mortgage-backed 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, which is the risk that early principal payments
made on the underlying mortgages, usually in response to a reduction
in interest rates, will result in the return of principal to the
investor, causing it to be invested subsequently at a lower current
interest rate. Alternatively, in a rising interest rate environment,
mortgage-backed security values may be adversely affected when
prepayments on underlying mortgages do not occur as anticipated,
resulting in the extension of the security's effective maturity and
the related increase in interest rate sensitivity of a longer-term
instrument. The prices of stripped mortgage-backed securities tend to
be more volatile in response to changes in interest rates than those
of non-stripped mortgage-backed securities.
REAL ESTATE INVESTMENT TRUSTS. Equity real estate investment trusts
own real estate properties, while mortgage real estate investment
trusts make construction, development, and long-term mortgage loans.
Their value may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property
taxes, interest rates, and tax and regulatory requirements, such as
those relating to the environment. Both types of trusts are dependent
upon management skill, are not diversified, and are subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free status of income under
the Internal Revenue Code and failing to maintain exemption from the
1940 Act.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. As
protection against the risk that the original seller will not fulfill
its obligation, the securities are held in a separate account at a
bank, marked-to-market daily, and maintained at a value at least equal
to the sale price plus the accrued incremental amount. While it does
not presently appear possible to eliminate all risks from these
transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well as
delays and costs to a fund in connection with bankruptcy proceedings),
the funds will engage in repurchase agreement transactions with
parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, a fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse repurchase
agreement is outstanding, a fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. The funds will enter into reverse repurchase agreements
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR. Such transactions may increase fluctuations in
the market value of fund assets and may be viewed as a form of
leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good
standing. Furthermore, they will only be made if, in FMR's judgment,
the consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other
eligible securities. Investing this cash subjects that investment, as
well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a
convertible security a fund holds, it may sell the stock short. If the
stock price subsequently declines, the proceeds of the short sale
could be expected to offset all or a portion of the effect of the
stock's decline on the value of the convertible security. A fund
currently intends to hedge no more than 15% of its total assets with
short sales on equity securities underlying its convertible security
holdings under normal circumstances.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold them aside while the short sale is outstanding. A
fund will incur transaction costs, including interest expenses, in
connection with opening, maintaining, and closing short sales.
SHORT SALES "AGAINST THE BOX." A fund may sell securities short when
it owns or has the right to obtain securities equivalent in kind or
amount to the securities sold short. Such short sales are known as
short sales "against the box." If a fund enters into a short sale
against the box, it will be required to set aside securities
equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.
SOVEREIGN DEBT OBLIGATIONS are 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 pay interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and payment of interest may depend on political as well as
economic factors. Although some sovereign debt, such as Brady Bonds,
is collateralized by U.S. Government securities, repayment of
principal and payment of interest is not guaranteed by the U.S.
Government.
SWAP AGREEMENTS can be individually negotiated and structured to
include exposure to a variety of different types of investments or
market factors. Depending on their structure, swap agreements may
increase or decrease a fund's exposure to long- or short-term interest
rates (in the United States or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such
as security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names.
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 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 a fund's investments
and its share price.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a fund. If a
swap agreement calls for payments by 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.
A fund may be able to eliminate its exposure under a swap agreement
either by assignment or other disposition, or by entering into an
offsetting swap agreement with the same party or a similarly
creditworthy party.
A fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If a fund enters into a swap agreement on a net basis, it
will segregate assets with a daily value at least equal to the excess,
if any, of the fund's accrued obligations under the swap agreement
over the accrued amount the fund is entitled to receive under the
agreement. If a fund enters into a swap agreement on other than a net
basis, it will segregate assets with a value equal to the full amount
of the fund's accrued obligations under the agreement.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. Variable rate securities
provide for a specified periodic adjustment in the interest rate,
while floating rate securities have interest rates that change
whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
WARRANTS. Warrants are instruments which entitle the holder to buy an
equity security at a specific price for a specific period of time.
Changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying security. The price of a
warrant may be more volatile than the price of its underlying
security, and a warrant may offer greater potential for capital
appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying security and do not represent any rights in
the assets of the issuing company. A warrant ceases to have value if
it is not exercised prior to its expiration date. These factors can
make warrants more speculative than other types of investments.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a 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 more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS REGARDING AFRICA
Africa is a highly diverse and politically unstable continent of over
50 countries and 720 million people. Civil wars, coups and even
genocidal warfare have beset much of this region in recent years.
Nevertheless, it is home to an abundance of natural resources,
including natural gas, aluminum, crude oil, copper, iron, bauxite,
cotton, diamonds and timber. Wealthier countries generally have strong
connections to European partners, and evidence of these relationships
is seen in the growing market capitalization and foreign investment of
these countries. Economic performance is closely tied to world
commodity markets, particularly oil, and also to weather conditions,
such as drought.
Five African countries are among the 20 fastest growing in the world
(Uganda, Ivory Coast, Botswana, Angola and Zimbabwe, confirm EIU
1995), with GDP growth rates ranging from 5.5% to 6.0%. Two countries,
Yemen and Bahrain, are experiencing growth at or below 2.0%, and one
country, Libya, is experiencing (-4.0%) negative growth.
African economic growth is projected to remain higher than in any
recent year other than 1996. The relatively small effects of the Asian
crisis are attributable to the comparatively low levels of private
capital flows to most countries in the regions. Africa can be
negatively impacted from the slowdown in global growth, and its
effects on commodity prices.
Several African countries in the north have substantial oil reserves
and accordingly their economies react strongly to world oil prices.
They share a regional and sometimes religious identification with the
oil producing nations of the Middle East and can be strongly affected
by political and economic developments in those countries. As in the
south, weather conditions also have a strong impact on many of their
natural resources, and, as was the case in 1995, severe drought can
adversely effect economic growth.
Twelve African countries have active equity markets (Bahrain,
Botswana, Egypt, Ghana, Kenya, Morocco, Nigeria, Oman, South Africa,
Tunisia, Zambia, and Zimbabwe). The oldest market, in Egypt, was
established in 1883, while the youngest, in Zambia, was established in
1994. Four additional markets have been established since 1989, and
the mean age for all equity markets is 40 years old. A total of 1,830
firms are listed on the respective exchanges. Total market
capitalization for these countries in 1996 was $290 billion, an
average increase of 54% over 1995 levels.
The South African market is the largest in Africa and has a
capitalization of more than ten times that of all the other African
markets combined. In 1997, the country's Johannesburg Stock Exchange
fell by 6.8%, due largely to weakening commodity prices and a slowdown
in the South African economy. The market decline extended into 1998 as
the South African rand declined versus the world's major currencies.
SPECIAL CONSIDERATIONS REGARDING CANADA
Canada is a confederation of ten provinces with a parliamentary system
of government. Canada is the world's second largest nation by landmass
and is inhabited by 30.2 million people, most of whom are descendants
of France, the United Kingdom and indigenous peoples. The country has
a workforce of over 15 million people in various industries such as
trade, manufacturing, mining, finance, construction and government.
While the country has many institutions which closely parallel the
United States, such as a transparent stock market and similar
accounting practices, it differs from the United States in that it has
an extensive social welfare system, much more akin to European welfare
states.
The confederated structures combined with recent financial pressure on
the federal government have pushed provinces, Quebec in particular, to
call for a revaluation of the legal and financial relationships
between the federal government in Ottawa and the provinces. Recent
referendums on Quebec sovereignty have been narrowly defeated and the
issue appears far from resolved. However, in August of 1998, the
country's Supreme Court decided that Quebec does not have the right to
secede unilaterally, removing any immediate threat that Canada will
break up. Nevertheless, the Canadian markets could continue to react
to any periodic escalations of separatist calls.
Canada is one of the richest nations in the world in terms of natural
resources. The country is a major producer of such commodities as
forest products, mining, metals, and agricultural products.
Additionally, energy related products such as oil, gas, and
hydroelectricity are important components of their economy.
Accordingly, the Canadian stock market is strongly represented by
basic material stocks, and movements in the supply and demand of
industrial materials, agriculture, and energy, both domestically and
internationally, can have a strong effect on market performance.
The United States is Canada's largest trading partner and
approximately 80% of Canadian merchandise traded in 1997 was with the
United States. Automobiles and auto parts accounted for the largest
export items followed by energy, mining and forest products. Canada is
the largest energy supplier to the United States, while the United
States is Canada's largest foreign investor. United States investment
has been largely focused on financial, energy, metals and mining
businesses. The expanding economic and financial integration of the
United States and Canada will likely make the Canadian economy and
securities markets increasingly sensitive to U.S. economic and market
events.
For United States investors in Canadian markets, currency has become
an important determinant of investment return. Since Canada let its
dollar float in 1970, its value has been in a steady decline against
its United States counterpart. While the decline has enabled Canada to
stay competitive with its more efficient southern neighbor, which buys
four-fifths of its exports, United States investors have seen their
investment returns eroded by the impact of currency conversion.
SPECIAL CONSIDERATIONS REGARDING EUROPE
Europe can be divided into two distinct categories of market
development: the developed economies of Western Europe and the
transition economies of Eastern Europe.
Any discussion of European national economies and securities markets
must be made with an eye to the impact that the European Union (EU)
and European and Economic Monetary Union (EMU) will have upon the
future of these countries as well as the rest of the world. The scope
and magnitude of these economic and political initiatives dwarfs
anything attempted to date. If successful, the EU will change or erase
many political, economic, cultural and market distinctions that define
and differentiate each of the Continent's countries today.
The third and final stage of the European Economic and Monetary Union
is scheduled to be implemented on January 1, 1999. The European Union
(EU) consists of 15 countries of western Europe: Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, Sweden and the United Kingdom. The
six founding countries first formed an economic community in the 1950s
to bring down trade barriers such as taxes and quotas, to eliminate
technical restrictions such as special standards and regulations for
foreigners, and to coordinate various industrial policies, such as
those pertaining to agriculture. Since that time the group has
admitted new members and, in time, may expand its membership to other
nations such as those of Eastern Europe. The EU has as its goal, the
creation of a single, unified market that would be, at over 370
million people, the largest in the developed world and through which
goods, people and capital could move freely.
A second component of the EU is the establishment of a single currency
- - the Euro, to replace each member country's domestic currencies. In
preparation for the creation of the Euro, the Exchange Rate Mechanism
(ERM) was established to keep the various national currencies at a
pre-specified value relative to each other. The year 1997 is
significant for membership in the EU as it is the initial reference
year for evaluating debt levels and deficits within the criteria set
forth by the Maastricht treaty. Specifically, the Maastricht criteria
include, among other indicators, an inflation rate below 3.3%, a
public debt below 60% of GDP, and a deficit of 3% or less of GDP.
Failure to meet the Maastricht levels would disqualify any country
from membership.
On May 3, 1998 the European Council of Ministers formally announced
the "first wave" of EMU participants. They are: Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Portugal and Spain. On January 1, 1999, the Euro becomes a currency,
while the bank notes used by EMU's eleven members remain legal tender.
After a three year transition period, the Euro will begin circulating
on January 1, 2002. Six months later, today's currencies will cease to
exist.
Many foreign and domestic businesses are establishing or increasing
their presence in Europe in anticipation of the new unified single
market. Clear, confident visions of a diverse, multi-industrial,
unified market under a single currency have been the impetus for much
of the recent corporate restructuring initiatives as well as for the
increased mergers and acquisitions activity in the region. A
successful EMU could prove to be an engine for sustained growth
throughout Europe.
While the securities markets view the introduction of the euro as
inevitable, the success of the union is not wholly assured. Europe
must grapple with a number of challenges, any one of which could
threaten the survival of this monumental undertaking. For example,
eleven disparate economies must adjust to a unified monetary system,
the absence of exchange rate flexibility and the loss of economic
sovereignty. The Continent's economies are diverse, its governments
decentralized and its cultures differ widely. Unemployment is
historically high and could pose a political risk that one or more
countries might exit the union placing the currency and banking system
in jeopardy.
For those countries in Western and Eastern Europe that will not be
included in the first round of the EU implementation, the prospects
for eventual membership serves as a strong political impetus for many
governments to employ tight fiscal and monetary policies. Particularly
for the Eastern European countries, aspirations to join the EU are
likely to push governments to act decisively. At the same time, there
could become an increasingly widening gap between rich and poor both
within the aspiring countries and also those countries who are close
to meeting membership criteria and those who are not. Realigning
traditional alliances could result in altering trading relationships
and potentially provoking divisive socio-economic splits.
The economies of Eastern Europe are embarking on the transition from
communism at different paces with appropriately different
characteristics. The transition countries also display sharp contrasts
in performance. Those that are most advanced in the transformation
process are now reaping the rewards of comprehensive reform and
stabilization policies pursued with determination over recent years.
These include Poland, the Baltic countries, Croatia, the Czech
Republic, Hungary, the Slovak Republic and Slovenia. Conversely, those
that are less advanced in the transition are struggling with a number
of policy challenges to strengthen their economies. Several countries
have made good progress, and in Armenia, Azerbaijan, Georgia,
Kazakhstan, and the Kyrgyz Republic, inflation has fallen considerably
in recent years. Nevertheless, the East European markets are
particularly vulnerable to weakness in the world's other emerging
countries and are particularly sensitive to events in Russia. For
example, in mid-1998 when economic and political turmoil forced the
Russian government to devalue its currency and restructure its debt
payments, the other markets in Eastern Europe suffered significant
destabilization of which the extent and duration is still unknown.
FRANCE. France is a republic of over 58 million people in the historic
if not the geographic center of Western Europe. The Fifth French
Republic, established in the early postwar period under Charles de
Gaulle, provides for a strong Presidency which can appoint its own
cabinet but must win approval of a parliamentary majority. The
government was founded upon the French cultural values of liberty,
brotherhood and egalitarianism. In France, this latter value often
translates into a government burden of providing job security. The
result is a large, vast bureaucracy in the public sector and strict
employment and labor laws in the private sector. In addition, a
significant portion of government economic policy revolves around
regulating and protecting domestic industries, particularly farming
and manufacturing. Finally, the French government frequently owns high
majority or minority interests in large companies, particularly
utility, transport and communications concerns. While privatization
has been a popular movement in many other European countries, it has
encountered a stalled stop-and-go cycle in France.
The French economy is the world's fourth-largest Western
industrialized economy, with a GDP of $1538 billion in 1996. The
nation has substantial agricultural resources, a diversified modern
industrial system, and a highly skilled labor force. France's economy
boasts a sophisticated industrial manufacturing base, which includes
not only high technology (information technology and
telecommunications, vehicles, aircraft, computer equipment, etc.) but
also a number of very large companies producing consumer goods. The
country's industrial structure is unusual for an industrialized
economy because the state still controls a large proportion of the
heavy strategic goods industries as well as institutions such as banks
and communications companies. The agricultural sector continues to be
important; however, most farms are small by European standards and
require massive government support. Exports are an economic strong
point and the nation has enjoyed trade surpluses in recent years.
Leading exports include chemicals, electronics and automotive and
aircraft machinery, while imports are dominated by petroleum,
industrial machinery and electronics. Their main trading partners are
the United States, Japan, and other EU countries.
The country is one of the largest consumers of nuclear energy,
obtaining nearly 75% of its total electricity needs from reactors.
While it has some small deposits of oil and gas, it remains heavily
dependent on imports for most of its needs.
In recent years, the country's economic growth has been hindered by a
series of general strikes. The government's efforts to reduce spending
to meet the Maastricht criteria have prompted strikes and unrest from
France's powerful trade unions. In addition, striking workers have
pushed their demands for a lower retirement age and a reduction in the
workweek. With an unemployment rate above 12%, the country's labor
markets are not functioning efficiently. France's pay-as-you-go
pension program is an additional deterrent to economic growth as
spending on pensions account for a tenth of GDP. While all parties
agree that the system must be replaced, no agreement has been reached
on an alternative.
France went to the polls in May 1997 after a surprise decision to hold
early elections by conservative President Jacques Chirac. Chirac's
calculation was to capitalize on popular support before he was forced
to undertake austere fiscal measures to meet the Maastricht criteria.
Voters responded that they were more concerned about the country's
high level of unemployment and Chirac's party lost enough seats in the
parliament that the president must now share power for the remaining
five years in office with a socialist-led government. This change
could set back the previous government's pledges to continue its
privatization initiatives, restrain spending, support the franc, and
endure fiscal austerity. It also calls into question whether the
French people have the will to adhere to the EMU convergence criteria
over the next few years.
The stock market in France has undergone both gradual and dramatic
changes in recent years, keeping pace with global trends toward
deregulation, privatization, and cross border activities, allowing
Paris to maintain its position as the world's fourth-largest financial
center. Until 1996, the Paris Bourse was the country's sole stock
exchange, providing access to all listed French securities. Since
then, foreign interest has been stimulated by the creation of new
markets, such as the Nouveau Marche, for riskier, growth oriented,
small corporations. While the listings of these combined markets are
fairly diverse financial companies that account for approximately
one-third of the total. The system underwent many regulatory changes
in the late 1980s, taking steps toward combating insider trading and
ensuring market transparency.
GERMANY. Germany is the largest economy in all of Europe and is the
third largest economy in the world behind the United States and Japan.
The country occupies a central position in Western Europe with strong
cultural and economic ties with the countries of Eastern Europe and
borders on no less than six other Western European countries. The
country's size, location and proven industrial ability have
historically thrust it to the center of European economic life, a
position it was able to re-attain in the wake of the post- war period.
More recently, Germany has used this position as a platform to
champion the cause of the European Union, and also to absorb and
transform the devastated economy of its former communist eastern half.
The German economy is heavily industrialized, with a strong emphasis
on manufacturing. The manufacturing sector is driven by small and
medium-sized companies, most of which are very efficient and dynamic.
Germany, nevertheless, has many large industries and manufacturing is
dominated by the production of motor vehicles, precision engineering,
brewing, chemicals, pharmaceuticals and heavy metal products.
The economy has benefited from a strong export performance throughout
the decade. Exports, weighted heavily in the industrial machinery,
autos and chemicals sectors, have provided the economy with positive
trade balances. Exports are the main engine of GDP growth,
highlighting Germany's dependence on the prosperity of its trading
partners. Five out of its top six trading partners are fellow EU
members (the sixth is the United States), while very low levels of
trade are conducted with Asian and Latin American countries. Germany
stands very well poised to supply the emerging markets of central
Europe. It is already the largest European foreign investor in the
Czech Republic and the largest trading partner for Poland and Hungary.
Accordingly, any weakness in the emerging market economies might
likely dampen demand for German goods, to the detriment of the German
economy. As most of these emerging markets aspire to join the EU, it
is possible that a larger EU could alter Germany's trading
relationships due to new quotas, tax rates, exchange rates and other
factors which will come with EU membership.
The recent performance of the German economy must be evaluated within
the context of the 1990 reunification of the eastern and western
states. GDP growth dropped markedly during the early years of
reunification. Industry in Eastern Germany is still catching up.
Workers in Eastern Germany earn two-thirds of western wages but
produce only half as much. In addition, one of the byproducts of
assimilating East Germany into the state has been the need to
restructure many of the government services to accommodate the new and
substantially less affluent citizens. Significant tax and welfare
reforms have yet to be undertaken, and pressure is mounting on the
government to address these issues. Unemployment rates have begun to
cause some discontent among German citizens whose culture generally
places strong emphasis on a social compact. Any dissatisfaction could
be expressed at the polls during the 1998 elections.
Germany is faced with other significant economic challenges.
Unemployment is currently above 12% as the country experiences its
longest period of slow growth since the Second World War. The
government's ability to deal with the problem is limited by its
efforts to meet the stringent Maastricht criteria for convergence.
There are also growing concerns about the exodus of German companies
relocating abroad in order to avoid the country's high labor costs. In
the longer run, Germany's government must alter the peculiar mix of
capitalism, welfarism and consensus that sets the country apart. Those
decisions will be politically sensitive - especially if they
antagonize the powerful trade unions or the country's many family-run
firms.
Germany's stock market has enjoyed dramatic growth in volume as the
main DAX index has soared over the past two years. Much of the
market's strength has been attributed to the dollar's recovery and
rising corporate earnings. In addition, a number of changes have
occurred recently to support the share-buying explosion and to
establish a German equity culture. A number of initial public
offerings were launched as the government sought to divest itself of
ownership in such businesses as the nation's telephone utility and
post office businesses to ease budgetary pressures. The government
also created a supervisory authority which has outlawed insider
trading and established stiffer company reporting standards intended
to further increase the appeal of Germany's stock market.
Nevertheless, while there has been progress in broadening the investor
base, shares remain overwhelmingly in the hands of institutions and
companies.
The German central bank is one of the world's strongest and most
independent. Their high interest rates have contributed to a
controlled growth of the stock market and a steadily decreasing
inflation rate. Keeping the Deutsche Mark strong in leading up to EMU
has been a priority for the bank. Nevertheless, exports have thrived
despite the currency's strong position.
A founding member of the EU and the most ardent proponent of EMU,
Germany is seen as the primary player in Union economics and politics.
Seeking to consolidate this position, recent government policy has put
a strong emphasis on the maintenance of a strong currency and the
achievement of the Maastricht criteria.
NORDIC COUNTRIES. Increasing economic globalization and the expansion
of the EU have forced the Nordic Countries to scale back their
historically liberal welfare spending policies. While public spending
has dropped from average levels, the cutbacks in social programs have
sparked drops in domestic demand and increases in unemployment.
Nevertheless, the Nordic economies are experiencing positive growth
fueled largely by strong exports and low interest rates. The
approaching EMU deadline is putting pressure on each nation to
maintain their economies in line with requirements of the Maastricht
treaty criteria and the fiscal and political issues remain central in
political debates.
Of the Nordic countries, Finland, Denmark and Sweden are all members
of the EU. Only Norway has elected not to join. However, the decision
likely will not isolate the Norwegian economy from those of its Nordic
neighbors. The country maintains a "shadow membership" in the EU, by
which it seeks to stay as closely informed as possible and to make its
voice heard on the issues. This may ensure that it will become more
closely aligned with the rest of Europe as time passes. One
significant aspect of opting out of the EU is that the central bank is
free to pursue its own agenda, such as setting inflation targets as
opposed to exchange rate targets. Inflation patterns and currency
stability could prove to be issues that may separate the policy
decisions of Norway from the other Nordic countries.
Politically, the countries of this region are historically known for
their approach to policy making that emphasizes consensus. The most
common type of government among the Nordic countries is dominated by
