Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a
copy of the Statement of Additional Information (SAI) dated June
15 , 1999. 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.
AEA-pro-0 6 99
1.713483.100
FIDELITY ADVISOR
EMERGING ASIA FUND
CLASS A, CLASS T, CLASS B, AND
CLASS C
Fund 756 (Class A) , Fund 760 (Class T), Fund 757 (Class B),
Fund 758 (Class C)
A FUND OF FIDELITY ADVISOR SERIES VIII
FIDELITY ADVISOR EMERGING ASIA FUND seeks long-term capital
appreciation by investing primarily in equity and debt
securities of Asian Emerging Market Issuers.
PROSPECTUS
JUNE 15 , 1999
(FIDELITY_LOGO_GRAPHIC)(registered trademark)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 2 WHO MAY WANT TO INVEST
3 EXPENSES Each class's sales
charge (load) and its yearly
operating expenses.
5 PERFORMANCE
THE FUND IN DETAIL 5 CHARTER How the fund is
organized.
6 INVESTMENT PRINCIPLES AND
RISKS The fund's overall
approach to investing.
8 BREAKDOWN OF EXPENSES How
operating costs are
calculated and what they
include.
YOUR ACCOUNT 9 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.
15 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND ACCOUNT 18 DIVIDENDS, CAPITAL GAINS, AND
POLICIES TAXES
19 TRANSACTION DETAILS Share
price calculations and the
timing of purchases and
redemptions.
22 EXCHANGE RESTRICTIONS
22 SALES CHARGE REDUCTIONS AND
WAIVERS
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 fund 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.
This non-diversified fund is designed for investors seeking to target
opportunities in emerging Asian markets. Non-diversified funds may
invest a greater portion of their assets in securities of individual
issuers than diversified funds. As a result, changes in the market
value of a single issuer could cause greater fluctuations in share
value than would occur in a more diversified fund