long-standing, left-of-center parties which often align themselves
with smaller centrist parties for majority support. The landscape,
however, is so fractured that governing from a minority position is
common. The absence of a clear majority party slows and sometimes
arrests policy making. The strongest opposition comes from traditional
European conservative parties, which have gained support in recent
years with the decline of the welfare state and the need for the
libertarian policies necessary to compete and integrate with free
markets. None of the Nordic countries face any serious risk of any
anti-democratic political change. However, in Sweden, the prospects of
the present government will depend on its ability to create more jobs
and to prepare the economy for EMU. A large minority of voters are
also disappointed about the benefits which membership in the EU was
expected to bring and have been increasingly voicing anti-EU
sentiments. However, in May 1998, Sweden and its fellow applicants,
Finland and Denmark, were formally admitted in the "first wave" of the
EMU.
Industry in the region is heavily resource-oriented. Denmark's
agricultural sector remains the backbone of the economy although other
industries have been developing rapidly in recent years, with
engineering, food processing, pharmaceuticals, brewing and
shipbuilding gaining in importance. Finland's major industry is
forestry which supplies a large paper and timber products sector. It
also produces household goods and telecommunications equipment and has
an extremely important heavy goods sector producing ships, cement,
steel and machine tools. In Sweden, the manufacturing sector dominates
the economy and includes major industries which range from motor
vehicles to aerospace, chemicals, pharmaceuticals, timber, pulp and
paper. Several of the country's export-oriented industries (in
particular forestry, mining and steel) are suffering as the country's
high wages squeeze them out of foreign markets. Norway's oil- driven
economy has provided its citizens with one of the highest standards of
living in the world. However, they must prepare for the time, due to
arrive early in the next century, when their vast reserves run out.
Reliance on exports concentrated in a few sectors tie these countries
closely to one another.
Economically, the Nordic countries are strong export economies that
take advantage of their abundant natural resources. They are also very
closely tied both to each other and to the rest of Europe. Most
countries have witnessed low levels of positive growth in the last six
years. Finland is the exception. As a significant portion of its trade
is with Russia, Finland suffered in the early years of the collapse of
the Soviet Union. However, in the past two years its economy has
recorded some of the highest growth rates in Western Europe while
having the lowest rate of inflation. Similarly, after five years of
recession, the overall outlook for the Swedish economy is also vastly
improved. A stringent package of spending cuts and tax increases has
brought down the budget deficit to a level that is well within the EMU
target. Exports are recovering as other parts of Europe are coming out
of recession and its inflation is among the lowest in Western Europe.
However, the one weak spot in both country's economies is a
persistently high unemployment rate. Finland's unemployment, at 17%,
is the second highest in Europe after Spain, and Finland's rate
represents only a marginal improvement over the previous year.
Norway's oil driven economy is the envy of many and unemployment is
just a little over five percent.
A portion of the region's unemployment woes can be attributed to the
cultural ethic which was advanced during the years of the welfare
state. Subsequent cuts in public spending, particularly in those
sectors that traditionally rely on large government spending,
exacerbated the problem. Labor market reform will be a critical issue
in these countries as public spending is cut back. Pensions and
structural issues such as union regulations all need to be reformed, a
task, which brings both challenges and unpopularity to the government
that accepts it. Not only will labor market reforms give governments a
daunting challenge; they could also cause the public to regret their
participation in the EMU. One positive point is that the countries
boast very high standards of living, which create healthy and highly
educated workforces.
The stock markets in Scandinavia are of medium size, and frequently
are strongly influenced by a small number of large multinational
firms. For example, in Sweden thirty firms constituted 75% of the
market's total capitalization and market turnover in 1997. Weighing
heavily in the equity markets are the electronics, forest products,
mining and manufacturing sectors. Market capitalization is highest in
Sweden at $273 billion, while the others are between $74 and $94
billion. Sweden also leads in numbers of firms (261) listed. Other
country's listings range from 126 (Finland) to 249 (Denmark).
Performance of Nordic country indexes tend to be skewed owing to the
dominant weightings that a few large companies have in the index. For
example, the market capitalization of Finnish telecommunications
equipment manufacturer Nokia comprises about one-third of the total
market capitalization of the Finnish exchange and has a substantial
impact upon the performance of the countries in the HEX Index.
UNITED KINGDOM. The United Kingdom is the world's sixth largest
economy and is home to one of the oldest, most established, and most
active stock markets. An island nation, it built an empire of
strategically located trading posts such as Hong Kong and India. While
today the empire is largely dissolved, trade remains a very key
component of the U.K. economy. Strong domestic sectors are services,
natural energy resources, and heavy industry, including steel, autos,
and machinery. Imports generally emphasize food and manufacturing
components. The United Kingdom's trading partners are predominately
established market economies, such as the United States, Japan, and
other member countries of the European Union. The United Kingdom, via
the North Sea, also has substantial petroleum resources.
The London Stock Exchange is comprised of six offices scattered
throughout Great Britain and Northern Ireland. It lists over 2900
firms, and trades both foreign and domestic securities as well as
securities issued by the British Government. A vast majority of the
firms listed (80%) are from the United Kingdom. Total market
capitalization in 1997 was over $5,440 billion. Such size prevents the
stock market from being overly sensitive to the performance of
individual firms.
In 1997 the U.K. posted its sixth year of recovery with GDP growth of
3.5%, the third highest in the EU. The labor market also appears to
have improved as pay settlements and wages remain under control
despite the employment rate falling from 6.5% to 5% over the year. The
strengthening economy prompted a sharp acceleration in consumer
spending and, in response, the nation's Monetary Policy Committee was
forced to raise base rates. The interest rate rise added fuel to an
already robust sterling which rose 8.6% in 1997 after appreciating by
15.6% in 1996. This proved particularly damaging to the manufacturing
sector and, although exports held up well during the year, there were
early indications that a decline was underway. Inflation is low,
making the country attractive for foreign investment. Investment is
especially attractive to the United States, with which the United
Kingdom shares many market similarities. Each country is the other's
largest foreign investment partner.
Under Conservative Party leadership in the early 1980s, the United
Kingdom privatized many state-run utilities, such as British Gas and
British Telecom. The success of these efforts is evidence both of the
strong entrepreneurial spirit of British society and also a
fundamental rejection of the welfare state policies that dominated the
scene in the early post-war period. Even today, the Labour Party has
shed much of its socialist economic platform, reflecting a strong
break away from policies that continue to be popular in other European
countries. Eager to attract foreign investment the new administration
is not expected to undo any of the major reforms put in place by the
Conservatives during their last 18 years in power. Some changes could
include an increase in spending on social programs, a slowing of
privatization, and an increase in corporate taxes. Tight monetary
policy and interest rate hikes could be used to keep inflation below
the government's self-imposed 2.5% ceiling. In addition, the
government will probably wish to rebuild ties with the rest of the EU
and has already taken steps to get the pound back into the European
system by increasing the independence of the country's central bank.
Nevertheless, there appears to be some nervousness among many
investors who see the U.K. market lagging behind the continental
European stock markets where they see more compelling prospects for
economic growth. In addition, the manufacturing industry is suffering
from the pound's lofty valuation and many fear that an economic
slowdown could spread to the services sector.
The political scene in London is largely shaped by positions regarding
EMU. Pro Europe MPs in the Tory opposition leadership were
marginalized after the 1997 election, further polarizing the positions
of the two parties. Despite this expression of support, the United
Kingdom continues to be overtly less enthusiastic about EMU than other
countries in Europe and has not committed itself to immediately
joining the new currency once it is established. While the new
government has stated that it hopes to meet the Maastricht criteria,
it is less a self-imposed pressure on the U.K. government than it is
for other countries in the Union. Signing on to the EU Social Charter
would neutralize the policies which have set the United Kingdom above
other countries in attracting investment, such as wages and employment
conditions.
SPECIAL CONSIDERATIONS REGARDING ASIA
Asia has undergone an impressive economic transformation in the past
decade. Many developing economies, utilizing substantial foreign
investments, established themselves as inexpensive producers of
manufactured and re-manufactured consumer goods for export. As
household incomes rose, middle classes increased, stimulating domestic
consumption. In recent years, large projects in infrastructure and
energy resource development have been undertaken, and have benefited
from cheap labor, foreign investment, and a business friendly
regulatory environment. During the course of development, democratic
governments fought to maintain the stability and control necessary to
attract investment and provide labor. Subsequently, Asian countries
today are coming under increasing, if inconsistent, pressure from
western governments regarding human rights practices.
Manufacturing exports declined significantly in 1997, due to drops in
demand, increased competition, and strong performance of the U.S.
dollar. This significant decline is particularly true of electronics,
a critical industry for several Asian economies. Declines in exports
reveal how much of the recent growth in these countries is dependent
on their trading partners. Many Asian exports are priced in U.S.
dollars, while the majority of its imports are paid for in local
currencies. A stable exchange rate between the U.S. dollar and Asian
currencies is important to Asian trade balances.
Despite the impressive economic growth experienced by Asia's emerging
economies, currency and economic concerns have recently roiled these
markets. Over the summer of 1997, a plunge in Thailand's currency set
off a wave of currency depreciations throughout South and Southeast
Asia. The Thai crisis was brought on by the country's failure to take
steps to curb its current-account deficit, reduce short-term foreign
borrowing and strengthen its troubled banking industry, which was
burdened by speculative property loans. Most of Southeast Asia's stock
markets tumbled in reaction to these events. Investors were heavy
sellers as they became increasingly concerned that other countries in
the region, faced with similar problems, would have to allow their
currencies to weaken further or take steps that would choke off
economic growth and erode company profits. For U.S. investors, the
impact of the market declines were further exacerbated by the effect
of the decline in the value of local currencies versus the U.S.
dollar.
The same kind of concerns that effected Thailand and other Southeast
Asian countries subsequently spread to North Asia. To widely varying
degrees, Taiwan, South Korea and Hong Kong all faced related currency
and/or equity market declines. Due to continued weakness in the
Japanese economy combined with the reliance of Asian economies on
intra-Asian trade and capital flows, most of the region was mired in
their worst recessions since World War II.
Investors continue to face considerable risk in Asian markets as
political, economic and currency turmoil has continued to undermine
market valuations throughout the first half of 1998. Rising
unemployment, food shortages and declining purchasing power could lead
to social unrest and threaten the orderly functioning of government.
Currency devaluations also increase pressure on both the consumers who
must pay more for imported goods and on many businesses that must deal
with the rising costs of raw materials. For U.S. investors, weakening
local currencies erode their returns in these markets upon currency
translation. Certainly, the resolve of the region's governments to
adhere to International Monetary Fund-mandated benchmarks will be
sorely tested, as their implementation could further exacerbate these
pressures on the nation's populace and businesses. In addition,
Japan's paralysis is fast becoming a problem for Asia. Worsening
Japanese banking problems could lead to a contraction of credit for
all of Asia and slow rehabilitation in the region. Similarly, a
significant portion of both domestic and foreign investors have fled
these markets in favor of safer havens outside of the region and will
not likely return until they see more evidence that these problems are
being effectively addressed. The scope and magnitude of the tasks that
these countries face in resolving their problems could mean that
investors will see a continuation of high market volatility over an
extended period.
JAPAN. A country of 126 million with a labor force of 64 million
people, Japan is renowned as the preeminent economic miracle of the
post-war era. Fueled by public investment, protectionist trade
policies, and innovative management styles, the Japanese economy has
transformed itself since the World War II into the world's second
largest economy. An island nation with limited natural resources,
Japan has developed a strong heavy industrial sector and is highly
dependent on international trade. Strong domestic industries are
automotive, electronics, and metals. Needed imports revolve around raw
materials such as oil, forest products, and iron ore. Subsequently,
Japan is sensitive to fluctuations in commodity prices. With only 19%
of its land suitable for cultivation, the agricultural industry is
small and largely protected. While the United States is Japan's
largest single trading partner, close to half of Japan's trade is
conducted with developing nations, almost all of which are in
southeast Asia. Investment patterns generally mirror these trade
relationships. Japan has over $100 billion of direct investment in the
United States.
The Tokyo Stock Exchange (TSE) is the largest of eight exchanges in
Japan. The exchanges divide the market for domestic stocks into two
sections, with larger companies assigned to the first section and
newly listed or smaller companies assigned to the second. In 1997,
1,805 firms were listed on the TSE, 96% of which were domestic. Some
believe that the TSE has a tendency to be strongly influenced by the
performance of a small circle of large cap firms that dominate the
market. The two key indexes are the Tokyo Stock Price Index (TOPIX)
and the Nikkei. In 1997, TSE performance was disappointing, with the
TOPIX down 28% for the year.
Since Japan's bubble economy collapsed seven years ago, the nation has
drifted between modest growth and recession. By mid-year 1998 the
world's second largest economic power had slipped into its deepest
recession since World War II. Much of the blame can be placed on
government inaction in implementing long-neglected structural reforms
despite strong and persistent proddings from the International
Monetary Fund and the G-7 nations. Steps have been taken to institute
deregulation and liberalization of protected areas of the economy, but
the pace of change has been disappointedly slow.
Unemployment levels, already at record rates when measured by the
broader criteria used in many other countries, have been an area of
increasing concern and a major cause of recent voter dissatisfaction
with recent governments. However, the most pressing need for action is
the daunting task of overhauling the nation's financial institutions
and securing public support for taxpayer-funded bailouts. Banks, in
particular, must dispose of their huge overhang of bad loans and trim
their balance sheets in preparation for greater competition from
foreign financial institutions as more areas of the financial sector
are opened. Successful financial sector reform would allow Japan's
financial institutions to act as a catalyst for economic recovery at
home and across the troubled Asian region. Further steps toward
complete financial liberalization are in the initial stages of
implementation. Proposals under consideration could lower many
barriers allowing foreign firms greater and cheaper access to funds,
and the recent relaxation of restrictions on the insurance market also
promise greater access to foreign companies. A large factor in
determining the pace and scope of recovery is the government's
handling of deregulation programs, a delicate task given the recent
changes in Japanese politics.
Recent political initiatives in Japan have fundamentally transformed
Japanese political life, ushering in a new attitude which is strongly
reverberating in the economy. The Japanese Parliament (the Diet) had
been consistently dominated by the Liberal Democratic Party (LDP)
since 1955. The LDP dynasty, recently fraught with scandal,
corruption, accusations of maintaining a virtual monopoly, effectively
ended in 1994 as a result of electoral reform measures that brought
Diet seats to previously underrepresented areas. The first election
under this new system was held in October 1996. While the LDP remained
as the ruling party, it did so from a minority position. A key result
of the electoral reforms has been a strengthening of ideas of
opposition parties. Indeed, many of the LDP's recent reforms
originated with the leaders of the opposition New Frontier Party. The
LDP's ability to consistently produce bold innovations in a
politically competitive environment is untested. The opposition
parties suffer from structural and organizational weaknesses.
Infighting and defections are common. This inexperience with a true
multi-party system has caused the rise and fall of four coalition
governments in recent years. Between the adjusting of the monolithic
LDP to a more demanding and competitive system and the settling of the
opposition parties, Japan's political environment remains unstable.
The desire for electoral reform arose out of what many see as a basic
change in Japanese public opinion in recent years. Faced with
recurring scandal and corruption, Japanese society has come to demand
more accountability from their leaders, more transparency in their
institutions, and less interference from their intensely bureaucratic
government. This attitude was reflected in the results of the recent
election where candidates of the LDP party were heavily defeated in an
election for the upper house of parliament and prime minister
Hashimoto was forced to resign. The election results were considered
to be a repudiation of the government's failure to come to grips with
the countries economic decline, widening corruption scandals and a
lack of any discernable progress in addressing the nation's banking
problems.
Nevertheless, sustaining reforms and recovery are not guaranteed.
Drops in consumption, increased budget deficits, or halting
deregulation could exacerbate the nation's economic woes. Furthermore,
as a trade-dependent nation long used to high levels of government
protection, it is unclear how the Japanese economy will react to the
potential adoption of the trade liberalization measures which are
constantly promoted by their trading partners. In addition, as the
largest economy in a rapidly changing and often volatile region of the
world, external events such as the Korean conflict could effect Japan.
As many of the governments of Southeast Asia frequently face domestic
discontent, and as many of these countries are Japanese trading
partners and investment recipients, their internal stability and its
impact on regional security are of tremendous importance to Japan.
Also of concern are Japan's trade and current-account surpluses. If
they continue to grow, they could lead to an increase in trade
friction between Japan and the United States. Additionally, with
inflationary pressures largely absent and wholesale prices falling,
Japan may be entering a period of deflation. A deflationary
environment would both hit corporate profits and increase the debt
burden of Japan's most highly leveraged companies.
CHINA AND HONG KONG. China is one of the world's last remaining
communist systems, and the only one that appears poised to endure due
to its measured embrace of capitalist institutions. It is the world's
most populous nation, with 1.22 billion people creating a workforce of
699 million people. Today's Chinese economy, roughly separated between
the largely agricultural interior provinces and the more
industrialized coastal and southern provinces, has its roots in the
reforms of the recently deceased communist leader Deng Xiaoping.
Originally an orthodox communist system, China undertook economic
reforms in 1978 by providing broad autonomy to certain industries and
establishing special economic zones (SEZs) to attract foreign
investment (FDI). Attracted to low labor costs and favorable
government policies, investment flowed from many sources, with Hong
Kong, Taiwan, and the United States leading the way. Most of this
investment, has been concentrated in the southern provinces,
establishing manufacturing facilities to process goods for re-export.
The result has been a steadily high level of real GDP growth,
averaging 11.35% per year so far this decade. With this growth has
come a doubling of total consumption, a tripling of real incomes for
many workers, and a reduction in the number of people living in
absolute poverty from 270 to 100 million people. Today there is a
market of more than 80 million people who are now able to afford
middle class western goods.
Such success has not come without negatives. As a communist system in
transition, there still exist high levels of subsidies to state-owned
enterprises (SOE) which are not productive. At the end of 1997, it was
reported that close to half of the SOEs ran losses. In addition, the
inefficiencies endemic to communist systems, with their parallel (thus
redundant) political, economic and governmental policy bodies,
contribute to high levels of inflation. Fighting inflation and
attempting to cool runaway growth has forced the government to
repeatedly implement periods of fiscal and monetary austerity.
Periodic intervention seems to be their chosen method of guarding
against overheating.
Performance in 1997 reflects this dynamic between growth, inflation,
and the government's attempts to control them. Growth slowed to 9.1%,
largely as a result of a tightening of credits to SOEs. Policy was a
mix between a loose monetary stance and some relatively austere fiscal
positions. While growth was a priority, it came at the cost of
double-digit inflation.
China has two stock exchanges that are set up to accommodate foreign
investment, in Shenzhen and in Shanghai. In both cases, foreign
trading is limited to a special class of shares (Class B) which was
created for that purpose. Only foreign investors may own Class B
shares, but the government must approve sales of Class B shares among
foreign investors. As of December 1997, there were 51 companies with
Class B shares on the two exchanges, for a total Class B market
capitalization of $2.1 billion U.S. dollars. In 1997, all of China's
stock market indices finished the year below the level at which they
began it. These markets were buoyed by strong speculative buying in
the year's second quarter. Market valuations peaked in September and
were subsequently hit by a heavy sell off from October onwards.
In Shanghai, all "B" shares are denominated in Chinese renminbi but
all transactions in "B" shares must be settled in U.S. dollars. All
distributions made on "B" shares are also payable in U.S. dollars, the
exchange rate being the weighted average exchange rate for the U.S.
dollar as published by the Shanghai Foreign Exchange Adjustment
Center. In Shenzhen, the purchase and sale prices for "B" shares are
quoted in Hong Kong dollars. Dividends and other lawful revenue
derived from "B" shares are calculated in renminbi but payable in Hong
Kong dollars, the rate of exchange being the average rate published by
the Shenzhen Foreign Exchange Adjustment Center. There are no foreign
exchange restrictions on the repatriation of gains made on or income
derived from "B" shares, subject to the repayment of taxes imposed by
China thereon.
China's proven ability to nurture domestic consumption and expand
export markets leads many to believe that the bulk of its growth has
yet to be seen. Most sources, notably the World Bank, predict future
growth levels through the year 2000 of over 7%. This auspicious
indicator notwithstanding, there are a few special considerations
regarding China's future. While this list is not all-inclusive, it
does highlight some internal and external forces that have a strong
influence on the country's future.
To begin with the internal issues, one matter is that infrastructure
bottlenecks could prove to be a problem, as most FDI has been
concentrated in manufacturing and industry at the expense of badly
needed transportation and power improvements. Secondly, as with all
transition economies, the ability to develop and sustain a credible
legal, regulatory, and tax system could influence the course of
investments. Third, environmentalists warn of the current and looming
problems regarding pollution and resource destruction, a common result
of such industrial growth in developing economies which can't afford
effective environmental protection. This is a particularly noteworthy
issue, given the size of the country's agricultural sector. Lastly,
given China's unique method of transition there exists the possibility
that further economic liberalization could give rise to new social
issues which have heretofore been effectively mitigated. One such
issue is the possible dismantling of inefficient state-owned
enterprises, something which is potentially socially explosive given
the communist policy of providing social welfare through the firm.
Exposing what many economists feel is a high level of open
unemployment and widening the gap between the newly empowered business
class and the disenfranchised could pressure the government to retreat
on the road to reform and continue with massive state spending.
Regarding external issues, China's position in the world economy and
its relationship with the United States also have a strong influence
on it's economic performance. The country has recently enjoyed an
almost uninterrupted positive trade balance. As the largest country
amidst the fastest growing region in the world, China and its
multi-million person ethnic diaspora have a significant role to play
in Asian growth. Should China ascend to become a member of the World
Trade Organization (WTO), as it desires, such movements of capital and
goods will become easier.
Export growth in China has recently been subject to fluctuations
caused by external political events, such as the U.S. elections and
debates over human rights issues. U.S. policy (specifically most
favored nation status) is frequently reconsidered by various elements
of the U.S. government in reaction to a variety of issues, from
nuclear proliferation to Tibetan rights. Significant changes in U.S.
policy could impact China's growth, as close to 9% of their GDP is
trade with the U.S. and the U.S. represents the third biggest investor
in China.
Perhaps the strongest influence on the Chinese economy is the policy
that is set by the political leaders in Beijing and this is somewhat
of an open question as the death of Deng has created a slight vacuum
in Chinese political society. A large part of Deng's strength derived
from a newly empowered business class endeared to him and it is
unclear if any of his successors can harness this loyalty as
effectively as he did. Sustained growth is one possible way to win
over this constituency, leading many to believe that the future
Chinese leadership will respect market forces at least as much as Deng
did. Choosing between double digit growth and reduced inflation could
continue to be a central economic question, with 1997 (Deng
influenced) decisions pointing to an acceptance of lower, albeit still
high, GDP growth.
Another key political player is the Chinese army. With provocative
situations occurring in Taiwan and the Korean peninsula, and with ever
present pressure from internal democrats, the military is in a
position of leverage regarding the shaping of the future political
scene. Finally, there is the communist party, long seen as a loser
amongst the beneficiaries of Deng's reforms. Many view the battle
between the party and the middle class as a zero sum game and as the
leadership settles, respective alliances and constituencies could
determine how much the government pursues its growth strategy.
As with almost all foreign investments, U.S. investors face the
significant risk of currency devaluation by the Chinese government.
Despite assurances from officials reemphasizing China's policy
commitment to maintain the current exchange rate of the renminbi
against the U.S. dollar, many observers believe that this policy will
be soon tested as China monitors the effect of regional devaluations
on exports. Government authorities feel that China has boosted its
international reputation by refraining from devaluing the renminbi at
a time when such a move could further destabilize the currencies of
its neighbors. Nevertheless, Chinese authorities have recently hinted
that a continued slide in the Japanese yen would make it very
difficult for them to maintain their promise not to devalue. If
efforts to prevent the slide in the yen fail, then China may be pushed
into devaluing their currency. For U.S. investors, a devaluation would
erode the investment returns on their investments.
The last significant force in the Chinese economy is the acquisition
on July 1, 1997 of Hong Kong as a Special Autonomous Region (SAR). For
the past 99 years as a British Colony, Hong Kong has established
itself as the world's freest market and more recently as an economic
gateway between China and the west.
A tiny, 814 square mile area adjacent to the coast of southern China
with a population of 6.3 million, Hong Kong has a long established
history as a global trading center. Originally a manufacturing-based
economy; most of these businesses have migrated to southern China. In
their place has emerged a developed, mature service economy which
currently accounts for approximately 80% of its Gross Domestic
Product. Hong Kong trades over $400 billion in goods and services each
year with countries throughout the world, notably China, Japan, and
the U.S. Its leading exports are textiles and electronics while
imports tend to revolve around foodstuffs and raw materials. Hong
Kong's currency, the HK dollar, was pegged to the US dollar at
HK7.7=$1 in 1983 and investors consider it to be a stable mechanism in
enduring confidence lapses and speculator attacks. The operation of a
currency board and accumulation of U.S. dollars in its monetary fund
is partly responsible for this stability.
The stock market (SEHK) listed 658 publicly traded companies by the
end of 1997, with total capitalization at $413 billion U.S. dollars. A
significant portion of SEHK firms are in real estate, and are
sensitive to fluctuations in the property markets. 1997 was a
tumultuous year for the Hong Kong stock market as a speculative attack
on the Hong Kong dollar in October provoked a global sell-off in
equities. Investors were shocked as the Hong Kong market, long
regarded as a safe-haven, plunged 40% in October. The stock market's
decline and the attack on the local currency sent interest rates
soaring, precipitating an erosion in local property values. This in
turn put additional pressure on the banking sector which is heavily
geared to real estate. The Hong Kong market's dramatic downturn
illustrates how vulnerable it is to the Asian region's economic
problems. The structural problems besetting Hong Kong's neighbors in
Southeast and Northeast Asia may not be quickly resolved. Exports to
the Asian region may remain depressed as the process of economic
reform in countries such as Thailand, Malaysia, Indonesia, Japan and
South Korea will likely hold back economic growth in the area.
Accordingly, Hong Kong and China will likely be more dependent upon
demand from the U.S. and Europe for some time to come.
As a trade center, Hong Kong's economy is very closely tied to that of
its trading partners, particularly China and the United States. In the
wake of Deng's reforms, Hong Kong and China have become increasingly
interdependent economically. Currently, China is Hong Kong's largest
trading partner. After Taiwan, Hong Kong is the largest foreign
investor in China, accounting for about 60 percent of overall foreign
direct investment. Hong Kong plays a particularly significant role as
an intermediary in U.S.-China trade. In 1996, it handled 56% of
China's exports to the U.S. and 49% of Chinese imports from the U.S.
The critical question regarding the future of Hong Kong is how the
Chinese leadership will exert its influence now that it has become a
Special Autonomous Region (SAR). This new status is in accordance with
pledges made at the Joint Declaration on the Question of Hong Kong
made by the Chinese and British governments in 1984. Leading up to the
hand over of the colony, the Chinese government has pledged to uphold
the Basic Law of 1990 which states that Hong Kong's status as an
unfettered financial center will remain intact for at least 50 years
after 1997. Part of this status includes retaining the legal,
financial and monetary systems (specifically the HK$/US$ peg) which
guarantee economic freedom and foster market expansion.
Many investors and citizens are closely monitoring Chinese actions in
order to assess their actual commitment to these principles. Already
there is evidence of a clear, if slow, current of political change
coming from Beijing. Certain actions, such as the curbing of media
freedoms, indicate that there is the possibility of significant
interference from communist authorities. More significant was the
clash between the U.K. and Chinese governments over China's abolition
of the elected legislature and subsequent installation of governmental
leaders in both the executive and the legislature who are directly
appointed by Beijing. Mr. Tung Chee-hwa, appointed as the first Chief
Executive of the SAR, has surrounded himself with like-minded
Machiavellian figures who have strong ties to both market successes
and Beijing leaders. They are portrayed as believing in the powers of
capitalism and central authority, if not democracy, leading some to
speculate that the SAR could develop into a South Korean style of
corporatism which preserves the economic status quo without
incorporating further political freedoms.
In assessing the prospects for Hong Kong's future, it must be noted
that China has a very strong interest in a prosperous SAR.
Particularly if Beijing pursues a growth strategy as it has in the
past, Hong Kong can be a key agent in China's economic policy. Desire
for investment and new technologies necessary for modernization is a
strong incentive to send positive signals through the treatment of
Hong Kong. This is reinforced by the respect Hong Kong is due given
its role in China's recent dynamic performance.
To be sure, there are more adamant concerns over the effect of the
acquisition. Many are skeptical of Beijing's ability to leave the
currency alone. Some note the continuous drop in GDP as evidence that
Hong Kong has yet to mature as a service economy and that the
workforce hasn't fully adjusted to the switch out of manufacturing.
Additionally, by tying Hong Kong so closely with China, it now must
weather the ups and downs of Beijing's relationship with the U.S. Most
Favored Nation Status now means just as much, if not more, to the SAR
than it does to Beijing, with some asserting that revoking MFN could
result in substantial losses in trade, income, and jobs.
Hong Kong's competitive advantage has traditionally been a mix of
geography, market freedoms and entrepreneurial spirit. The
preservation of these advantages is now a function of the island's
independence from Beijing. Today's investors will be vigilant in
measuring how much of that independence is retained after July 1,
1997.
AUSTRALIA. Australia is a 3 million square mile continent (about the
size of the 48 continental United States) with a predominantly
European ethnic population of 18.2 million people. A member of the
British Commonwealth, its government is a democratic, federal-state
system.
The country has a western style capitalist economy with a workforce of
9.2 million people that is concentrated in services, mining, and
agriculture. Australia's large agricultural sector specializes in
wheat and sheep rearing and together, these two activities account for
more than half of the country's export revenues. Australia also
possesses abundant natural resources such as bauxite, coal, iron ore,
copper, tin, silver, uranium, nickel, tungsten, mineral sands, lead,
zinc, diamonds, natural gas, and oil. The health of the country's
domestic economy is particularly sensitive to movements in the world
prices of these commodities. Primary trading partners are the United
States, Japan, South Korea, New Zealand, the United Kingdom and
Germany. Imports revolve around machinery and high technology
equipment.
Historically, Australia's strong points were its agricultural and
mining sectors. While this is still true to a large extent, the
government managed to boost its manufacturing sector by undertaking
protective measures in the 1970's and early 1980's. These have
subsequently been liberalized in an effort to spur growth in the
industrial sector. Today's economy is more diverse, as manufactures'
share of total exports is increasing. Part of the government's effort
to make manufacturing more competitive was a floating of the
Australian dollar in 1984, precipitating an initial depreciation, and
a campaign to reduce taxes. Such reforms have attracted foreign
investment, particularly in the transport and manufacturing sectors.
Restrictions do exist on investment in certain areas as media, mining
and some real estate.
With inflation well under control but unemployment stubbornly high and
signs of cyclical slack in the economy, Australia's monetary policy is
focused on preserving the low inflation environment while keeping
monetary conditions conducive to stronger economic growth. The
government has set a goal of achieving a government budget surplus in
fiscal year 1998/1999.
Australia is fully integrated into the world economy, participating in
GATT and also more regional trade associations such as the Asia and
the Pacific Economic Cooperation (APEC) forum. Future growth could
result from their movement towards regional economic liberalization,
but a countervailing force is the reality that some export markets in
Europe could be lost to continued European economic integration.
After suffering a significant recession in 1990-91, the Australian
economy has enjoyed six years of expansion. The medium-term outlook
appears favorable, with domestic spending supported by low interest
rates, improving consumer confidence and a strengthening labor market.
GDP growth has increased steadily throughout 1997. However, weakness
in commodity prices, particularly metal prices, coupled with an
increase in the nation's current account deficit have placed
significant pressure on the Australian dollar.
Investors should be aware that, while Australia's prospects for strong
economic growth appear favorable over the long-term, many sectors
currently face significant risks arising from the recent turbulence in
Asian countries, which account altogether for almost 60 percent of
Australia's exports. While projections already embody a more subdued
outlook for growth in these countries, there is a risk of this outlook
deteriorating further, especially in Japan and Korea.
Due to the large position that the agriculture and natural resource
sectors have in the nation's export driven economy, any weakness in
commodity prices may negatively impact both the economy and stock
prices. In addition, United States investors face the risk that their
investment returns from investments in Australia could be eroded if
the Australian currency declines relative to the United States dollar.
INDONESIA. Indonesia is a country that encompasses over 17,000 islands
on which live 195 million people. It is a mixed economy that balances
free enterprise with significant government intervention. Deregulation
policies, diversification of strong domestic sectors, and investment
in infrastructure projects have all contributed to high levels of
growth since the late 1980's. Indonesia's economy grew at 7.1% in
1996, the exact average of its performance for the current decade.
Growth in the 1990's had been fairly steady, hovering between 6.5-7.5%
for the most part, peaking at 8.1% in 1995. Moderate growth in
investment, including public investment, and also in import growth,
helped to slowdown GDP growth. Growth has been accompanied by
moderately high levels of inflation.
In recent years, Indonesia had been undergoing a diversification of
the core of its economy. No longer strictly revolving around oil and
textiles, it is now gaining strength in high technology manufactures,
such as electronics. Indonesia consistently runs a positive trade
balance. Strong export performers are oil, gas, and textiles and
apparel. Oil, once responsible for 80% of export revenues, now
accounts for only 25%, an indication of how far other (mostly
manufacturing and apparel) sectors have developed. Main imports are
raw materials and capital goods.
However, as with many of its Asian neighbors, Indonesia's bright
prospects came to a sudden halt in August of 1997 when the plunging
Thai baht began to destabilize the rupiah. By mid-year 1998 the local
currency had fallen more than 80% against the dollar, and hugely
increased the cost of servicing foreign debts; a collapse of the real
economy, and a growing number of bad loans. Various central bank
initiatives, including a doubling of interest rates, failed to halt
the currency's depreciation. The nation's banks, unable to service
their extensive short term borrowings, were suddenly in danger of
collapse. Of more than 200 local banks, a mere handful were estimated
to be solvent at mid-year 1998.
The social effects of this decline have been devastating. By the end
of 1998 the government expects 47% of the population to be living
below the poverty line and unemployment is expected to surpass 20% of
the workforce. This has led to an increase in social tensions and food
riots and large-scale strikes have broken out sporadically. Rioting
and attacks upon the countries business oriented ethnic Chinese
population have prompted as many as 80,000 to flee the country. Rising
popular opposition forced President Suharto to resign less than three
months after being appointed to his seventh consecutive five-year term
and was replaced by his vice-president, B. J. Habibie. The political
upheaval and resulting uncertainty has resulted in the further erosion
in public confidence at home and abroad.
The breakdown in public confidence in the Indonesian economy will
likely be difficult to reverse, and will prolong the period of
recovery. Resumption of lending by multilateral institutions under a
rescue package drawn up by the International Monetary Fund (IMF) may
speed up the process of restoring the faith in the government's
efforts to shore up the banking system. Nevertheless, even if the two
critical outstanding issues of restructuring the corporate sector's
external debt and shoring up the banking sector can be resolved this
year, the economy will remain weak in 1999 and recover only slowly in
the following years.
The Indonesian stock market plunged to record lows in 1997 under the
combined impact of the country's economic implosion, political
uncertainty and social unrest. The market's retreat continued into
mid-1998 as domestic and foreign investors fled the market for safer
havens overseas. While many investors believe that the market's steep
decline has brought valuations of a number of Indonesian companies to
very attractive levels, there remains considerable risk particularly
for foreign investors. As with most foreign investments, United States
investors could see their investment returns eroded if the Indonesian
currency declines in value relative to the U.S. dollar. Secondly, any
escalation of rioting and other forms of social unrest could be a
major obstacle in the path of economic recovery. Thirdly, many
question the will of the Indonesian government and its people to
accept the conditions of economic reform as mandated by the IMF.
Fourth, the Indonesian economy, currency and securities markets are
extremely sensitive to events that take place within the Asian region
and their fortunes are somewhat dependent upon how well other Asian
nations resolve their own economic and currency problems.
MALAYSIA. 1997 saw Malaysia's GDP growth slow to 7.4%, down from over
8.2% in 1996 and 9.5% in 1995. Inflation has been kept relatively low
at 3.8%. Performance in 1996 avoided the economy's potential
overheating as export growth, investment, and consumption all slowed.
A large part of Malaysia's recent growth is due to its manufacturing
industries, particularly electronics and semiconductors. This has led
to an increased reliance on imports; thus the economy is sensitive to
shifts in foreign production and demand. This is particularly true
regarding its main trading partners: the United States, Japan, and
Singapore. Such shifts were partly responsible for the slowdown in
1997. In addition, monetary policies to stem the threat of overheating
were evident, but the country still needs massive public and private
investment to finance several large infrastructure projects.
Government industrial policy seeks investment to create more value
added high technology manufacturing and service sectors in order to
decrease the emphasis on low skilled manufacturing. Already U.S.
investors have invested over $9 billion, and most of this is in
electronics and energy projects.
However, like its Asian neighbors, Malaysia has stumbled in its dash
to become a developed nation by 2020. The grandiose ambitions of
Malaysian Prime Minister Mahathir Mohamad have been set back by its
worst-ever currency crisis, which also brought a sharp fall in the
country's stock market. An overheated property market, a growing
current-account deficit and a highly leveraged economy, precipitated
much of the country's problems. Following the sharp decline of
Thailand's currency, the Malaysian ringgit came under severe pressure.
The Malaysian central bank attempted to defend the currency and the
resulting spikes in interbank rates marked the start of a period of
escalating interest rates. Once the central bank ceased using foreign
exchange reserves to slow the ringgit's depreciation in the
region-wide currency slide, the Malaysian currency quickly weakened
versus the United States dollar and by year end had declined by 35%.
By mid-year 1998, the outlook for the Malaysian economy remained bleak
as economists predicted that the economy would shrink by at least 5
percent this year, the first contraction in 13 years. The likelihood
that Malaysia will be forced to seek IMF assistance is increasing.
Although Malaysia does not have the high level of foreign debt that
has overwhelmed its Asian neighbors, domestic lending, at 170 percent
of GDP, was the highest in Southeast Asia when the currency crisis
struck. The nation's banks are now faced with a growing number of
unpaid loans as more businesses are struggling to stay afloat in the
sagging economic environment.
Adding to the bleak outlook is the government's seemingly confused and
erratic response to the nation's serious economic and currency crisis.
The Prime Minister is increasingly at odds with the finance minister
on what policies the country has to institute to remedy the country's
serious problems. Prime Minister Mahathir has abandoned the tight
money, financially conservative recovery policy endorsed by the IMF
and has placed the blame for the nation's troubles on foreign currency
and stock market speculators. The move risks triggering another round
of currency devaluations, inflation and, in the long run, economic
collapse.
Investors should be aware that investing in Malaysia currently entails
a number of potential risks, not the least of which is the
increasingly erratic economic policies of the Malaysian government
that are counter to the advice of the IMF and many of the developed
nations. In addition, the government appears to be escalating its
hostile attitude toward foreign investors. In September of 1998
Malaysian authorities imposed new restrictions on the foreign exchange
and securities markets. Included were limitations in repatriating the
investment proceeds of foreign investors.
While the Malaysian population has been relatively passive during the
first year of the economic meltdown, there could be mounting social
unrest if the crisis is prolonged. Should the country finally adopt
IMF remedies the Malaysian people may be reluctant to accept the
additional sacrifices that they will be called upon to endure. This
could seriously undermine the recovery of Malaysia's economy as well
as its currency and stock market. An increasingly hostile government
towards foreign investors could also lead to additional curbs on the
free access to their funds. As with other Asian markets, currency risk
remains substantial.
SINGAPORE. Since achieving independence from the British in 1965,
Singapore has repeatedly elected the People's Action Party (PAP) as
their government. It is a party that is so consistent it has only
offered up two prime ministers in this 32-year period. Elections in
January 1997 returned the PAP to power, signaling satisfaction with
their policy of close coordination with the private sector to
stimulate investment. Typical policies include selective tax
incentives, subsidies for R&D, and joint ventures with private firms.
While the combination of consistent leadership and interventionist
policies is sometimes seen as impeding civil liberties and
laissez-faire economics, it has produced an attractive investment
environment.
The Singapore economy is almost devoid of agriculture and natural
resources, not surprising given the island nation's geographic size.
Its strongest sector is manufacturing, particularly of electronics,
machinery and petroleum and chemical products. They produce 45% of the
world's computer disk drives. Major trading partners are Japan,
Malaysia and the United States.
The economic situation in Singapore registered a passable year in 1996
but weakened in early 1997, dragged down by the downturn in the global
electronics industry. However, it ended the year on a firmer footing
as real GDP growth rose from 4.1% in the first quarter to 7% by the
fourth quarter. Inflation remained low and the current account balance
maintained its large surplus. Property values have declined recently,
impacted by continuing oversupply.
Although Singapore boasts one of the strongest economies in Asia,
investors in that market face a number of possible risks. Chief among
these is that the country is not immune to the region's economic
troubles, as Singapore's neighbors account for nearly one-quarter of
its trade. Any prolonged regional economic downturn could slow its
growth. In addition, Analysts believe that there is considerable
downside risk in the current Singapore dollar exchange rate and any
decline in the Singapore currency versus the U.S. dollar could erode
the investment return of United States investors in that market.
Lastly, manufacturing, a major pillar of Singapore's economy, is
unlikely to sustain growth into 1998 as recent indications point to
continued excess capacity in the computer electronics industry.
SOUTH KOREA. South Korea has been one of the more spectacular economic
stories of the post-war period. Coming out of a civil war in the
mid-1950's, the country found itself with a destroyed economy and
boundaries that excluded most of the peninsula's mineral and
industrial resources. It proceeded over the next 40 years to create a
society that includes a highly skilled and educated labor force and an
economy that exploited the large amounts of foreign aid given to it by
the United States and other countries. Exports of labor intensive
products such as textiles initially drove the economy and were
eventually replaced by heavy industries such as automobiles.
Hostile relations with North Korea dictate large expenditures on the
military and political uncertainty and potential famine in the north
has put the south on high alert. Any kind of significant military
effort could have multiple effects, both positive and negative, on the
economy. South Korea's lack of natural resources put a premium on
imported energy products, making the economy very sensitive to oil
prices.
Since 1991, GDP growth has fluctuated widely between 5% and 9%,
settling down at 5.6% last year. Currently the labor market is in need
of restructuring, and its rigidity has hurt performance. Relations
between labor and the large conglomerates, or Chaebols, could prove to
be a significant influence on future growth. Inflation in the same
period has been consistently dropping, save a brief rise in 1994 and
finished the year at 4.5%. The country consistently runs trade
deficits, and the current account deficit widened sharply in 1996,
more than doubling to $19.3 billion. South Korea's strong domestic
sectors are electronics, textiles and industrial machinery. Exports
revolve around electronics, textiles, automobiles, steel and footwear,
while imports focus on oil, food, chemicals and metals.
The stock market (Korea Stock Exchange) is currently undergoing
liberalization to include more foreign participation, which was only
first allowed in 1992, but the bond market remains off limits until
1999. Foreign ownership has since been increased to 55% for all listed
stocks except three. The foreign ownership liberalization is in
response to the KSE 1996 performance, which was down 18%. The number
of listed companies totaled 726 in 1997, a decline of 34 from the
previous year, while the market's capitalization plummeted 70 percent
from its 1996 level.
Over the calendar year 1997, the Korean stock market extended its
two-year decline plunging by 42% to its lowest year-end level since
1986. The collapse came as a direct result of the Asian region's
currency crisis and the failure of several Korean conglomerates. In
the summer of 1997 the South Korean won hit record lows against the
U.S. dollar as a series of nationwide labor strikes aggravated the
already escalating trade deficit. Despite aggressive official
intervention to support the local currency, the won had fallen from
860 to 914 to the U.S. dollar by year-end.
The Korean market poses risks for current and prospective investors.
The Korean government will need to maintain public support to
implement the radical and difficult restructuring of the economy
demanded by the IMF under a $58 million loan package. This opposition
could come from the country's major conglomerates that have yet to
institute necessary restructuring initiatives, and from workers
protesting against rising unemployment.
In addition, relations with its long-standing enemy, North Korea have
been worsening as widespread famine could prompt another attack on its
southern neighbor to divert the attention of its people from their
suffering. More importantly, South Korea's heavy reliance on exporting
to the Asian region holds its economy hostage to the economic fortunes
of its neighbors.
THAILAND. The Thai economy has witnessed a fundamental transition in
recent years. Traditionally it was a strong producer of textiles,
minerals and agricultural products, but more recently it has tried to
build high technology export industries. This proved particularly
fortuitous in the mid 1990s when flooding wiped out much of their
traditional exports, but the newer industries remained strong, keeping
the growth rate above 8%. (This level had been achieved through the
1990s, giving the economy a name as one of the fastest growing in the
region.) Successive governments have also taken steps toward reducing
the influence of central planning, opening its market to foreigners
and abandoning five-year plans. This restructuring is still underway,
and the change can cause difficulty at times.
The political situation in Thailand is tenuous. Democracy has a short
history in the country, and power is alternatively obtained by the
military, a non-elected bureaucratic elite, and democratically elected
officials. The frequent transfers of power have generally gone without
divisive, bloody conflicts, but there are bitter differences between
the military and the political parties. Free elections in 1992 and
again in 1995 have produced non-military democratic leaders from
different parties, a healthy sign of party competition. More recently,
the dramatic downturn in the economy generated demands from all
sectors of society for the resignation of Prime Minister Chavalit. The
worsening economic situation threatened social stability of the nation
and the Prime Minister resigned after barely one year in power.
In 1997 GDP contracted by approximately 0.3%, compared with 7.2%
growth in 1996 and 8.6% in 1995. The 1997 current account deficit was
1.9% of GDP as against 7.9% in 1996. Inflation was 5.6%, however, the
government has projected a 16.2% rate for 1998. One cause for
Thailand's economic downturn was a decline in export growth as its
manufacturing industry faces stiff competition from low priced
competitors and its agriculture has suffered a severe drop in
production. In 1996, Thailand's currency, the baht, was linked to a
U.S. dollar dominated basket, and monetary policy had remained tight
to keep that link strong and avoid inflationary pressures.
The situation changed in early 1997, however, with the revelation of
many bad bank loans and a bubbling of property prices due to
over-investment. Many companies, faced with slowing exports, stopped
servicing their debts. Many other firms have stayed alive only with
infusions of public cash, and the government has been slow to let many
property laden financial firms fail. The stock market has reacted
strongly, dropping to new lows for the decade. Reluctant to float the
baht, indeed promising that it wouldn't, the government relented in
early July hoping to revive export and stock market growth. The
subsequent devaluation (approximately 20% against the dollar in the
first month) led to the need for a $16 billion loan coordinated by the
IMF to shore up foreign reserves. Most of the loan came from
neighboring countries led by Japan, indicating their desire to both
protect their own investments in Thailand, and also mitigate the
effect of the devaluation on their home currencies.
The total impact of the entire situation is negative, particularly on
inflation, unemployment and foreign debt. Significant turnover and a
major gamble on the currency has put the government in a precarious
position, especially given the fact that it is a six party coalition.
Dissatisfaction amongst the military, always a political factor, is
high.
The new Thai government has produced mixed results in their efforts to
remedy the country's serious economic woes. Crucial to Thailand's
recovery are both the outcome of newly instituted economic and banking
reforms and the outlook for both China's and Malaysia's economies.
Looking forward, currency risk remains high and the baht will likely
be highly vulnerable to regional contagion.
INDIA. India is the second most populous and seventh largest country
in the world. Although the country occupies only 2.4% of the world's
land area, it supports over 15% of the world's population. Only China
has a larger population. The Indian government is classified as a
federation, or union, and is, under its constitution a "sovereign,
socialist, secular, democratic republic" composed of 25 states and 7
union territories. Like the United States, it has a federal form of
government. However, the central government in India has greater power
in relation to its states, and is patterned after the British
parliamentary system.
India's population was estimated at 952 million in 1997 and has been
projected to double by the year 2028. Religion, caste, and language
are major determinants of social and political organization. Although
83% of the people are Hindu, India also is the home of more than 120
million Muslims - one of the world's largest Muslim populations.
Despite economic modernization and laws countering discrimination
against the lower end of the class structure, the caste system remains
an important factor in Indian society.
India has the world's fifth largest economy in terms of purchasing
power parity. About 62% of the population depends directly on
agriculture. Industry and services sectors are growing in importance
and account for 29% and 42% of GDP, respectively, while agriculture
contributes about 29%. More than 35% of the population lives below the
poverty line, but a large and growing middle class of 150 - 200
million has disposable income for consumer goods. In the industrial
sector, India now manufactures a variety of finished products for
domestic use and export.
India gained independence in 1947 after two centuries of British
colonial rule. Economic policies in the first four decades of
independence were driven by its leaders' deep distrust of foreign
economic interests and admiration for the Soviet model of centrally
planned industrialization. Accordingly, the country has followed a
policy regime that has been characterized by extreme protectionism and
public sector dominance in strategic sectors. Nevertheless, India has
developed a large and diversified private sector, and agriculture has
remained almost entirely in private hands.
India's treatment of foreign investment has been alternatively
encouraging, ambivalent or difficult, depending on the industry sector
involved. Most industries are open to limited investment by
multinational companies while others are closed to foreign investors.
Sectors closed to foreign investment currently number five: mineral
oils; railway transport; war ships and the military-related areas of
aircraft; atomic energy; and associated minerals. Although recent
measures have liberalized the investment limits on a number of major
industries, several political parties, deeply hostile to foreign
investment, have made these issues the subject of pre-election
rhetoric.
India has a large and active stock market which ranks twentieth
globally in market value. There are 23 recognized stock exchanges in
India. The BSE is the premier exchange; accounting for more than
one-third of trading volume, over 70% of listed capital and over 90%
of market capitalization. As of the end of 1997 there were 5,842
listed companies on the BSE with a total market value of US$128.27
billion.
Relations between India and its neighbors have been fraught with
difficulties. India disputes Pakistan's claims to part of Kashmir, and
repeated attempts at mediation have not resolved this conflict. The
dispute has triggered wars between the two countries in 1947, 1965 and
1971. More recently, India's nuclear tests prompted Pakistan to reply
in kind, despite Western efforts to dissuade it. Economic sanctions
imposed by the U.S. and other industrialized countries following the
nuclear tests in May of 1998 have not been without consequences. While
their short-term, direct effect on the economy has been relatively
modest, the indirect and medium-term consequences of sanctions could
become more serious. Relations with Nepal, with Bhutan and with China
are marred by China's two territorial claims in the nation's east and
north. Historical suspicions remain following the 1962 border war
between India and China and the two countries have continued to work
towards expanding their political and economic influence in the South
Asian region.
While India presents many attractions for U.S. investors, there are a
number of factors that could pose considerable risk to those investing
in this market: Contemporary politics have become increasingly
unpredictable since the resounding defeat of Congress in 1996 after
decades at the helm. The alignment of political forces has become
increasingly erratic among factions, parties and interest groups. Some
factions within the current administration have been hostile to
foreign investment and could impose measures that would be detrimental
to the interests and rights of these investors.
India's foreign relations in the region remain fragile and the
possibility of increased tensions or open warfare is an ever-present
danger to the stability of the market. In addition, the monetary cost
of economic sanctions resulting from recent nuclear tests could
substantially impact economic growth and corporate profits. Sanctions
affect India in several ways. Crucially, there will be a deferment or
loss of direct aid and concessional loans, from multilateral agencies
(notably the World Bank) and bilateral donors (the U.S., Japan and
Canada, among others). The loss of export credit and guarantees,
notably from the US Export-Import Bank could delay and increase the
cost of large infrastructure and foreign investment projects. This, in
turn, could have a negative impact upon creditor and investor
confidence in the Indian market.
Relative to the more mature markets of the world, the level of
corporate disclosure in India is very low and companies are generally
less disposed to act in the best interests of their shareholders.
Accordingly, investors face a much more difficult task in ascertaining
the true investment worth of a particular stock.
As with most other emerging markets, the Indian market has been
negatively impacted by recent economic and currency turmoil in the
world's less developed regions and is likely to be similarly impacted
in any future weakness. Currency fluctuation is an additional risk to
U.S. investors as any weakening in the value of the Indian rupee
versus the U.S. dollar could erode the value of their investments upon
currency translation.
TAIWAN. Taiwan is one of the most densely populated countries in the
world, with a population of over 20 million, or 1,504 persons per
square mile. Most Taiwanese are descendants of immigrants who came
from China's Fukien and Kwantung provinces over 100 years ago.
Mandarin is the official language while English is taught to all
students as their first foreign language, beginning in the seventh
grade.
Although settled by Chinese in the seventeenth century, Taiwan (also
called Formosa) was ruled by Japan from 1895-1945 and subsequently
reverted to Chinese administration at the end of World War II. In
1949, nationalist leader Chiang Kai-shek took control of the island
after fleeing mainland China with two million supporters, following
his defeat at the hands of the communists. Since that time, Taiwan has
been governed by the right-wing Kuomintang (KMT) which was founded by
Chiang Kai-shek. In 1996 the island held its first popular
presidential elections in which the KMT retained its control.
Both Taipei and Beijing governments consider Taiwan an integral part
of China. The KMT has vowed to reconquer the mainland while The
People's Republic of China has urged Taiwan to accept a peaceful
reunification with the mainland. China has proposed that they regain
sovereignty over Taiwan on the basis of a "one country - two systems"
arrangement similar to that of the recent reunification of Hong Kong.
Nevertheless, China has periodically threatened to annex Taiwan
through military action.
Under the KMT government, Taiwan achieved a remarkable record of
economic growth with the assistance of massive U.S. aid in the early
years of the post war period. Today, Taiwan has one of the world's
strongest economies and is among the ten leading capital exporters.
Between 1980 and 1990 real GDP expanded at an average annual rate of
7.9%. During 1990-95 an annual GDP growth rate of 6.6% was recorded.
In 1996, compared with the previous year, GDP increased by 5.7% in
real terms, while it was anticipated that growth would exceed 6.0% in
1997 and 1998. Between 1960 and 1973 the island's exports rose 20 fold
and real GDP increased 3.3 times. Even more remarkable, as the shift
of millions of people from villages to cities took place, was the high
level of employment. Between 1964 and 1995 the unemployment rate
rarely exceeded 2% of the work force in any year.
Prior to 1967 foreign sources played a large role in financing capital
formation expansion, but thereafter domestic savings financed the
entire growth of net capital formation. By 1986 the ratio of national
gross savings to GDP had reached 38.5%. Thereafter the ratio declined,
standing at 26.0% in 1996. The expansion of foreign trade was the
major reason for Taiwan's rapid capital growth. Much of the growth in
exports could be attributed to the competitiveness of its exports in
price and quality in world markets.
Since the mid-1990s the island's traditional reliance upon light
industry has gradually given way to high technology activities, as
emphasis shifted from labor-intensive to capital-intensive production.
The electrical and electronic machinery sector continued to show
particularly strong growth in the 1990s as did the chemical sector.
Taiwan also has eleven vehicle manufacturers, all of which have
contracted joint ventures with foreign companies. By the mid-1990s
Taiwan had become one of the world's largest producers of personal
computers and semiconductors.
Taiwan has a large and active stock market ranking twelfth by market
value among the world's markets. The TSE in Taipei is the only
official stock exchange in Taiwan, although there is also a small OTC
market. At the end of 1997 there were 404 companies listed on the TSE
with a market capitalization of US$288.1 billion. The market is
dominated by individual investors, who account for 90.7% of total
turnover in listed shares. Many local institutions, such as banks,
insurance companies or pension funds, are prohibited or restricted
from investing in listed shares. Foreign individuals and institutional
investors meeting certain criteria have been able to invest in the
market directly since 1990 but are subject to certain limits. Foreign
involvement in the market through qualified foreign institutional
investors and mutual funds is small but growing.
Investing in Taiwan entails special risks as well as those risks that
are common to other emerging markets. Taiwan's relations with The
People's Republic of China remain fragile. The conflict between the
entrenched nationalization of China and the nascent nationalism of
Taiwan persists and armed conflict between the two nations remains a
possibility. Beijing continues its policy of attempting to isolate
Taiwan and could use its growing economic power and political
influence to interfere with the nation's trade with the rest of the
world's economies.
In addition, the Taiwan market has been one of the most volatile in
Asia over the past decade. The country did not escape the effects of
the Asian economic and currency crises in 1997 and 1998 and could
continue to be negatively impacted by an extension of the current
regional turmoil. The nation's heavy dependence upon trade and
manufacturing partnerships with foreign companies also leaves it
particularly vulnerable to downturns in the global economies. Currency
fluctuation is an additional risk to U. S. investors as any weakening
in the value of the local currency versus the U.S. dollar could erode
the value of their investments upon currency conversion.
THE PHILIPPINES. The Philippines is a developing democratic republic.
After 300 years of Spanish rule, the United States acquired the
Philippines from Spain in 1898 and ruled for 48 years. The country
subsequently gained its independence from the United States in 1946.
The nation, as provided by the 1987 Constitution, is a democratic
republican state with a presidential form of government. However,
since its independence, the government has been periodically roiled by
military coups, martial law and political assassinations.
The Filipino population consists of approximately 70 million people,
primarily of Indo-Malay, Chinese and Spanish descent. Thirteen percent
of the population lives within the Metro Manila area. Most Filipinos
are bilingual, with English as the basic language in business,
government, schools, and everyday communication. While there are 87
languages spoken throughout the Philippines, the official language is
Pilipino, which is spoken mainly in the Metro Manila area and widely
used in the mass media.
The Philippine economy is basically agricultural if food-processing
manufacture is included. Agriculture (including forestry and fishing)
contributed 21.5% of GDP in 1996, and engaged 39.8% of the employed
labor force, while industry (including mining, manufacturing,
construction and power) contributed 31.9% of GDP and engaged 16.5% of
the employed labor force.
Manufacturing accounted for 22.6% of GDP in 1996 and engaged 9.8% of
the labor force. The principal branches of manufacturing are food
products, petroleum refineries, electrical machinery, chemical
products, beverages, metals and textiles.
The services sector contributed 46.6% of GDP in 1996, and engaged
43.7% of the employed labor force. Remittances from Filipino workers
abroad constituted the Government's principal source of foreign
exchange, while tourism remains a significant sector of the economy.
In 1995 the Philippines recorded a trade deficit and a deficit on the
current account of the balance of payments. The principal source of
imports was Japan, which accounted for 22.1% of the total. Other
significant suppliers were the United States, Saudi Arabia, Singapore,
the Republic of Korea and Taiwan. The United States was the principal
market for exports (35.8%), while other purchasers were Japan,
Singapore and the United Kingdom.
Under the regime of General Fidel Ramos, installed in 1992, the
economic performance of the Philippines improved dramatically, owing
to extensive structural reforms, including the dismantling of
protectionist legislation and the liberalization of trade, foreign
investment and foreign exchange controls. However, economic growth was
adversely affected by the regional financial crisis in 1997. The
effective devaluation of the peso in July caused a collapse of the
stock market and led to rising inflation and the depletion of foreign
exchange reserves. The absence of large foreign investment inflows,
which had previously contributed to an overall surplus on the balance
of payments despite a recurrent account deficit, resulted in an
overall deficit in 1997.
The Philippine stock exchange (PSE) is the country's only exchange and
ranks thirty-sixth in total market capitalization among the world's
markets. The total number of companies listed on the exchange was 221
in 1997. Individual domestic investors are the majority participants
while foreign investment is dominated by the Taiwanese, who are
closely followed by the Japanese and Hong Kong Chinese. Foreign
investors are generally allowed to acquire 100% of the equity of a
Philippine listed company, although there are businesses where foreign
ownership is restricted by law.
Foreign investors face special risks when investing in the
Philippines. The country's economy and stock market have historically
been highly sensitive to changes in the Asian region's economies and
this has been amply demonstrated in recent years. After posting
dramatic gains in the four years preceding Asia's financial crisis in
mid-1997, the Philippine stock market plummeted in response to the
spreading economic, political turmoil in Southeast Asia and Japan. The
market's weakness was further exacerbated as foreign investors pulled
out of the market in large numbers.
Weakening conditions in neighboring countries has also negatively
impacted the Philippine peso. Plummeting currencies in Thailand,
Indonesia, Singapore and Malaysia sent the Philippine peso into a
steady decline. Over the 1997 calendar year, the value of the peso
fell by 52 percent versus the U.S. dollar.
For U.S. investors, currency fluctuation presents an additional risk
to investing in the Philippines as a weakening peso can erode the
investment returns on their investments in that country.
Because the Philippines is highly dependent upon the United States,
Japan and the Southeast Asian countries as the primary purchasers of
their exports, their economy is particularly sensitive to changes in
the economic fortunes of these nations.
Although the Philippine political climate appears to have improved
over the past few years, investors should be aware that the country
has periodically been subjected to military coups, martial law, and
wide spread political corruption since it gained independence. Several
past administrations have instituted policies that have also been
detrimental to the domestic economy and the rights of its citizens.
Cronyism and corruption have also been rampant in both government and
the business community to the detriment of the interests of corporate
shareholders.
PAKISTAN. The Islamic Republic of Pakistan was founded in 1947, when
the British partitioned the South Asian subcontinent into two states:
India and Pakistan. (East Pakistan broke away to become Bangladesh in
1971). The Pakistan constitution of 1973, amended substantially in
1985, provides for a President (Chief of State) who is elected by an
electoral college consisting of both houses of the federal parliament
and members of the four provincial legislatures. The National Assembly
in a special session elects a Prime Minister. Following the election,
the President invites the Prime Minister to create a government. The
constitution permits a vote of "no confidence" against the Prime
Minister by a majority of the National Assembly. In practice, the army
has a strong voice in the decision-making process and few Presidents
have been able to oppose its interests for long.
Relations between Pakistan and India have been fraught with
difficulties. India disputes Pakistan's claims to part of Kashmir, and
repeated attempts at mediation have not resolved this conflict. The
dispute has triggered wars between the two countries in 1947, 1965 and
1971. India has accused Pakistan of fomenting religious and political
unrest and in 1994 there were frequent disturbances in the region. The
two sides frequently exchange fire. More recently, India's nuclear
tests prompted Pakistan to reply in kind, despite Western efforts to
dissuade it. Economic sanctions imposed by the U.S. and other
industrialized countries following the nuclear tests have not been
without consequences. While their short-term, direct effect on the
economy has been relatively modest, the indirect and medium-term
consequences of sanctions could become more serious as the resumption
of IMF funding is currently in jeopardy.
With a per capita GDP of about $470, Pakistan is considered a
low-income country by the World Bank. No more than 39% of adults are
literate and life expectancy at birth is about 62 years. Relatively
few resources have been devoted to socio-economic development or
infrastructure projects. Inadequate provision of social services and
high population growth have contributed to a persistence of poverty
and unequal income distribution.
The country's principal natural resource is arable land ( 25% of the
total land area is under cultivation). Agriculture accounts for 24% of
GDP and employs about 50% of the labor force. Wheat, cotton, and rice
together account for almost 70% of the value of total crop output and
are among the countries major exports. Pakistan's manufacturing sector
accounts for about 20% of GDP. Cotton textile production and apparel
manufacturing are Pakistan's largest industries, accounting for about
50% of total exports. Other major industries include cement,
fertilizer, sugar, steel, tobacco, chemicals, machinery and food
processing.
Weak world demand for its exports and domestic political uncertainty
have contributed to the nation's widening trade deficit. The nation
continues to rely heavily on imports of such materials as petroleum
products, capital goods, industrial raw materials and consumer
products and the resulting external imbalance has left Pakistan with a
growing foreign debt burden. Annual debt service now exceeds 27% of
export earnings.
Pakistan has three stock exchanges located in Karachi, Lahore and
Islamabad. The Karachi Stock Exchange (KSE) is dominant, accounting
for approximately 80% of equity transactions in Pakistan. The KSE
ranks forty-eighth among the world's markets and had a market
capitalization of US$11billion in 1997. At the end of that year there
were 781 companies listed on the KSE. The combined market
capitalization of the 20 largest companies represented 71.7% of the
market total.
U.S. investors should be aware that there are a number of factors that
could pose special risks to investing in Pakistan securities. Among
these is the country's long history of government instability marked
by military coups, political assassinations and frequent outbreaks of
violent rioting, strikes and ethnic unrest. While recent governments
have made some progress on addressing some of the country's social and
economic ills, the current administration is faced with a number of
serious crises. The country appears to be close to defaulting on its
international commitments. With no debt repayments made since August
of 1998, Pakistan faces the possibility of outright default unless it
can secure a bailout package and debt rescheduling. Recent talks with
the IMF on a debt rescue package broke down and a default could
precipitate declines in the nation's trade and currency. By November
of 1998, foreign investment has slowed dramatically in response to a
rise in investment risk and new restrictions imposed by the central
bank designed to limit the outflow of foreign exchange.
Corruption within the government and business community remains a
problem and corporate managements are generally not focused on
improving shareholder interests.
The threat of war with India over the disputed province of Kashmir
remains a threat to peace in the region and any outbreak of
hostilities would likely plunge the nation's economy into deep
depression and further erode the relative value of its currency versus
the world's major currencies.
SPECIAL CONSIDERATIONS REGARDING LATIN AMERICA
Latin America represents one of the world's more advanced emerging
markets. With a total population of 427 million people and its
abundant natural resources, the area is a prime trading partner for
the United States and Canada. Latin American exports represent, on
average, 16.6% of GDP. Strong export sectors are petroleum,
manufactured goods, agricultural commodities such as coffee and beef,
and metals and mining products. GDP growth in Latin America as a
region was 3.4% in 1996, up from 0.1% in 1995. Recognizing the
important role of international trade as a component of GDP, the
countries of Latin America have formed strong regional trade
organizations, notably Mercado Comun del Sur (MERCOSUR). Talk of
extending the North American Free Trade Agreement (NAFTA) down through
Latin America indicates some desire to tie the economies even closer
to those of the north.
Politically, Latin American countries generally have strong
presidential systems closely modeled after the United States. The
transition to democracy is largely complete in most countries. All
countries enjoy good relations with the United States, with whom they
cooperate on a range of non-economic matters, such as preservation of
the environment and drug control. Monetarist minded governments were
responsible for the successful staving off of contagion from the 1995
currency crisis in Mexico, increasing their stature in the eyes of
most capital market participants.
ARGENTINA. Prior to 1989, Argentine politics were characterized by
populist leaders, sometimes democratically elected and sometimes not,
who ruled with the overt support of the military. Coups and outright
military rule were not uncommon. Economic polices were highly
protectionist, with significant barriers and restrictions on foreign
trade and investment. Markets were highly regulated and the state was
heavily involved in many industries. Inflation was routinely high and
growth stagnant.
President Carlos Menem was first elected to office in 1989 and
undertook a program of deregulation, liberalization and macroeconomic
reform. The results have been positive. GDP growth in 1997 was 8.0%,
up from 4.4% in 1996 and -4.4% in 1995. Argentina's growth, averaging
over 6% from 1991 to 1997, had been driven primarily by domestic
consumption. Immediately after the Mexican crisis, bank liquidity was
restrained. However, deposits have since returned to the system
surpassing the levels that existed prior to the crisis and liquidity
is very much improved. Lending also increased and consumer spending
rebounded although it has slowed somewhat due to the most recent
Brazilian crisis. The positive effect is that inflation, well over
150% at the beginning of the decade, was 0.4% in 1996. Still
troublesome for Argentina is unemployment, quite high at 15%. Menem's
economic liberalization policies have succeeded in attracting foreign
investment. From the U.S. alone, approximately $10 billion was
invested by 1996. Investors have been most attracted to the
telecommunications, finance, and energy sectors.
Argentina enjoys a positive trade balance. The export economy is
heavily weighted toward agriculture, which represents 60% of the total
value of all Argentine exports. Primary products are livestock,
oilseeds, and grain. Argentina's single biggest trading partner is
Brazil, and the United States is the second. Primary imports are
machinery, vehicles and chemicals.
The resignation of Economy Minister Domingo Cavallo in July 1996 was
initially greeted with skepticism from the markets. Cavallo was widely
recognized as the man responsible for ensuring the convertibility of
the peso by pegging it to the dollar, a move which saved Argentina
from the hyperinflation and continuous drops in output which could
have followed from the Mexican crisis in 1994. Confidence was quickly
restored, however, with the appointment of Roque Fernandez, who
promptly reaffirmed commitment to Cavallo's plan and introduced
further measures for fiscal stability.
The next presidential election is due in 1999. In accordance with the
constitution, Menem, a member of the Peronist party, can not seek a
third consecutive term. The next election is likely to present a third
candidate to the voters beyond the traditional contestants from the
Peronist and Radical parties. Frepaso, a center-left alliance, first
emerged in the 1995 elections and by 1999 could build itself up enough
to promote a viable alternative to the older parties. It is uncertain
how policies would be effected by the systemic change from a
predominantly two party system to a three party one.
The Argentine stock market reached an all-time high in October of 1997
in response to rising corporate earnings and strong economic growth.
However, the market underwent a significant correction due largely to
the "contagion effect"of the Asian economic and currency crisis and
the Mervel index ended the year only 5.9% ahead. While there was
little direct impact from the Asian crisis on Argentina's economy
foreign investors fled the market, as they feared that Asia's currency
problems would spread to Latin America.
The Argentine market may pose special risks for investors. As an
emerging nation, Argentina's stock market may be particularly
vulnerable to widespread economic, currency and market turmoil such as
we have seen recently in Asia. These crises may prompt investors to
become increasingly averse to emerging market exposure on concern that
the impact of these events will spread to other countries. In
addition, mutual funds that invest in emerging markets may be forced
to sell holdings in countries that have little similarity with the
markets in trouble, merely to raise cash to meet redemptions.
Similarly, the Asian crisis has accelerated a growing imbalance
between supply and demand for basic commodities such as oil, metals,
pulp, grains and others. This could impact the Argentinean stock
market where energy stocks (oil, gas and electricity) comprise
approximately 40% of the market's total value. A currency devaluation
by one or more of its Latin American neighbors could precipitate a
recession and political pressure for competitive devaluation to
protect the country's trade competitiveness.
While Argentina's political situation is relatively stable; there is a
high degree of dissatisfaction with the government's inability to
lower the country's high unemployment rate. This could eventually lead
to social unrest and a turnover of the government to the control of
parties less favorable to investors.
BRAZIL. Brazil is the largest country in South America and is home to
vast amounts of natural resources. Its 155 million people are
descendants from indigenous tribes and European immigrants. They live
in diverse socio-economic conditions, from the urban cities of Sao
Paolo to the undeveloped trading posts of the distant regions.
Industrial development has been concentrated in specific areas. The
disenfranchised population is quite large and is a source of many of
Brazil's social problems.
The Brazilian economy is currently undergoing extensive reforms,
stemming from a 1994 effort to stabilize the currency called the Real
Plan. With the aim of curbing inflation, a new currency, the Real, was
introduced and supported via a floating exchange band. The plan has
stabilized the exchange rate and controlled inflation which was at
2,700% in 1994. Inflation in 1995 dropped to 81%, and fell even
further in 1996, settling at 18.7%. Perhaps the most remarkable
achievement for the Brazilian economy in 1997 was the lowest rate of
inflation in the past 40 years, as the National Consumer Price Index
increased just 7.48%. At the same time, however, the Real Plan has
sent the trade and current account balances into a deficit. The
current account deficit is expected to reach $30 billion in 1998,
equivalent to 3.6% of GDP.
Other objectives of the administration of the current President,
Fernando Henrique Cardoso, are trade liberalization and privatization,
but these efforts are sporadic and often stalled by special interests
in the legislature. Some privatization efforts are performing well,
particularly in the utilities sector. Utilities and telecommunications
have been key draws for foreign investment, and foreign direct
investment (FDI) is coming in at record levels. In 1998 the country
received over $20 billion from privatizations. Still, there are
restrictions against investments in certain industries, such as metals
and mining.
Traditionally a primarily agricultural economy, a strong industrial
sector has developed which produces metals, chemical, and manufactured
consumer goods. Agriculture still plays a significant role, however,
representing 11% of the GDP, 40% of exports and employing over 35%
of the workforce. Primary agricultural products are grains,
coffee, and cattle. Regarding energy and utilities, the country is a
leading producer of hydroelectric power, but they are dependent on
imports for oil.
Presidential elections were held in October of 1998 and President
Cardoso won with 53% of the vote. This should insure continuity in
policy, which will be much needed given the difficulties caused by the
recent instability in the global markets and its impact on Brazil.
In 1997 the Brazilian stock market rose to an all-time high in the
first quarter. Over the summer, the speculative attack on the Thai
currency triggered a sharp reversal in the Brazilian market, as
investors feared a raid on the Brazilian real. However, the market
ended the year with a gain of 4.34%. By mid-year 1998 the Brazilian
market plummeted amid growing concern that Brazil, Latin America's
largest economy, might suffer the confidence crisis that had caused
large currency devaluations in Russia and Asia.
Investing in Brazil could entail special risks: High unemployment is
the chief challenge facing Brazil's president Cardoso following his
reelection in October of 1998. Joblessness is at a record high and
social unrest could hinder his progress in subduing inflation and
denationalizing government ownership of many of its businesses. Brazil
could be a likely target for a renewed attack on its currency. The
economy is in a more precarious state: interest rates remain high and,
despite austerity measures, little progress has been made in reducing
the current account deficit. This poses particular risk for U.S.
investors who would see their investment returns eroded if the
Brazilian real were to be devalued.
Overall, Brazil remains vulnerable to both external shocks and
changing sentiment due to worsening domestic indicators or political
risk.
CHILE. Chile is a transition economy which has recently made great
strides toward putting its authoritarian, statist, past behind itself.
In all of Latin America, it is the country with the highest rates of
growth. Averaging 7.3% so far this decade, GDP grew at 6.0% in 1996,
down from 6.6% the previous year. Inflation has been steadily
declining and is down over 15% in the last five years. Inflation in
1997 was 6.0%, a 0.6% drop over 1996. Unemployment in 1996 was 6.2%,
particularly low for the Latin American region. Chile is still
considered to have one of the best performing stock markets in the
region.
Performance of the Chilean stock market was lackluster in 1997 as weak
copper prices and rising interest rates led to a contraction in the
domestic economy. Also contributing to the market's weakness was the
contagion effect of the Asian economic and currency crises, a decline
in pulp and steel prices, and uncertainty about the growth prospects
of its Latin American neighbors. These factors combined to produce a
15% decline in the stock market for the 1997 calendar year. The market
weakness carried through into the first half of the next year.
Eduardo Frei is President and is due for reelection in 1999. President
Frei has been trying to decentralize the government but encounters
stiff opposition from the powerful trade unions. Also high on Frei's
agenda is tax reform.
There is a considerable military component to political life in Chile.
In the legislature there is strong representation by parties with
authoritarian views. As part of the negotiated settlement with coup
leader General Augusto Pinochet in 1990, the army chain of command
ends with General Pinochet, not an elected official. Furthermore,
certain seats are reserved in the Senate for appointed officials from
the military. Pinochet must resign in 1998, and shortly thereafter the
reserved Senate seats will fall open to election. There are
constitutional reforms currently in progress further diminishing the
role and influence of the military, and thus the political transition
is still underway. A successful outcome requires that the military
acquiesce as it is stripped of its political powers.
Investors in the Chilean market face special risks: The Chilean market
is particularly sensitive to the fluctuation in the international
price of copper and pulp on the international markets and they have a
significant impact on the nation's economy and stock market.
As is typical of most emerging markets, much of the Chilean market
equity is firmly held by controlling families and their associates.
Accordingly, these owners may not always act in the interests of
outside shareholders. In addition, any weakness in the Chilean
currency versus the dollar could erode the investment returns to U.S.
investors upon currency conversion.
MEXICO. The Mexican economy has recovered fairly well since the
currency crisis of December 1994 thanks in large part to growth in
exports, peso stabilization, and massive financial assistance from the
United States. GDP growth rose to 7.3%, with consumer spending and
investment leading the way. A major positive factor supporting growth
during 1997 was the strength of the peso, which closed the year little
changed from its 1996 year-end level. In addition, the nation's
inflation rate declined to 15.7% from the 27.7% rate of 1996. This
marked the second straight year of improvement. Inflation is the chief
concern of the central bank, which takes active measures such as the
setting of wage ceilings and the adjustment of interest rates to
control it. Domestic consumption, while improved, has yet to return to
pre-1994 levels, and has also contributed to the containment of
inflation.
The Mexican economy is very strong in manufacturing and natural
resources, specifically oil. Manufacturing alone counts for 22% of the
Mexican GDP and 21% of all urban employment. The economy is also very
closely tied to the United States, which is responsible for 60% of all
foreign investment and with whom it conducts over 75% of all trade.
Trade pacts such as NAFTA further integrate the economies, giving the
United States strong incentives to provide assistance in times of
crisis. NAFTA also enabled the recent recovery, given the ease with
which it allows increases in exports and investment. The Mexican stock
market listed 194 companies with total capitalization of $156 billion
in 1997.
Internally, the various people of the Mexican states have recently
experienced a great deal of dissatisfaction with their relationship to
the federal government. Most notably, in Chiapas there have been armed
uprisings by indigenous groups demanding further autonomy. While the
rebellions have not strongly shaken financial markets, they serve as a
reminder of the diversity of Mexico, of the vast socio-economic gaps
between various peoples, and of the potential for such groups to
demand the attention of both their government and the world.
Politically, the landscape changed fundamentally in July 1997. The
defeat of candidates from the Institutional Revolutionary Party (PRI)
in legislative elections signaled the end of decades of one party
rule. Citizens now have the confidence that their votes count and that
the PRI is no longer invincible. Winning every presidential election
since its founding in 1929, the PRI was the country's monolithic
political machine, maintaining power through rigged elections and
ruling in an environment rife with intrigue and corruption. Internal
pressures including armed rebellion from domestic interest groups,
extensive crises and scandals caused by intra-party rivalries and
corruption, and deteriorating relationships with foreign countries
over financial mismanagement and mutual social problems all
contributed to the establishment of fully free and unfettered
elections. Numerous electoral reforms implemented since 1989 have
aided in the further opening of the Mexican political system and
opposition parties have made historic gains in elections at all
levels. Much of the impetus for the establishing a real two party
system in Mexico can be credited to President Zedillo and the PRI
majority in Congress. During 1995-96 the political parties negotiated
constitutional amendments to address electoral campaign fairness
issues, which passed unanimously. The response from the Mexican people
was clear as a record number of registered voters cast ballots. Though
they took the most votes (39%) for the 500-member Lower House of
Congress, the PRI has lost their majority. Mid-term elections held
in July of 1997, also saw large gains for opposition parties and
marked a significant step in Mexico's political transformation.
Market reaction to the new Mexican political world was positive. The
IPC index, consisting of 35 of the most representative stocks on the
Mexican Stock Exchange, rose 3.25% the day after the election. Further
financial implications of the new landscape are as yet uncertain.
Relevant considerations are the effect of the new configurations on
government consensus and policy making, the demands of newly empowered
groups on economic and other resources, the balance of power between
the executive and the legislature, and the ability of the government
to maintain law and order.
Mexico's stock market fell sharply in late 1997 and continued its
decent through mid-1998 as the worsening Asian economic and currency
crises threatened to cause problems for Mexico's trade balance and
raised questions concerning the sustainability of its economic growth.
Foreign investors fled the Mexican market, as they feared that Asia's
currency problems would spread to Latin America.
Investors in Mexico face a number of potential risks. As an emerging
nation, Mexico's stock market may be particularly vulnerable to
widespread economic, currency and stock market turmoil such as that
recently experienced in Asia and Russia. These crises may prompt
investors to become increasingly averse to emerging market exposure on
concern that the impact of these events will spread to other
countries. In addition, mutual funds that invest in emerging markets
may be forced to sell holdings in countries that have little
similarity with the troubled markets, merely to raise cash to meet
redemptions. Similarly, because the United States is Mexico's largest
trading partner, any economic downturn in the U.S. economy can have a
strongly adverse impact upon Mexico's economy and stock market.
While Mexico's political situation is relatively stable, there is a
high degree of dissatisfaction with the government's inability to
effectively address the nation's growing social problems, particularly
in the country's less developed regions. Occasional flair-ups of
strikes and armed rebellion could pose a threat to Mexico's political
and economic stability.
SPECIAL CONSIDERATIONS REGARDING THE RUSSIAN FEDERATION
The Russian Federation is the largest republic of the Commonwealth of
Independent States with a 1995 population of 147,500,000. It is about
one and four fifths of the land area of the United States and occupies
most of Eastern Europe and north Asia.
Russia has had a long history of political and economic turbulence.
The USSR lasted 69 years and for more than half that time it ranked as
a nuclear superpower. In the 1930's tens of millions of its citizens
were collectivized under state agricultural and industrial enterprises
and millions died in political purges and the vast penal and labor
system or in state-created famines. During World War II, as many as 20
million Soviet citizens died. After decades of communist rule, the
Soviet Union was dissolved on December 8, 1991 following a failed coup
attempt against the government of Mikhail Gorbachev. On the day that
the leaders declared that the Soviet Union ceased to exist, the Soviet
republics were invited to join with Russia in the Commonwealth of
Independent states (CIS). At one time or another those that have
agreed to join have included the Ukraine, Belarus, Moldova, Georgia,
Armenia, Azerbaijan, Uzbekistan, Turkmenistan, Tajikistan, Kazakhstan
and Kyrgyzstan, but a number have dropped out since or have only
observer status. Each of the republics is a sovereign state that
controls its own economy and natural resources and collects its own
taxes, providing only minimal support to the CIS.
Boris Yeltsin, President of Russia, inherited the mantle of economic
and political chaos. With the freeing of most prices he staked his
political life on the rapid creation of a free market economy. Since
1991 Yeltsin and his Russian reformers have been faced with the
daunting task of stabilizing the Russian economy while transforming it
into a modern and efficient structure able to compete in international
markets and respond to the needs of the Russian people. To date, their
efforts have yielded widely mixed results. On the one hand, they have
made some impressive progress. Since 1992, they have abolished central
planning, decontrolled prices, unified the foreign exchange market,
made the ruble convertible, and privatized two thirds of the economy.
They have accomplished this in spite of the crushing burdens inherited
from the communist system: huge industrial enterprises that are
unprofitable; an obsolete capital stock; a crumbling energy sector,
huge external debt; and armies that had to be repatriated and
resettled at home.
Russia remains a paradox among the major economies of the world in
that it is a country marked by stagnation in production levels, but
has few constraints on growth. Labor supply is adequate and savings
are high. In addition, there is almost unlimited scope for increasing
productivity through the introduction of improved technologies,
production process and market-oriented managerial development. There
are 147 million consumers who are slowly increasing their buying power
and education standards are high. Russia is also rich in natural
resources. It has 40% of the world's natural gas reserves, 6% of its
oil, 25% of coal, diamonds, gold and nickel, and 30% of timber and
bauxite. Approximately ten million people are engaged in agriculture
and they produce half of the region's grain, meat, milk, and other
dairy products.
The main reason for the continued poor performance of the Russian
economy is the country's failure to mobilize the resources that are
available. While the official unemployment rate was at 10.6% in 1996,
up to half of the working population is, in effect, unemployed or, to
a significant degree, underemployed in inefficient and unproductive
industries. Much of the country's savings have been siphoned off
through capital flight. Russia's technological potential for
assimilating both domestic and foreign technologies is not being
exploited. Industry privatization and restructuring initiatives have
generally failed to mobilize the available factors of production as
the country's privatization program virtually ensures the predominance
of the old management teams that are largely non market-oriented in
their management approach. Approximately 80% of Russian privatized
companies continue to be majority-owned by insiders and only 10% are
owned by investors with large enough stakes to influence the running
of the company.
In July 1996, Boris Yeltsin was re-elected for a second term and it
was hoped that the election would mark the start of a more stable
period of economic growth. However, macroeconomic indicators in 1996
proved contradictory. On the one hand, the Russian government
continued its strict credit policies, and the annual inflation rate
for 1997 dropped to 11%, down from 22% in 1996. Inflation has since
remained below 3% a month through the first half of 1997. In addition,
expenditure cuts trimmed the budget deficit to 7% of GDP for the first
nine months of 1996.
By the end of 1997, GDP was up 0.4% following 1996's 6% fall, and
industrial production was up by 1.9%. Non-payment continues to
represent a serious problem for the economy, particularly in the
energy sector.
While Russia is widely believed to be one of the most risky markets in
Eastern Europe, it is also recognized for its potential for positive
returns. However, the market has been essentially liquidity driven and
concentrated in very few of the country's largest companies. At just
$129 billion, the total capitalization of the stock market accounts
for just 28.7 percent of GDP. The majority of investors in Russian
equities are small and medium-sized United States hedge funds. In
addition, several country specific funds have been established to make
direct and portfolio investments in Russian companies. To facilitate
foreign investment, a number of the larger Russian companies have
issued equity in the form of American depository receipts while six
big firms have issued securities in the form of Russian depository
certificates. These certificates are issued and marketed by the Bank
of New York. Any investment in Russia is risky and deciding which
companies will perform well at this stage of the country's
transformation is far from easy. A combination of poor accounting
standards, inept management, limited shareholder rights and the
criminalization of large sectors of the economy pose a significant
risk, particularly to foreign investors.
In 1996 the Russian market delivered the world's best stock market
performance and was among the top performing markets in the first half
of 1997. However, the markets strength masked a rapidly deteriorating
political and economic picture. Many of the country's economic reform
initiatives have floundered as the proceeds of IMF and other
assistance have been squandered or stolen. Taxes were not being
collected and Russian banks, suffering from a collapsed ruble, could
not meet the demands of either domestic depositors or foreign
creditors. In July of 1998 the Yeltsin government effectively devalued
the Russian ruble by approximately 34% to strengthen the ailing
banking system and stimulate demand for Russian exports. In addition
the government announced a restructuring of their foreign debt that
would allow a 90-day moratorium on banks' foreign loans and a
rescheduling of $40 billion in domestic debt. These actions were
viewed by investors as being tantamount to default and they fled the
Russian stock market. President Yeltsin's relations with the communist
dominated Duma worsened and there was talk among the body of beginning
impeachment proceedings against the president. By August of 1998 the
ruble had fallen by 70 percent and food prices soared, heightening
fears of social unrest. By early September the Russian economy
appeared to be slipping out of control and the government in a state
of paralysis as the President and the Duma feuded over remedial
initiatives. Many observers fear that country's communist party could
regain control of the government and end free market reforms, which
could further negatively impact stock prices.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of each fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including,
but not limited to: the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold;
the execution efficiency, settlement capability, and financial
condition of the broker-dealer firm; the broker-dealer's execution
services rendered on a continuing basis; the reasonableness of any
commissions; and, if applicable, arrangements for payment of fund
expenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that sub-adviser is
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described
above.
Generally, commissions for investments traded on foreign exchanges
will be higher than for investments traded on U.S. exchanges and may
not be subject to negotiation.
Each 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; and
the availability of securities or the purchasers or sellers of
securities. In addition, such broker-dealers may furnish analyses and
reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and
effect securities transactions and perform functions incidental
thereto (such as clearance and settlement).
The selection of such broker-dealers for transactions in equity
securities is generally made by FMR (to the extent possible consistent
with execution considerations) in accordance with a ranking of
broker-dealers determined periodically by FMR's investment staff based
upon the quality of research and execution services provided.
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that fund or its other clients, and conversely,
such research provided by broker-dealers who have executed transaction
orders on behalf of other FMR clients may be useful to FMR in carrying
out its obligations to a 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.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer commissions for agency transactions that
are in excess of the amount of commissions charged by other
broker-dealers in recognition of their research and execution
services. In order to cause a fund to pay such higher commissions, FMR
must determine in good faith that such commissions are reasonable in
relation to the value of the brokerage and research services provided
by such executing broker-dealers, viewed in terms of a particular
transaction or FMR's overall responsibilities to that 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.
To the extent permitted by applicable law, FMR is authorized to
allocate portfolio transactions in a manner that takes into account
assistance received in the distribution of shares of the funds or
other Fidelity funds and to use research services of the brokerage and
other firms that have provided such assistance. FMR may use research
services provided by and place agency transactions with National
Financial Services Corporation (NFSC) and Fidelity Brokerage Services
(Japan) LLC (FBSJ), indirect 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 December 9, 1997, FMR used research services
provided by and placed agency transactions with Fidelity Brokerage
Services (FBS), an indirect subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers (including
affiliates of FMR) who have entered into arrangements with FMR under
which the broker-dealer allocates a portion of the commissions paid by
a fund toward the reduction of that fund's expenses. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund 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 funds' annualized turnover rates for the first fiscal period are
not expected to exceed 100% (Asset Allocation, Diversified
International, Japan, Latin America, and Global Equity Funds), 200%
(Dividend Growth and Europe Capital Appreciation Funds), and 300%
(Retirement Growth Fund). Because a high turnover rate increases
transaction costs and may increase taxable gains, FMR carefully weighs
the anticipated benefits of short-term investing against these
consequences.
The Trustees of each fund have approved procedures in conformity with
Rule 10f-3 under the 1940 Act whereby a fund may purchase securities
that are offered in underwritings in which an affiliate of FMR
participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the funds of some portion of the brokerage commissions
or similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.
Although the Trustees and officers of each fund are substantially the
same as those of other funds managed by FMR or its affiliates,
investment decisions for each fund are made independently from those
of other funds managed by FMR or accounts managed by FMR affiliates.
It sometimes happens that the same security is held in the portfolio
of more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds and accounts are managed by the same
investment adviser, particularly when the same security is suitable
for the investment objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each fund is
concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines each class's
net asset value per share (NAV) as of the close of the New York Stock
Exchange (NYSE) (normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing each class's NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Most equity securities
for which the primary market is the United States are valued at last
sale price or, if no sale has occurred, at the closing bid price. Most
equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale
price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated
quote or last bid price normally is used. Securities of other open-end
investment companies are valued at their respective NAVs.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the funds may use various pricing
services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value. In addition, securities and other assets for which
there is no readily available market value may be valued in good faith
by a committee appointed by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities
owned by a fund if, in the opinion of a committee appointed by the
Board of Trustees, some other method would more accurately reflect the
fair market value of such securities.
PERFORMANCE
A class may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. Each class's share price and
total return fluctuate in response to market conditions and other
factors, and the value of fund shares when redeemed may be more or
less than their original cost.
YIELD CALCULATIONS (ASSET ALLOCATION FUND). Yields for a class are
computed by dividing the class's pro rata share of 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 of that class entitled to
receive distributions during the period, dividing this figure by the
class's NAV or offering price, as applicable, 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 then
are converted to U.S. dollars, either when they are actually converted
or at the end of the 30-day or one month period, whichever is earlier.
Capital gains and losses generally are excluded from the calculation,
as are gains and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating a class's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a class's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
In calculating a class's yield, the fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in
order to reflect the risk premium on that security. This practice will
have the effect of reducing a class's yield.
Yield information may be useful in reviewing a class's performance and
in providing a basis for comparison with other investment
alternatives. However, a class's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
a class's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates a class's 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 its
shares will likely be invested in instruments producing lower yields
than the balance of the fund's holdings, thereby reducing a class's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a class's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a class's
NAV over a stated period. A class's total return may be calculated by
using the performance data of a previously existing class prior to the
date that the new class commenced operations, adjusted to reflect
differences in sales charges but not 12b-1 fees. Average annual total
returns are calculated by determining the growth or decline in value
of a hypothetical historical investment in a class over a stated
period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative total return of 100% over ten years would produce an
average annual total return of 7.18%, which is the steady annual rate
of return that would equal 100% growth on a compounded basis in ten
years. Average annual total returns covering periods of less than one
year are calculated by determining a class's total return for the
period, extending that return for a full year (assuming that return
remains constant over the year), and quoting the result as an annual
return. While average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that a
class's performance is not constant over time, but changes from year
to year, and that average annual total returns represent averaged
figures as opposed to the actual year-to-year performance of a class.
In addition to average annual total returns, a class may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis and may be quoted with or without taking a class's
maximum sales charge into account. Excluding a class's sales charge
from a total return calculation produces a higher total return figure.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a class's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by a fund and reflects all elements of a class's return. Unless
otherwise indicated, a class's adjusted NAVs are not adjusted for
sales charges, if any.
MOVING AVERAGES. A fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving
average is the average of each day's adjusted closing NAV for a
specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving
averages for a specified period to produce indicators showing when an
NAV has crossed, stayed above, or stayed below its moving average.
Each class may compare its total return to the record of the S&P 500,
the Dow Jones Industrial Average (DJIA), and the cost of living, as
measured by the Consumer Price Index (CPI), over the same period. The
S&P 500 and DJIA comparisons would show how each class's total return
compared to the record of a broad unmanaged index of common stocks and
a narrower set of stocks of major industrial companies, respectively.
Each fund has the ability to invest in securities not included in
either index, and its investment portfolio may or may not be similar
in composition to the indexes. The S&P 500 and DJIA returns are based
on the prices of unmanaged groups of stocks and, unlike each class's
returns, do not include the effect of brokerage commissions or other
costs of investing.
INTERNATIONAL INDICES, MARKET CAPITALIZATION, AND NATIONAL STOCK
MARKET RETURN
The following tables show the total market capitalization of certain
countries according to the Morgan Stanley Capital International
Indices database, the total market capitalization of Latin American
countries according to the International Finance Corporation Emerging
Markets database, and the performance of national stock markets as
measured in U.S. dollars by the Morgan Stanley Capital International
stock market indices for the twelve months ended December 31, 1997. Of
course, these results are not indicative of future stock market
performance or the funds' performance. Market conditions during the
periods measured fluctuated widely. Brokerage commissions and other
fees are not factored into the values of the indices.
MARKET CAPITALIZATION. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization.
According to Morgan Stanley Capital International, the size of the
markets as measured in U.S. dollars grew from $5,749.5 billion in 1996
to $6,207.8 billion in 1997.
The following table measures the total market capitalization of
certain countries according to the Morgan Stanley Capital
International Indices database. The value of the markets are measured
in billions of U.S. dollars as of December 31, 1997.

TOTAL MARKET CAPITALIZATION
Australia $ 164.1 Japan $ 1,498.6

Austria 23.0 Netherlands 337.9

Belgium 75.5 Norway 31.5

Canada 305.9 Singapore/Malaysia 54.5/49.0

Denmark 67.7 Spain 158.3

France 474.5 Sweden 154.5

Germany 584.7 Switzerland 465.6

Hong Kong 167.0 United Kingdom 1,284.8

Italy 238.9 United States 6,209.9

The following table measures the total market capitalization of Latin
American countries according to the International Finance Corporation
Emerging Markets database. The value of the markets is measured in
billions of U.S. dollars as of December 31, 1997.

TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 38.1

Brazil 136.7

Chile 33.0

Colombia 8.2

Mexico 112.5

Venezuela 13.1

10.3

Total Latin America $ 351.9

NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents
the performance of national stock markets as measured in U.S. dollars
by the Morgan Stanley Capital International stock market indices for
the twelve months ended December 31, 1997. The second table shows the
same performance as measured in local currency. Each table measures
total return based on the period's change in price, dividends paid on
stocks in the index, and the effect of reinvesting dividends net of
any applicable foreign taxes. These are unmanaged indices composed of
a sampling of selected companies representing an approximation of the
market structure of the designated country.

STOCK MARKET PERFORMANCE MEASURED IN U.S. DOLLARS
Australia -10.4% Japan -23.7%

Austria 1.6 Netherlands 23.8

Belgium 13.6 Norway 6.2

Canada 12.8 Singapore/Malaysia -30.0/-68.3

Denmark 34.5 Spain 25.4

France 11.9 Sweden 12.9

Germany 24.6 Switzerland 44.2

Hong Kong -23.3 United Kingdom 22.6

Italy 35.5 United States 33.4

STOCK MARKET PERFORMANCE MEASURED IN LOCAL CURRENCY
Australia 9.2% Japan -14.5%

Austria 18.5 Netherlands 45.1

Belgium 32.4 Norway 22.7

Canada 17.8 Singapore/Malaysia -15.7/-51.1

Denmark 56.1 Spain 46.9

France 29.5 Sweden 31.2

Germany 45.3 Switzerland 56.7

Hong Kong -23.2 United Kingdom 27.5

Italy 57.5 United States 33.4

The following table shows the average annualized stock market returns
measured in U.S. dollars as of December 31, 1997.

STOCK MARKET PERFORMANCE
Five Years Ended Ten Years Ended
December 31, 1997 December 31, 1997

Germany 15.32% 14.34%

Hong Kong 0.86 19.18

Japan -4.11 -2.76

Spain 26.67 11.65

United Kingdom 17.42 13.95

United States 24.58 18.42

PERFORMANCE COMPARISONS. A class's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and are
prepared without regard to tax consequences. In addition to the mutual
fund rankings, a class's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability
of principal, but generally do not offer the higher potential returns
available from stock mutual funds.
From time to time, a class's performance may also be compared to other
mutual funds tracked by financial or business publications and
periodicals. For example, a fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising.
A class's performance may also be compared to that of a benchmark
index representing the universe of securities in which the fund may
invest. The total return of a benchmark index reflects reinvestment of
all dividends and capital gains paid by securities included in the
index. Unlike a class's returns, however, the index returns do not
reflect brokerage commissions, transaction fees, or other costs of
investing directly in the securities included in the index.
The Aggressive Asset Allocation Composite Index is a hypothetical
representation of the performance of Asset Allocation's three asset
classes according to their respective weighting in the fund's neutral
mix (5% short-term/money market; 25% bonds; and 70% stocks). The
weightings are rebalanced monthly. The following indices are used to
calculate the asset allocation composite index: The Lehman Brothers
3-month Treasury Bill Index, representing the average of T-Bill rates
for each of the prior three months, adjusted to a bond equivalent
yield basis (short-term and money market instruments); the Lehman
Brothers Aggregate Bond Index, a market value weighted performance
benchmark for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities
with maturities of at least one year; and the S&P 500, a widely
recognized unmanaged index of common stocks.
Asset Allocation has the ability to invest in securities that are not
included in any of the indices, and the fund's actual investment
portfolio may not reflect the composition or the weighting of the
indices used. The S&P 500 and the asset allocation composite index
include reinvestment of income or dividends and are based on the
prices of unmanaged groups of stocks or U.S. Treasury obligations.
Unlike the fund's returns, the indices do not include the effect of
paying brokerage commissions, spreads, or other costs of investing.
Historical results are used for illustrative purposes only and do not
reflect the past or future performance of the fund.
The following table represents the comparative indices' calendar
year-to-year performance.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Aggressive Lehman Brothers Lehman Brothers S&P 500
Asset Allocation 3-Month Treasury Aggregate Bond Index
Composite Index Bill Index

1997 25.81% 5.52% 9.65% 33.36%

1996 15.74% 5.38% 3.63% 22.96%

1995 29.89% 6.09% 18.47% 37.58%

1994 0.11% 4.26% -2.92% 1.32%

1993 9.95% 3.20% 9.75% 10.08%

1992 7.34% 2.92% 7.40% 7.62%

</TABLE>

Each of Dividend Growth, Retirement Growth, and Asset Allocation may
compare its performance to that of the Standard & Poor's 500 Index, a
widely recognized, unmanaged index of common stocks.
Diversified International Fund may compare its performance to that of
the Morgan Stanley Capital International Europe, Australasia, Far East
(EAFE) Index, an unmanaged, market capitalization weighted index that
is designed to represent the performance of developed stock markets
outside of the United States and Canada. The index returns for periods
after January 1, 1997 are adjusted for tax withholding rates
applicable to U.S.-based mutual funds organized as Massachusetts
business trusts.
Europe Capital Appreciation Fund may compare its performance to that
of the Morgan Stanley Capital International Europe Index, an
unmanaged, market capitalization weighted index that is designed to
represent the performance of developed stock markets in Europe. The
index returns for periods after January 1, 1997 are adjusted for tax
withholding rates applicable to U.S.-based mutual funds organized as
Massachusetts business trusts.
Japan Fund may compare its performance to that of the Tokyo Stock
Price Index (TOPIX), a market capitalization weighted index of over
1100 stocks traded in the Japanese market.
Latin America Fund may compare its performance to that of the Morgan
Stanley Capital International Emerging Markets Free-Latin America
Index, a market capitalization weighted index of approximately 190
stocks traded in seven Latin American markets.
Global Equity Fund may compare its performance to that of the Morgan
Stanley Capital International World Index, an unmanaged, market
capitalization weighted index that is designed to represent the
performance of developed stock markets throughout the world.
Stocks are selected for the Morgan Stanley Capital International
(MSCI) indexes on the basis of industry representation, liquidity,
sufficient float, and avoidance of cross-ownership. The MSCI Free
index excludes those stocks that cannot be purchased by foreign
investors in otherwise free markets.
A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, a fund may offer greater liquidity or higher
potential returns than CDs, a fund does not guarantee your principal
or your return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; model portfolios or allocations; and saving for
college or other goals. In addition, Fidelity may quote or reprint
financial or business publications and periodicals, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products.
Each fund may be advertised as part of certain asset allocation
programs involving other Fidelity or non-Fidelity mutual funds. These
asset allocation programs may advertise a model portfolio and its
performance results.
Each fund may be advertised as part of a no transaction fee (NTF)
program in which Fidelity and non-Fidelity mutual funds are offered.
An NTF program may advertise performance results.
A class may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote the fund's current portfolio
manager.
VOLATILITY. A class may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare a class's historical share price fluctuations or total
returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical
data. In advertising, Asset Allocation may also discuss or illustrate
examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents a
class's percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which
may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of October 31, 1998, FMR advised over $32 billion in municipal fund
assets, $118 billion in money market fund assets, $436 billion in
equity fund assets, $13 billion in international fund assets, and $28
billion in Spartan fund assets. The funds may reference the growth and
variety of money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management
figure represents the largest amount of equity fund assets under
management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
Fidelity may provide prior performance information similar to that
described above for funds or accounts with substantially similar
investment objectives, policies, and strategies as the funds described
in this SAI.
PRIOR PERFORMANCE OF SIMILAR FUNDS
Because the funds were new when this SAI was printed, they have no
previous operating history. However, Dividend Growth, Retirement
Growth, Asset Allocation, Diversified International, Europe Capital
Appreciation, Japan, and Latin America are modeled after the following
existing registered funds, respectively: Fidelity Dividend Growth
Fund, Fidelity Retirement Growth Fund, Fidelity Asset Manager: Growth,
Fidelity Diversified International Fund, Fidelity Europe Capital
Appreciation Fund, Fidelity Japan Fund, and Fidelity Latin America
Fund (Related Funds).
The Related Funds are managed by FMR and have investment objectives
and policies that are substantially identical in all materi al
respects to those of the corresponding funds described in this SAI.
The Related Funds, however, have different expenses and are sold
through different distribution channels.
Below you will find information about the prior performance of the
Related Funds, not the performance of the funds described in this SAI.
The performance data of the Related Funds is net of advisory fees and
other expenses.
Although the funds described in this SAI have investment objectives
and policies that are substantially identical in all material respects
to those of the corresponding Related Funds, you should not assume
that the funds described in this SAI will have the same
performance as the Related Funds. For example, a fund's future
performance may be better or worse than the performance of the
corresponding Related Fund due to, among other things, differences in
sales charges, expenses, asset sizes and cash flows between the fund
and the corresponding Related Fund.
MOVING AVERAGES. Like the funds, a Related Fund may illustrate
performance using moving averages. For September 30, 1998, the 13-week
and 39-week long-term moving averages for each Related Fund are
outlined in the chart below.

<TABLE>
<CAPTION>
<S> <C> <C>
Fund Name 13 Week Long-Term 39 Week Long-Term
Moving Average Moving Average

Fidelity Dividend Growth Fund $ 25.15 $ 24.47

Fidelity Retirement Growth Fund $ 19.88 $ 19.43

Fidelity Asset Manager: Growth $ 19.65 $ 19.67

Fidelity Diversified International Fund $ 17.84 $ 17.89

Fidelity Europe Capital Appreciation Fund $ 17.67 $ 17.48

Fidelity Japan Fund $ 9.85 $ 10.07

Fidelity Latin America Fund $ 11.97 $ 14.69

</TABLE>

CALCULATING HISTORICAL FUND RESULTS. The following tables show
performance for each Related Fund calculated including certain Related
Fund expenses for the period ended September 30, 1998. Fidelity Europe
Capital Appreciation Fund, Fidelity Japan Fund, and Fidelity Latin
America Fund have a maximum front-end sales charge of 3%, which is
included in the average annual and cumulative total returns. Total
return figures do not include the effect of paying Fidelity Europe
Capital Appreciation Fund's, Fidelity Japan Fund's, or Fidelity Latin
America Fund's $25 exchange fee, which was in effect from December 1,
1987 through October 23, 1989, or other charges for special
transactions or services, such as Fidelity Europe Capital Appreciation
Fund's 1.00% short-term trading fee for shares held less than 90 days,
or Fidelity Japan Fund's or Fidelity Latin America Fund's 1.5%
short-term trading fee for shares held less than 90 days.

Average Annual Total Cumulative Total
Returns Returns

One Five Ten Years/ One Five Ten Years/
Year Years Life of Year Years Life of
Fund Fund

Fidelity Dividend Growth Fund (4/27/93)* 15.49% 22.81% 24.61% 15.49% 179.35% 230.19%

Fidelity Retirement Growth Fund 5.58% 13.55% 15.08%+ 5.58% 88.79% 307.38%+

Fidelity Asset Manager: Growth (12/30/91)* 5.53% 12.65% 14.85% 5.53% 81.45% 154.80%

Fidelity Diversified International Fund -5.01% 11.30% 10.08% -5.01% 70.78% 91.46%
(12/27/91)*

Fidelity Europe Capital Appreciation Fund -2.54% N/A 14.77% -2.54% N/A 93.11%
(12/21/93)*

Fidelity Japan Fund (9/15/92)* -24.06% -6.64% -0.44% -24.06% -29.07% -2.62%

Fidelity Latin America Fund (4/19/93)* -50.16% -4.35% -0.23% -50.16% -19.92% -1.26%

</TABLE>

* Commencement of Operations
+ 10 year return
Note: If FMR had not reimbursed certain fund expenses during these
periods, Fidelity Asset Manager: Growth's, Fidelity Diversified
International Fund's, and Fidelity Japan Fund's total returns would
have been lower.
The following tables show the income and capital elements of each
Related Fund's cumulative total return. The tables compare each
Related Fund's return to the record of the Standard & Poor's 500 Index
(S&P 500), the Dow Jones Industrial Average (DJIA), and the cost of
living, as measured by the CPI, over the same period. The CPI
information is as of the month-end closest to the initial investment
date for each Related Fund. The S&P 500 and DJIA comparisons are
provided to show how each Related Fund's total return compared to the
record of a broad unmanaged index of common stocks and a narrower set
of stocks of major industrial companies, respectively, over the same
period. Each Related 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 indexes. The S&P 500 and DJIA returns
are based on the prices of unmanaged groups of stocks and, unlike each
Related Fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each Related Fund during the past 10 years ended
on the most recent calendar quarter of each Related Fund or life of
each fund, as applicable, assuming all distributions were reinvested.
Total returns are based on past results and are not an indication of
future performance. Tax consequences of different investments (with
the exception of foreign tax withholdings) have not been factored into
the figures below.
FIDELITY DIVIDEND GROWTH FUND: During the period from April 27, 1993
(commencement of operations) to September 30, 1998, a hypothetical
$10,000 investment in Fidelity Dividend Growth Fund would have grown
to $33,019, assuming all distributions were reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY DIVIDEND GROWTH FUND INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 24,330 $ 604 $ 8,085 $ 33,019 $ 26,323 $ 25,939 $ 11,382

1997 $ 23,850 $ 424 $ 4,315 $ 28,589 $ 24,139 $ 25,837 $ 11,194

1996 $ 18,270 $ 185 $ 2,150 $ 20,605 $ 17,187 $ 18,772 $ 10,958

1995 $ 16,200 $ 57 $ 699 $ 16,956 $ 14,283 $ 14,956 $ 10,639

1994 $ 12,330 $ 10 $ 145 $ 12,485 $ 11,008 $ 11,701 $ 10,375

1993* $ 11,820 $ 0 $ 0 $ 11,820 $ 10,617 $ 10,534 $ 10,076

</TABLE>

* From April 27, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Dividend Growth Fund on April 27, 1993, the net amount invested in
fund shares was $10,000. The cost of the initial investment ($10,000),
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested), amounted to $17,222. If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $430 for dividends and $5,830 for capital gains
distributions.
FIDELITY RETIREMENT GROWTH FUND: During the ten-year period ended
September 30, 1998, a hypothetical $10,000 investment in Fidelity
Retirement Growth Fund would have grown to $40,738, assuming all
distributions were reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY RETIREMENT GROWTH FUND INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 14,897 $ 2,863 $ 22,978 $ 40,738 $ 49,268 $ 49,076 $ 13,681

1997 $ 17,163 $ 2,993 $ 18,430 $ 38,586 $ 45,181 $ 48,882 $ 13,456

1996 $ 15,071 $ 2,179 $ 12,642 $ 29,892 $ 32,169 $ 35,517 $ 13,172

1995 $ 15,293 $ 1,675 $ 10,507 $ 27,475 $ 26,734 $ 28,296 $ 12,788

1994 $ 14,636 $ 1,283 $ 7,526 $ 23,445 $ 20,604 $ 22,138 $ 12,471

1993 $ 15,016 $ 1,146 $ 5,416 $ 21,578 $ 19,872 $ 19,931 $ 12,112

1992 $ 14,374 $ 932 $ 1,537 $ 16,843 $ 17,584 $ 17,811 $ 11,795

1991 $ 13,550 $ 702 $ 530 $ 14,782 $ 15,833 $ 15,948 $ 11,452

1990 $ 10,055 $ 431 $ 394 $ 10,880 $ 12,070 $ 12,516 $ 11,077

1989 $ 12,488 $ 216 $ 0 $ 12,704 $ 13,300 $ 13,224 $ 10,434

</TABLE>

Explanatory Notes: With an initial investment of $10,000 in Fidelity
Retirement Growth Fund on October 1, 1988, the net amount invested in
fund shares was $10,000. The cost of the initial investment ($10,000),
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested), amounted to $32,937. If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $1,712 for dividends and $12,448 for capital
gains distributions.
FIDELITY ASSET MANAGER: GROWTH: During the period from December 30,
1991 (commencement of operations) to September 30, 1998, a
hypothetical $10,000 investment in Fidelity Asset Manager: Growth
would have grown to $25,480, assuming all distributions were
reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY ASSET MANAGER: GROWTH INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 18,800 $ 2,023 $ 4,657 $ 25,480 $ 28,848 $ 29,126 $ 11,885

1997 $ 19,970 $ 1,615 $ 2,606 $ 24,191 $ 26,455 $ 29,011 $ 11,690

1996 $ 16,560 $ 859 $ 967 $ 18,386 $ 18,836 $ 21,078 $ 11,443

1995 $ 14,880 $ 524 $ 869 $ 16,273 $ 15,653 $ 16,793 $ 11,110

1994 $ 13,910 $ 272 $ 618 $ 14,800 $ 12,064 $ 13,139 $ 10,834

1993 $ 13,770 $ 178 $ 95 $ 14,043 $ 11,636 $ 11,828 $ 10,522

1992* $ 11,160 $ 0 $ 0 $ 11,160 $ 10,296 $ 10,571 $ 10,247

</TABLE>

* From December 30, 1991 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Asset Manager: Growth made on December 30, 1991, the net amount
invested in fund shares was $10,000. The cost of the initial
investment ($10,000), together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested), amounted to $15,746. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $1,490 for dividends
and $3,580 for capital gains distributions. Tax consequences of
different investments have not been factored into the above figures.
FIDELITY DIVERSIFIED INTERNATIONAL FUND: During the period from
December 27, 1991 (commencement of operations) to September 30, 1998,
a hypothetical $10,000 investment in Fidelity Diversified
International Fund would have grown to $19,146, assuming all
distributions were reinvested.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY DIVERSIFIED INTERNATIONAL FUND INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 16,010 $ 949 $ 2,187 $ 19,146 $ 29,471 $ 29,719 $ 11,885

1997 $ 17,480 $ 799 $ 1,877 $ 20,156 $ 27,026 $ 29,602 $ 11,690

1996 $ 14,290 $ 487 $ 1,137 $ 15,914 $ 19,243 $ 21,508 $ 11,443

1995 $ 12,900 $ 199 $ 577 $ 13,676 $ 15,991 $ 17,135 $ 11,110

1994 $ 12,240 $ 155 $ 109 $ 12,504 $ 12,325 $ 13,406 $ 10,834

1993 $ 11,080 $ 131 $ 0 $ 11,211 $ 11,887 $ 12,069 $ 10,522

1992* $ 9,140 $ 0 $ 0 $ 9,140 $ 10,518 $ 10,786 $ 10,247

</TABLE>

* From December 27, 1991 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Diversified International Fund on December 27, 1991, the net amount
invested in fund shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
case value at the time they were reinvested) amounted to $12,568. If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $700 for dividends and
$1,670 for capital gain distributions.
FIDELITY EUROPE CAPITAL APPRECIATION FUND: During the period from
December 21, 1993 (commencement of operations) to September 30, 1998,
a hypothetical $10,000 investment in Fidelity Europe Capital
Appreciation Fund would have grown to $19,311, including the effect of
the fund's 3% sales charge.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY EUROPE CAPITAL APPRECIATION FUND INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 14,657 $ 737 $ 3,917 $ 19,311 $ 24,305 $ 23,236 $ 11,241

1997 $ 16,859 $ 633 $ 1,709 $ 19,201 $ 22,289 $ 23,145 $ 11,056

1996 $ 13,473 $ 263 $ 0 $ 13,736 $ 15,870 $ 16,816 $ 10,823

1995 $ 12,086 $ 0 $ 0 $ 12,086 $ 13,188 $ 13,397 $ 10,508

1994* $ 10,942 $ 0 $ 0 $ 10,942 $ 10,165 $ 10,482 $ 10,247

</TABLE>

* From December 21, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Europe Capital Appreciation Fund on December 21, 1993, assuming the 3%
sales charge had been in effect, the net amount invested in fund
shares was $9,700. The cost of the initial investment ($10,000),
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested), amounted to $14,212. If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $600 for dividends and $3,269 for capital gains
distributions. The figures in the table do not include the effect of
the fund's 1.0% short-term trading fee applicable to shares held less
than 90 days.
FIDELITY JAPAN FUND: During the period from September 15, 1992
(commencement of operations) to September 30, 1998, a hypothetical
$10,000 investment in Fidelity Japan Fund would have become $9,738,
including the effect of the fund's 3% sales charge.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY JAPAN FUND INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 9,002 $ 174 $ 562 $ 9,738 $ 27,924 $ 27,126 $ 11,599

1997 $ 11,698 $ 11 $ 731 $ 12,440 $ 25,608 $ 27,019 $ 11,408

1996 $ 12,106 $ 0 $ 756 $ 12,862 $ 18,233 $ 19,631 $ 11,168

1995 $ 11,989 $ 0 $ 749 $ 12,738 $ 15,152 $ 15,640 $ 10,842

1994 $ 13,590 $ 0 $ 453 $ 14,043 $ 11,678 $ 12,237 $ 10,573

1993 $ 13,318 $ 0 $ 0 $ 13,318 $ 11,263 $ 11,016 $ 10,269

1992* $ 9,642 $ 0 $ 0 $ 9,642 $ 9,966 $ 9,845 $ 10,000

</TABLE>

* From September 15, 1992 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Japan Fund on September 15, 1992, assuming the 3% sales charge had
been in effect, the net amount investment in fund shares was $9,700.
The cost of initial investment ($10,000), together with the aggregate
cost of reinvested dividends and capital gain distributions for the
period covered (their cash value at the time they were reinvested),
amounted to $10,737. If distributions had not been reinvested, the
amount of distributions earned from the fund over time would have been
smaller, and cash payments for the period would have amounted to $184
for dividends and $728 for capital gains distributions. The figures in
the table do not include the effect of the fund's 1.5% short-term
trading fee applicable to shares held less than 90 days.
FIDELITY LATIN AMERICA FUND: During the period from April 19, 1993
(commencement of operations) to September 30, 1998, a hypothetical
$10,000 investment in Fidelity Latin America Fund would have become
$9,874, including the effect of the fund's 3% sales charge.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY LATIN AMERICA FUND INDICES
Period Ended Value of Value of Value of Total S&P DJIA Cost of
September 30 Initial Reinvested Reinvested Value 500 Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1998 $ 9,409 $ 433 $ 32 $ 9,874 $ 25,776 $ 25,573 $ 11,382

1997 $ 18,527 $ 629 $ 62 $ 19,218 $ 23,638 $ 25,473 $ 11,194

1996 $ 12,523 $ 194 $ 42 $ 12,759 $ 16,830 $ 18,508 $ 10,958

1995 $ 10,292 $ 34 $ 35 $ 10,361 $ 13,987 $ 14,745 $ 10,639

1994 $ 16,568 $ 55 $ 56 $ 16,679 $ 10,780 $ 11,536 $ 10,375

1993* $ 11,960 $ 0 $ 0 $ 11,960 $ 10,397 $ 10,386 $ 10,076

</TABLE>

* From April 19, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Fidelity
Latin America Fund on April 19, 1993, assuming the 3% sales charge had
been in effect, the net amount invested in fund shares was $9,700. The
cost of the initial investment ($10,000), together with the aggregate
cost of reinvested dividends and capital gain distributions for the
period covered (their cash value at the time the were reinvested),
amounted to $10,643. If distributions had not bee reinvested, the
amount of distributions earned from the fund over time would have been
smaller, and cash payments for the period would have amounted to $582
for dividends and $49 for capital gains distributions. The figures in
the table do not include the effect of the fund's 1.5% short-term
trading fee applicable to shares held less than 90 days.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class A's front-end sales charge on shares acquired through
reinvestment of dividends and capital gain distributions or in
connection with a fund's merger with or acquisition of any investment
company or trust. In addition, FDC has chosen to waive Class A's
front-end sales charge in certain instances due to sales efficiencies
and competitive considerations. The sales charge will not apply:
CLASS A SHARES ONLY
1. to shares purchased for an employee benefit plan (including 403(b)
programs, but otherwise as defined in ERISA) with at least $25 million
or more in plan assets;
2. to shares purchased for an employee benefit plan (including 403(b)
programs, but otherwise as defined in ERISA) investing through an
insurance company separate account used to fund annuity contracts;
3. to shares purchased for an employee benefit plan (including 403(b)
programs, but otherwise as defined in ERISA) investing through a trust
institution, bank trust department or insurance company, or any such
institution's broker-dealer affiliate that is not part of an
organization primarily engaged in the brokerage business. Employee
benefit plans that participate in the Advisor Retirement Connection do
not qualify for this waiver;
4. to shares purchased for an employee benefit plan (including 403(b)
programs, but otherwise as defined in ERISA) investing through an
investment professional sponsored program that requires the
participating employee benefit plan to initially invest in Class C or
Class B shares and, upon meeting certain criteria, subsequently
requires the plan to invest in Class A shares;
5. to shares purchased by a trust institution or bank trust department
for a managed account that is charged an asset-based fee. Employee
benefit plans (including 403(b) programs, but otherwise as defined in
ERISA) and accounts managed by third parties do not qualify for this
waiver;
6. to shares purchased by a broker-dealer for a managed account that
is charged an asset-based fee. Employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA) do not qualify for
this waiver;
7. to shares purchased by a registered investment advisor that is not
part of an organization primarily engaged in the brokerage business
for an account that is managed on a discretionary basis and is charged
an asset-based fee. Employee benefit plans (including 403(b) programs,
but otherwise as defined in ERISA) do not qualify for this waiver;
8. to shares purchased by a bank trust officer, registered
representative, or other employee (or a member of one of their
immediate families) of investment professionals having agreements with
FDC; or
9. to shares purchased prior to December 31, 1998 by shareholders who
have closed their Class A Municipal Bond, Class A California Municipal
Income, or Class A New York Municipal Income accounts prior to
December 31, 1997. This waiver is limited to purchases of up to
$10,000; shareholders are entitled to this waiver after the original
load waiver certificate is received in proper form by FIIOC.
CLASS T SHARES ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class T's front-end sales charge on shares acquired through
reinvestment of dividends and capital gain distributions or in
connection with a fund's merger with or acquisition of any investment
company or trust. In addition, FDC has chosen to waive Class T's
front-end sales charge in certain instances due to sales efficiencies
and competitive considerations. The sales charge will not apply:
1. to shares purchased for an insurance company separate account used
to fund annuity contracts for employee benefit plans (including 403(b)
programs, but otherwise as defined in ERISA);
2. to shares purchased by a trust institution or bank trust department
for a managed account that is charged an asset-based fee. Accounts
managed by third parties do not qualify for this waiver;
3. to shares purchased by a broker-dealer for a managed account that
is charged an asset-based fee;
4. to shares purchased by a registered investment adviser that is not
part of an organization primarily engaged in the brokerage business
for an account that is managed on a discretionary basis and is charged
an asset-based fee;
5. to shares purchased for an employee benefit plan (as defined by
ERISA (except SIMPLE IRA, SEP, and SARSEP plans and plans covering
self-employed individuals and their employees (formerly, Keough/H.R.
10 plans), but including 403(b) programs));
6. to shares purchased for a Fidelity or Fidelity Advisor account
(including purchases by exchange) with the proceeds of a distribution
from (i) an insurance company separate account used to fund annuity
contracts for employee benefit plans (including 403(b) programs, but
otherwise as defined in ERISA) that are invested in Fidelity Advisor
or Fidelity funds or (ii) an employee benefit plan (including 403(b)
programs, but otherwise as defined in ERISA) that is invested in
Fidelity Advisor or Fidelity funds. (Distributions other than those
transferred to an IRA account must be transferred directly into a
Fidelity account.);
7. to shares purchased for any state, county, or city, or any
governmental instrumentality, department, authority or agency;
8. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent
deferred sales charge;
9. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or FIL or their 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;
10. to shares purchased by a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more;
11. to shares purchased by a bank trust officer, registered
representative, or other employee (or a member of one of their
immediate families) of investment professionals having agreements with
FDC;
12. to shares purchased for a charitable remainder trust or life
income pool established for the benefit of a charitable organization
(as defined for purposes of Section 501(c)(3) of the Internal Revenue
Code);
13. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined Trusts; or
14. to shares purchased prior to December 31, 1998 by shareholders who
have closed their Class T Fidelity Advisor Municipal Bond Fund, Class
T Fidelity Advisor California Municipal Income Fund, or Class T
Fidelity Advisor New York Municipal Income Fund accounts prior to
December 31, 1997. This waiver is limited to purchases of up to
$10,000; shareholders are entitled to this waiver after the original
load waiver certificate is received by FIIOC.
CLASS B AND CLASS C SHARES ONLY
The contingent deferred sales charge (CDSC) on Class B and Class C
shares may be waived (1) in the case of disability or death, provided
that the shares are redeemed within one year following the death or
the initial determination of disability; (2) in connection with a
total or partial redemption related to certain distributions from
retirement plans or accounts at age 70 1/2 which are permitted without
penalty pursuant to the Internal Revenue Code; (3) in connection with
redemptions through the Fidelity Advisor Systematic Withdrawal
Program; or (4) (APPLICABLE TO CLASS C ONLY) in connection with any
redemptions from an employee benefit plan (including 403(b) programs,
but otherwise as defined by ERISA).
A sales load waiver form must accompany each transaction available for
each class.
INSTITUTIONAL CLASS SHARES ONLY
Institutional Class shares are offered to:
1. Broker-dealer managed account programs that (i) charge an
asset-based fee and (ii) will have at least $1 million invested in the
Institutional Class of the Advisor funds. In addition, employee
benefit plans (including 403(b) programs, but otherwise as defined by
ERISA) must have at least $50 million in plan assets;
2. Registered investment advisor managed account programs, provided
the registered investment advisor is not part of an organization
primarily engaged in the brokerage business and the program (i)
charges an asset-based fee, and (ii) will have at least $1 million
invested in the Institutional Class of the Advisor funds. In addition,
non-employee benefit plan accounts in the program must be managed on a
discretionary basis;
3. Trust institution and bank trust department managed account
programs that (i) charge an asset-based fee and (ii) will have at
least $1 million invested in the Institutional Class of the Advisor
funds. Accounts managed by third parties are not eligible to purchase
Institutional Class shares;
4. Insurance company separate accounts that will have at least $1
million invested in the Institutional Class of the Advisor funds;
5. Current or former Trustees or officers of a Fidelity fund or
current or retired officers, directors, or regular employees of FMR
Corp. or Fidelity International Limited or their direct or indirect
subsidiaries (Fidelity Trustee or employee), spouses of Fidelity
Trustees or employees, Fidelity Trustees or employees acting as a
custodian for a minor child, or persons acting as trustee of a trust
for the sole benefit of the minor child of a Fidelity Trustee or
employee; and
6. Insurance company employee benefit plan programs (including 403(b)
programs, but otherwise as defined in ERISA) that (i) charge an
asset-based fee and (ii) will have at least $1 million invested in the
Institutional Class of the Advisor funds. Insurance company employee
benefit plan programs include such programs offered by a broker-dealer
affiliate of an insurance company, provided that the affiliate is not
part of an organization primarily engaged in the brokerage business.
For purchases made by managed account programs, insurance company
separate accounts, or insurance company employee benefit plan
programs, FDC reserves the right to waive the requirement that $1
million be invested in the Institutional Class of the Advisor funds.
FOR CLASS A AND CLASS T SHARES ONLY
FINDER'S FEE. On eligible purchases of (i) Class A shares in amounts
of $1 million or more that qualify for a Class A load waiver, (ii)
Class A shares in amounts of $25 million or more, or (iii) Class T
shares in amounts of $1 million or more, investment professionals will
be compensated with a fee at the rate of 0.25% of the purchase amount.
Except as provided below, Class A eligible purchases are the following
purchases made through broker-dealers and banks: an individual trade
of $25 million or more; an individual trade of $1 million or more that
is load waived; a trade which brings the value of the accumulated
account(s) of an investor (including an employee benefit plan
(including 403(b) programs, but otherwise as defined in ERISA)) past
$25 million; a load waived trade that brings the value of the
accumulated account(s) of an investor (including an employee benefit
plan (including 403(b) programs, but otherwise as defined in ERISA))
past $1 million; a trade for an investor with an accumulated account
value of $25 million or more; a load waived trade for an investor with
an accumulated account value of $1 million or more; an incremental
trade toward an investor's $25 million "Letter of Intent"; and an
incremental load waived trade toward an investor's $1 million "Letter
of Intent." Except as provided below, Class T eligible purchases are
the following purchases made through broker-dealers and banks: an
individual trade of $1 million or more; a trade which brings the value
of the accumulated account(s) of an investor (including an employee
benefit plan (including 403(b) programs, but otherwise as defined in
ERISA)) past $1 million; a trade for an investor with an accumulated
account value of $1 million or more; and an incremental trade toward
an investor's $1 million "Letter of Intent."
For the purpose of determining the availability of Class A or Class T
finder's fees, purchases of Class A or Class T shares made with the
proceeds from the redemption of shares of any Fidelity fund will not
be considered "eligible purchases."
Except as provided below, any assets on which a finder's fee has been
paid will bear a contingent deferred sales charge (Class A or Class T
CDSC) if they do not remain in Class A or Class T shares of the
Fidelity Advisor funds, or Daily Money Class shares of Treasury Fund,
Prime Fund or Tax-Exempt Fund, for a period of at least one
uninterrupted year. The Class A or Class T CDSC will be 0.25% of the
lesser of the cost of the Class A or Class T shares, as applicable, at
the initial date of purchase or the value of the Class A or Class T
shares, as applicable, at redemption, not including any reinvested
dividends or capital gains. Class A and Class T shares acquired
through distributions (dividends or capital gains) will not be subject
to a Class A or Class T CDSC. In determining the applicability and
rate of any Class A or Class T CDSC at redemption, Class A or Class T
shares representing reinvested dividends and capital gains, if any,
will be redeemed first, followed by those Class A or Class T shares,
as applicable, that have been held for the longest period of time.
Shares held by an insurance company separate account will be
aggregated at the client (e.g., the contract holder or plan sponsor)
level, not at the separate account level. Upon request, anyone
claiming eligibility for the 0.25% fee with respect to shares held by
an insurance company separate account must provide FDC access to
records detailing purchases at the client level.
With respect to shares held by an insurance company separate account,
the Class A or Class T CDSC does not apply.
With respect to employee benefit plans (including 403(b) programs, but
otherwise as defined in ERISA), the Class A or Class T CDSC does not
apply to the following types of redemptions: (i) plan loans or
distributions or (ii) exchanges to non-Advisor fund investment
options. With respect to Individual Retirement Accounts, the Class A
or Class T CDSC does not apply to redemptions made for disability,
payment of death benefits, or required partial distributions starting
at age 70 1/2.
Investment professionals must notify FDC in advance of a purchase
eligible for a finder's fee, and may be required to enter into an
agreement with FDC in order to receive the finder's fee.
CLASS A, CLASS T, CLASS B, AND CLASS C SHARES ONLY
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales
charge on Class A or Class T shares, you or your investment
professional must notify Fidelity at the time of purchase whenever a
quantity discount is applicable to your purchase. Upon such
notification, you will receive the lowest applicable front-end sales
charge.
For purposes of qualifying for a reduction in front-end sales charges
under the Combined Purchase, Rights of Accumulation or Letter of
Intent programs, the following may qualify as an individual or a
"company" as defined in Section 2(a)(8) of the 1940 Act: an
individual, spouse, and their children under age 21 purchasing for
his, her, or their own account; a trustee, administrator or other
fiduciary purchasing for a single trust estate or a single fiduciary
account or for a single or a parent-subsidiary group of "employee
benefits plans" (as defined in Section 3(3) of ERISA); and tax-exempt
organizations as defined under Section 501(c)(3) of the Internal
Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any
future purchases of Class A or Class T shares after you have reached a
new breakpoint in a fund's sales charge schedule. The value of
currently held (i) Fidelity Advisor fund Class A, Class T, Class B and
Class C shares, (ii) Advisor B Class and C Class shares of Treasury
Fund and (iii) Daily Money Class shares of Treasury Fund, Prime Fund,
and Tax-Exempt Fund acquired by exchange from any Fidelity Advisor
fund, is determined at the current day's NAV at the close of business,
and is added to the amount of your new purchase valued at the current
offering price to determine your reduced front-end sales charge.
LETTER OF INTENT. You may obtain Class A or Class T shares at the same
reduced front-end sales charge by filing a non-binding Letter of
Intent (Letter) within 90 days of the start of Class A or Class T
purchases. Each Class A or Class T investment you make after signing
the Letter will be entitled to the front-end sales charge applicable
to the total investment indicated in the Letter. For example, a $2,500
purchase of Class A or Class T shares toward a $50,000 Letter would
receive the same reduced sales charge as if the $50,000 had been
invested at one time. Purchases of Class B and Class C shares during
the 13-month period also will count toward the completion of the
Letter. To ensure that you receive a reduced front-end sales charge on
future purchases, you or your investment professional must inform
Fidelity that the Letter is in effect each time Class A or Class T
shares are purchased. Reinvested income and capital gain distributions
do not count toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you
plan to invest. Out of the initial purchase Class A or Class T shares
equal to 5% of the dollar amount specified in the Letter will be
registered in your name and held in escrow. The Class A or Class T
shares held in escrow cannot be redeemed or exchanged until the Letter
is satisfied or the additional sales charges have been paid. You will
earn income dividends and capital gain distributions on escrowed Class
A or Class T shares. The escrow will be released when your purchase of
the total amount has been completed. You are not obligated to complete
the Letter.
If you purchase more than the amount specified in the Letter and
qualify for a future front-end sales charge reduction, the front-end
sales charge will be adjusted to reflect your total purchase at the
end of 13 months. Surplus funds will be applied to the purchase of
additional Class A or Class T shares at the then-current offering
price applicable to the total purchase.
If you do not complete your purchase under the Letter within the
13-month period, 30 days' written notice will be provided for you to
pay the increased front-end sales charges due. Otherwise, sufficient
escrowed Class A or Class T shares will be redeemed to pay such
charges.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A, Class T, Class B, Class C or Institutional
Class shares of the funds monthly, bimonthly, quarterly, or
semi-annually with the Systematic Investment Program by completing the
appropriate section of the account application and attaching a voided
personal check with your bank's magnetic ink coding number across the
front. If your bank account is jointly owned, be sure that all owners
sign.
You may cancel your participation in the Systematic Investment Program
at any time without payment of a cancellation fee. You will receive a
confirmation from the transfer agent for every transaction, and a
debit entry will appear on your bank statement.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A,
Class T, or Institutional Class shares worth $10,000 or more, you can
have monthly, quarterly or semi-annual checks sent from your account
to you, to a person named by you, or to your bank checking account. If
you own Class B or Class B shares worth $10,000 or more you can have
monthly or quarterly checks sent from your account to you, to a person
named by you, or to your bank checking account. Aggregate redemptions
per 12-month period from your Class B or Class C account may not
exceed 10% of the value of the account and are not subject to a CDSC;
and you may set your withdrawal amount as a percentage of the value of
your account or a fixed dollar amount. Your Systematic Withdrawal
Program payments are drawn from Class A, Class T, Class B, Class C, or
Institutional Class share redemptions, as applicable. If Systematic
Withdrawal Plan redemptions exceed income dividends earned on your
shares, your account eventually may be exhausted.
ALL CLASSES
Each fund is open for business and each class's net asset value per
share (NAV) is calculated each day the New York Stock Exchange (NYSE)
is open for trading. The NYSE has designated the following holiday
closings for 1998: New Year's Day, Martin Luther King's Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule to be observed in the future,
the NYSE may modify its holiday schedule at any time. In addition, on
days when the Federal Reserve Wire System is closed, federal funds
wires cannot be sent.
FSC normally determines each class's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
SEC. To the extent that portfolio securities are traded in other
markets on days when the NYSE is closed, a class's NAV may be affected
on days when investors do not have access to the fund to purchase or
redeem shares. In addition, trading in some of a fund's portfolio
securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are
valued in computing each class's NAV. Shareholders receiving
securities or other property on redemption may realize a gain or loss
for tax purposes, and will incur any costs of sale, as well as the
associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules
and regulations thereunder, or the fund to be acquired suspends the
sale of its shares because it is unable to invest amounts effectively
in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the
fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
DISTRIBUTIONS AND TAXES
DIVIDENDS. A portion of each of Dividend Growth, Retirement Growth and
Asset Allocation'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
Diversified International, Europe Capital Appreciation, Japan, Latin
America, and Global Equity invest significantly in foreign securities,
corporate shareholders should not expect fund dividends to qualify for
the dividends-received deduction. Each fund will notify corporate
shareholders annually of the percentage of fund dividends that
qualifies for the dividends-received deduction. Because each fund may
earn other types of income, such as interest, income from securities
loans, non-qualifying dividends, and short-term capital gains, the
percentage of dividends from the fund that qualifies for the deduction
generally will be less than 100%. A portion of each fund's dividends
derived from certain U.S. Government securities 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. If a fund's
distributions exceed its net investment company taxable income during
a taxable year, all or a portion of the distributions made in the same
taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing each shareholder's cost basis in the
fund. Short-term capital gains are distributed as dividend income.
Each fund will send each shareholder a notice in January describing
the tax status of dividends and capital gain distributions for the
prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of a fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by each fund are taxable to shareholders as dividends, not
as capital gains.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to
foreign securities. If, at the close of its fiscal year, more than 50%
of a fund's total assets are invested in securities of foreign
issuers, the fund may elect to pass through foreign taxes paid and
thereby allow shareholders to take a credit or deduction on their
individual tax returns.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies.
Each fund is treated as a separate entity from the other funds, if
any, of its trust for tax purposes.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the
Internal Revenue Code, it may be subject to U.S. federal income tax on
a portion of any excess distribution or gain from the disposition of
such shares. Interest charges may also be imposed on a fund with
respect to deferred taxes arising from such distributions or gains.
Generally, a fund will elect to mark-to-market any PFIC shares.
Unrealized gains will be recognized as income for tax purposes and
must be distributed to shareholders as dividends.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, 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 Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (68), 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc. Abigail Johnson, Vice President of certain
Equity Funds, is Mr. Johnson's daughter.
J. GARY BURKHEAD (57), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (66), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (66), Trustee. 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),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (55), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES (71), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (66), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of National Arts Stabilization Inc., Chairman of
the Board of Trustees of the Greenwich Hospital Association, Director
of the Yale-New Haven Health Services Corp. (1998), a Member of the
Public Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995), and as a Public Governor of
the National Association of Securities Dealers, Inc. (1996).
*PETER S. LYNCH (55), Trustee, is Vice Chairman and Director of FMR.
Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). 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.
WILLIAM O. McCOY (65), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (70), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board 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 Imation Corp. (imaging and
information storage, 1997).
*ROBERT C. POZEN (52), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (70), 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 ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
ABIGAIL P. JOHNSON (36), is Vice President of certain Equity Funds
(1997), and is a Director of FMR Corp. (1994). Before assuming her
current responsibilities, Ms. Johnson managed a number of Fidelity
funds. Edward C. Johnson 3d, Trustee and President of the Funds, is
Ms. Johnson's father.
ROBERT A. LAWRENCE (46), is Vice President of certain Equity Funds
(1997), Vice President of Fidelity Real Estate High Income Fund (1995)
and Fidelity Real Estate High Income Fund II (1996), and Senior Vice
President of FMR (1993).
RICHARD A. SPILLANE, JR. (47), is Vice President of certain Equity
Funds and Senior Vice President of FMR (1997). Since joining Fidelity,
Mr. Spillane is Chief Investment Officer for Fidelity International,
Limited. Prior to that position, Mr. Spillane served as Director of
Research.
CHARLES MANGUM (34), is Vice President of Advisor Dividend Growth Fund
(1998). Prior to his current responsibilities, Mr. Mangum managed a
number of Fidelity funds.
J. FERGUS SHIEL (41), is Vice President of Advisor Retirement Growth
Fund (1998). Prior to his current responsibilities, Mr. Shiel managed
a number of Fidelity funds.
RICHARD C. HABERMANN (58), is Vice President of Advisor Asset
Allocation Fund (1998) and Advisor Global Equity Fund (1998). Prior to
his current responsibilities, Mr. Habermann managed a number of
Fidelity funds.
GREGORY FRASER (38), is Vice President of Advisor Diversified
International Fund (1998). Prior to his current responsibilities, Mr.
Fraser managed a number of Fidelity funds.
KEVIN McCAREY (38), is Vice President of Advisor Europe Capital
Appreciation Fund (1998). Prior to his current responsibilities, Mr.
McCarey managed a number of Fidelity funds.
BRENDA REED (36), is Vice President of Advisor Japan Fund (1998).
Prior to her current responsibilities, Ms. Reed managed a number of
Fidelity funds.
PATRICIA SATTERTHWAITE (39), is Vice President of Advisor Latin
America Fund (1998). Prior to her current responsibilities, Ms.
Satterthwaite managed a number of Fidelity funds.
ERIC D. ROITER (50), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
MATTHEW N. KARSTETTER (37), Deputy Treasurer (1998), is Deputy
Treasurer of the Fidelity funds and is an employee of FMR (1998).
Before joining FMR, Mr. Karstetter served as Vice President of
Investment Accounting and Treasurer of IDS Mutual Funds at American
Express Financial Advisors (1996-1998). Prior to 1996, Mr. Karstetter
was Vice President, Mutual Fund Services at State Street Bank and
Trust (1991-1996).
JOHN H. COSTELLO (52), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (52), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity
funds, Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994)
and Chief Financial Officer of Fidelity Brokerage Services, Inc.
(1990-1993).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ending in 1999, or calendar year
ended December 31, 1997, as applicable.

COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Aggregate Compensation J. Gary Ralph Phyllis Robert Edward C. E.
from a Fund Burkhea F. Burke M. Gates Johnson Bradley
d** Cox Davis *** 3d** Jones

Dividend GrowthB,+ $ 0 $ 46 $ 45 $ 45 $ 0 $ 46

Retirement GrowthB,+ $ 0 $ 17 $ 16 $ 16 $ 0 $ 17

Asset AllocationB,+ $ 0 $ 8 $ 8 $ 8 $ 0 $ 8

Diversified InternationalB,++ $ 0 $ 8 $ 8 $ 8 $ 0 $ 8

Europe Capital $ 0 $ 4 $ 4 $ 4 $ 0 $ 4
AppreciationB,++

JapanB,++ $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Latin AmericaB,++ $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Global EquityB,++ $ 0 $ 8 $ 8 $ 8 $ 0 $ 8

TOTAL COMPENSATION FROM THE FUND $ 0 $ 214,500 $ 210,000 $ 176,000 $ 0 $ 211,500
COMPLEX*,A

</TABLE>

COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Compensation Donald Peter S. William Gerald C. Marvin Robert C. Thomas
from a Fund J. Lynch O. McCoy McDono L. Pozen R.
Kirk ** **** ugh Mann ** Williams

Dividend GrowthB,+ $ 46 $ 0 $ 46 $ 57 $ 46 $ 0 $ 46

Retirement GrowthB,+ $ 17 $ 0 $ 17 $ 21 $ 17 $ 0 $ 17

Asset AllocationB,+ $ 8 $ 0 $ 8 $ 10 $ 8 $ 0 $ 8

Diversified InternationalB,++ $ 8 $ 0 $ 8 $ 10 $ 8 $ 0 $ 8

Europe Capital $ 4 $ 0 $ 4 $ 5 $ 4 $ 0 $ 4
AppreciationB,++

JapanB,++ $ 0 $ 0 $ 0 $ 1 $ 0 $ 0 $ 0

Latin AmericaB,++ $ 0 $ 0 $ 0 $ 1 $ 0 $ 0 $ 0

Global EquityB,++ $ 8 $ 0 $ 8 $ 10 $ 8 $ 0 $ 8

TOTAL COMPENSATION FROM THE FUND $211,500 $ 0 $ 214,500 $ 264,500 $214,500 $ 0 $ 214,500
COMPLEX*,A

</TABLE>

* Information is for the calendar year ended December 31, 1997 for 230
funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
*** Mr. Gates was elected to the Board of Trustees of Advisor Series I
and Advisor Series VIII on July 16, 1997 and June 18, 1997,
respectively.
**** Mr. McCoy was elected to the Board of Trustees of Advisor Series
I and Advisor Series VIII on July 16, 1997 and June 18, 1997,
respectively.
+ Figures presented are estimated for the fund's first fiscal year
ending October 31, 1999.
++ Figures presented are estimated for the fund's first fiscal year
ending November 30, 1999.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
B Compensation figures include cash.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of the public offering of shares of each fund, 100% of each class's
total outstanding shares was held by FMR. FMR Corp. is the ultimate
parent company of FMR. By virtue of his ownership interest in FMR
Corp., as described in the "FMR" section on page 41, Mr. Edward C.
Johnson 3d, President and Trustee of the fund, may be deemed to be a
beneficial owner of these shares.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant to
which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of its management contract with
each fund, FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel of
each fund or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include
providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable
to FMR and the fees payable to the transfer, dividend disbursing, and
shareholder servicing agent, pricing and bookkeeping agent, and
securities lending agent, each fund or each class thereof, as
applicable, pays all of its expenses that are not assumed by those
parties. Each fund pays for the typesetting, printing, and mailing of
its proxy materials to shareholders, legal expenses, and the fees of
the custodian, auditor and non-interested Trustees. Each fund's
management contract further provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to shareholders; however,
under the terms of each fund's transfer agent agreement, the transfer
agent bears the costs of providing these services to existing
shareholders of the applicable classes. Other expenses paid by each
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
securities laws and making necessary filings under state securities
laws. Each fund is also liable for such non-recurring 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.
MANAGEMENT FEES. For the services of FMR under the management
contract, each fund pays FMR a monthly management fee which has two
components: 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.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

$ 0 - 3 billion .5200% $ 0.5 billion .5200%

3 - 6 .4900 25 .4238

6 - 9 .4600 50 .3823

9 - 12 .4300 75 .3626

12 - 15 .4000 100 .3512

15 - 18 .3850 125 .3430

18 - 21 .3700 150 .3371

21 - 24 .3600 175 .3325

24 - 30 .3500 200 .3284

30 - 36 .3450 225 .3249

36 - 42 .3400 250 .3219

42 - 48 .3350 275 .3190

48 - 66 .3250 300 .3163

66 - 84 .3200 325 .3137

84 - 102 .3150 350 .3113

102 - 138 .3100 375 .3090

138 - 174 .3050 400 .3067

174 - 210 .3000 425 .3046

210 - 246 .2950 450 .3024

246 - 282 .2900 475 .3003

282 - 318 .2850 500 .2982

318 - 354 .2800 525 .2962

354 - 390 .2750 550 .2942

390 - 426 .2700

426 - 462 .2650

462 - 498 .2600

498 - 534 .2550

Over 534 .2500

The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $592 billion of group net assets - the approximate level for
October 1998 - was 0.2910%, which is the weighted average of the
respective fee rates for each level of group net assets up to $592
billion.
Each fund's individual fund fee rate is set forth in the following
chart. Based on the average group net assets of the funds advised by
FMR for October 1998, each fund's annual management fee rate would be
calculated as follows:

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

Dividend Growth 0.2910% + 0.30% = 0.5910%

Retirement Growth 0.2910% + 0.30% = 0.5910%

Asset Allocation 0.2910% + 0.30% = 0.5910%

Diversified International 0.2910% + 0.45% = 0.7410%

Europe Capital Appreciation 0.2910% + 0.45% = 0.7410%

Japan 0.2910% + 0.45% = 0.7410%

Latin America 0.2910% + 0.45% = 0.7410%

Global Equity 0.2910% + 0.45% = 0.7410%

</TABLE>

One-twelfth of this annual management fee rate is applied to each
fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
FMR may, from time to time, voluntarily reimburse all or a portion of
a class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase a class's total returns,
and repayment of the reimbursement by a class will lower its total
returns.
Effective December 29, 1998, FMR voluntarily agreed to reimburse Class
A, Class T, Class B, Class C, and Institutional Class of Dividend
Growth, Retirement Growth, and Asset Allocation if and to the extent
that their aggregate operating expenses, including management fees,
were in excess of an annual rate of 1.75%, 2.00%, 2.50%, 2.50%, and
1.50%, respectively, of their average net assets. Effective December
18, 1998 (December 22, 1998 for Latin America), FMR voluntarily agreed
to reimburse Class A, Class T, Class B, Class C, and Institutional
Class of Diversified International, Europe Capital Appreciation,
Japan, Latin America, and Global Equity if and to the extent that
their aggregate operating expenses, including management fees, were in
excess of an annual rate of 2.00%, 2.25%, 2.75%, 2.75%, and 1.75%,
respectively, of their average net assets.
SUB-ADVISERS. On behalf of each fund, FMR has entered into
sub-advisory agreements with FMR U.K. and FMR Far East. On behalf of
Diversified International, Europe Capital Appreciation, Japan, Latin
America, and Global Equity, FMR also has entered into a sub-advisory
agreement with FIIA. FIIA, in turn, has entered into a sub-advisory
agreement with FIIA(U.K.)L. On behalf of Diversified International,
Japan, and Global Equity, FMR also has entered into a sub-advisory
agreement with FIJ. Pursuant to the sub-advisory agreements, FMR may
receive investment advice and research services outside the United
States from the sub-advisers.
On behalf of each fund, FMR may also grant the sub-advisers investment
management authority as well as the authority to buy and sell
securities if FMR believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIA(U.K.)L each
focus on issuers in countries other than the United States such as
those in Europe, Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. FIJ and FIIA are wholly owned subsidiaries
of Fidelity International Limited (FIL), a Bermuda company formed in
1968 which primarily provides investment advisory services to non-U.S.
investment companies and institutional investors investing in
securities throughout the world. Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family own,
directly or indirectly, more than 25% of the voting common stock of
FIL. FIJ was organized in Japan in 1986. FIIA was organized in Bermuda
in 1983. FIIA(U.K.)L was organized in the United Kingdom in 1984, and
is a direct subsidiary of Fidelity Investments Management Limited and
an indirect subsidiary of FIL.
Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR
Far East, FIJ, and FIIA. FIIA, in turn, pays the fees of FIIA(U.K.)L.
For providing non-discretionary investment advice and research
services, the sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East fees equal to
110% and 105%, respectively, of FMR U.K.'s and FMR Far East's costs
incurred in connection with providing investment advice and research
services.
(small solid bullet) FMR pays FIIA and FIJ fees equal to 30% of FMR's
monthly management fee with respect to the average net assets held by
the fund for which the sub-adviser has provided FMR with investment
advice and research services.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing investment
advice and research services.
For providing discretionary investment management and executing
portfolio transactions, the sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a
fee equal to 50% of its monthly management fee with respect to the
fund's average net assets managed by the sub-adviser on a
discretionary basis.
(small solid bullet) FIIA pays FIIA(U.K.)L a fee equal to 110% of
FIIA(U.K.)L's costs incurred in connection with providing
discretionary investment management services.
Currently, FIJ is primarily responsible for choosing investments for
Japan Fund.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
Class A, Class T, Class B, Class C and Institutional Class shares of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow Class A, Class T, Class B,
Class C and Institutional Class shares of each fund and FMR to incur
certain expenses that might be considered to constitute direct or
indirect payment by the funds of distribution expenses.
Pursuant to each Class A, Class T, Class B, and Class C Plan, FDC is
paid a monthly distribution fee at an annual rate of up to 0.75% of
the class's average net assets for each fund. For the purpose of
calculating the distribution fees, average net assets are determined
at the close of business on each day throughout the month. Currently,
the Trustees have approved a distribution fee for Class A of each fund
at an annual rate of 0.25% of its average net assets; a distribution
fee for Class T of each fund at an annual rate of 0.50% of its average
net assets; a distribution fee for Class B of each fund at an annual
rate of 0.75% of its average net assets; and a distribution fee for
Class C of each fund at an annual rate of 0.75% of its average net
assets. The fee rates for Class A and Class T may be increased only
when, in the opinion of the Trustees, it is in the best interests of
the shareholders of the applicable class to do so. Class B and Class C
of each fund also pay investment professionals a service fee at an
annual rate of 0.25% of Class B's or Class C's average daily net
assets determined at the close of business on each day throughout the
month for personal service and/or the maintenance of shareholder
accounts.
Currently, up to the full amount of distribution fees paid by Class A
and Class T may be reallowed to investment professionals as
compensation for their services in connection with the distribution of
Class A or Class T shares, as applicable, and for providing support
services to Class A or Class T shareholders, as applicable, based upon
the level of services provided.
Currently, the full amount of distribution fees paid by Class B is
retained by FDC as compensation for its services and expenses in
connection with the distribution of Class B shares, and up to the full
amount of service fees paid by Class B may be reallowed to investment
professionals for providing personal service to and/or maintenance of
Class B shareholder accounts.
Currently, and except as provided below, for the first year of
investment, the full amount of distribution fees paid by Class C is
retained by FDC as compensation for its services and expenses in
connection with the distribution of Class C shares, and the full
amount of service fees paid by Class C is retained by FDC for
providing personal service to and/or maintenance of Class C
shareholder accounts. Normally, after the first year of investment, up
to the full amount of distribution fees paid by Class C may be
reallowed to investment professionals as compensation for their
services in connection with the distribution of Class C shares, and up
to the full amount of service fees paid by Class C may be reallowed to
investment professionals for providing personal service to and/or
maintenance of Class C shareholder accounts. For purchases of Class C
shares made for an employee benefit plan (including 403(b) programs,
but otherwise as defined in ERISA) or through reinvested dividends or
capital gain distributions, during the first year of investment and
thereafter, up to the full amount of distribution fees and service
fees paid by such Class C shares may be reallowed to investment
professionals as compensation for their services in connection with
the distribution of Class C shares and for providing personal service
to and/or maintenance of Class C shareholder accounts.
Under each Institutional Class Plan, if the payment of management fees
by the fund to FMR is deemed to be indirect financing by the fund of
the distribution of its shares, such payment is authorized by the
Plan. Each Institutional Class Plan specifically recognizes that FMR
may use its management fee revenue, as well as its past profits or its
other resources, to pay FDC for expenses incurred in connection with
the distribution of Institutional Class shares. In addition, each
Institutional Class Plan provides that FMR, directly or through FDC,
may make payments to third parties, such as banks or broker-dealers,
that engage in the sale of Institutional Class shares, or provide
shareholder support services. Currently, the Board of Trustees has
authorized such payments for Institutional Class shares.
Under each Class A, Class T, Class B, and Class C Plan, if the payment
of management fees by the fund to FMR is deemed to be indirect
financing by the fund of the distribution of its shares, such payment
is authorized by the Plan. Each Class A, Class T, Class B, and Class C
Plan specifically recognizes that FMR may use its management fee
revenue, as well as its past profits, or its other resources, to pay
FDC for expenses incurred in connection with the distribution of the
applicable class's shares, including payments made to third parties
that engage in the sale of the applicable class's shares or to third
parties, including banks, that provide shareholder support services.
Currently, the Board of Trustees has authorized such payments for
Class A, Class T, Class B, and Class C shares.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the applicable class of each fund and its shareholders. In
particular, the Trustees noted that each Institutional Class Plan does
not authorize payments by Institutional Class of a fund other than
those made to FMR under its management contract with the fund. To the
extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of shares of the applicable class,
additional sales of fund shares may result. Furthermore, certain
shareholder support services may be provided more effectively under
the Plans by local entities with whom shareholders have other
relationships.
Each Class A, Class T, Class B, and Class C Plan does not provide for
specific payments by the applicable class of any of the expenses of
FDC, or obligate FDC or FMR to perform any specific type or level of
distribution activities or incur any specific level of expense in
connection with distribution activities.
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the funds might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each class of each fund has entered into a transfer agent agreement
with FIIOC, an affiliate of FMR. Under the terms of the agreements,
FIIOC performs transfer agency, dividend disbursing, and shareholder
services for each class of each fund.
For providing transfer agency services, FIIOC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in a fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
The asset-based fees are subject to adjustment if the year-to-date
total return of the S&P 500 exceeds a positive or negative 15%.
FIIOC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FIIOC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has entered into a service agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC calculates
the NAV and dividends for each class of each fund, maintains each
fund's portfolio and general accounting records, and administers each
fund's securities lending program.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
0.0600% (for equity funds) or 0.0750% (for international funds) of the
first $500 million of average net assets and 0.0300% (for equity
funds) or 0.0375% (for international funds) of average net assets in
excess of $500 million. The fee, not including reimbursement for
out-of-pocket expenses, is limited to a minimum of $60,000 and a
maximum of $800,000 per year.
For administering each fund's securities lending program, FSC receives
fees based on the number and duration of individual securities loans.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer
and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Advisor Dividend Growth Fund, Fidelity
Advisor Retirement Growth Fund, and Fidelity Advisor Asset Allocation
Fund are funds of Fidelity Advisor Series I, an open-end management
investment company organized as a Massachusetts business trust by a
Declaration of Trust dated June 24, 1983, as amended and restated
October 26, 1984. On January 29, 1992, the name of the trust was
changed from Equity Portfolio Growth to Fidelity Broad Street Trust by
an amendment to the Declaration of Trust. On April 15, 1993, the name
of the trust was changed again from Fidelity Broad Street Trust to
Fidelity Advisor Series I by an amendment to the Declaration of Trust.
Currently there are 11 funds of the trust: Fidelity Advisor Dividend
Growth Fund, Fidelity Advisor Retirement Growth Fund, Fidelity Advisor
Asset Allocation Fund, Fidelity Advisor Small Cap Fund, Fidelity
Advisor Equity Growth Fund, Fidelity Advisor Growth & Income Fund,
Fidelity Advisor Growth Opportunities Fund, Fidelity Advisor Large Cap
Fund, Fidelity Advisor Mid Cap Fund, Fidelity Advisor Strategic
Opportunities Fund, and Fidelity Advisor TechnoQuant Growth Fund.
SM
Fidelity Advisor Diversified International Fund, Fidelity Advisor
Europe Capital Appreciation Fund, Fidelity Advisor Japan Fund,
Fidelity Advisor Latin America Fund, and Fidelity Advisor Global
Equity Fund are funds of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business
trust by a Declaration of Trust dated September 23, 1983, as amended
and restated October 1, 1986. On April 15, 1993, the name of the trust
was changed from Fidelity Special Situations Fund to Fidelity Advisor
Series VIII. Currently there are eight funds of the trust: Fidelity
Advisor Diversified International Fund, Fidelity Advisor Europe
Capital Appreciation Fund, Fidelity Advisor Japan Fund, Fidelity
Advisor Latin America Fund, Fidelity Advisor Global Equity Fund,
Fidelity Advisor Emerging Markets Income Fund, Fidelity Advisor
International Capital Appreciation Fund, and Fidelity Advisor Overseas
Fund.
The Declarations of Trust permit the Trustees to create additional
funds.
In the event that FMR ceases to be the investment adviser to a trust
or a fund, the right of the trust or fund to use the identifying name
"Fidelity" may be withdrawn. There is a remote possibility that one
fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of
each of its funds and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially
allocated to such fund, and constitute the underlying assets of such
fund. The underlying assets of each fund are segregated on the books
of account, and are to be charged with the liabilities with respect to
such fund and with a share of the general liabilities of their
respective trusts. Expenses with respect to each trust are to be
allocated in proportion to the asset value of their respective funds,
except where allocations of direct expense can otherwise be fairly
made. The officers of each trust, subject to the general supervision
of the Boards of Trustees, have the power to determine which expenses
are allocable to a given fund, or which are general or allocable to
all of the funds of a certain trust. In the event of the dissolution
or liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be
held personally liable for the obligations of the trust. Each
Declaration of Trust provides that the trust shall not have any claim
against shareholders except for the payment of the purchase price of
shares and requires that each agreement, obligation, or instrument
entered into or executed by the trust or its Trustees shall include a
provision limiting the obligations created thereby to the trust and
its assets. Each Declaration of Trust provides for indemnification out
of each fund's property of any shareholder held personally liable for
the obligations of the fund. Each Declaration of Trust also provides
that its funds shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the fund and
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the
risk of personal liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declarations of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office. Claims asserted against one class of shares may subject
holders of another class of shares to certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive rights, and
Class A, Class T, Class C, and Institutional Class shares have no
conversion rights; the voting and dividend rights, the conversion
rights of Class B shares, the right of redemption, and the privilege
of exchange are described in the Prospectus. Shares are fully paid and
nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of a
trust, a fund, or a class of a fund may, as set forth in the
Declarations of Trust, call meetings of a trust, fund, or class, as
applicable, for any purpose related to the trust, fund, or class, as
the case may be, including, in the case of a meeting of an entire
trust, the purpose of voting on removal of one or more Trustees. Each
trust or fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the trust or the fund, as determined by the current value
of each shareholder's investment in the fund or trust. If not so
terminated, each trust and fund will continue indefinitely. Each fund
may invest all of its assets in another investment company.
CUSTODIAN. State Street Bank and Trust Company, 1776 Heritage Drive,
Quincy, Massachusetts, is custodian of the assets of the funds. The
custodian is responsible for the safekeeping of a fund's assets and
the appointment of any subcustodian banks and clearing agencies. The
custodian takes no part in determining the investment policies of a
fund or in deciding which securities are purchased or sold by a fund.
However, a fund may invest in obligations of the custodian and may
purchase securities from or sell securities to the custodian. The Bank
of New York and the Chase Manhattan Bank, each headquartered in New
York, also may serve as special purpose custodians of certain assets
in connection with repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain 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. PricewaterhouseCoopers LLP, One Post Office Square, Boston,
Massachusetts, serves as the independent accountant for Advisor
Dividend Growth, Advisor Retirement Growth, Advisor Asset Allocation,
Advisor Diversified International, Advisor Japan, Advisor Latin
America, and Advisor Global Equity. Deloitte & Touche LLP, 125 Summer
Street, Boston, Massachusetts, serves as independent accountant
for Advisor Europe Capital Appreciation. The auditors examine
financial statements for the funds and provide other audit, tax, and
related services.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
funds. A 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 RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody's applies numerical
modifiers of 1, 2, or 3 to each generic rating classification from Aa
through B. 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
on the lower end of its generic rating category.
AAA - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA - Bonds that are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect
to principal or interest.
CA - Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS
Debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB"
through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA to CCC may be modified by the addition of a plus sign (+) or minus
sign (-) to show relative standing within the major rating categories.
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 than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB - Debt 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. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC - The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
D rating will also be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
Fidelity is a registered trademark of FMR Corp. TechnoQuant is a
servicemark of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.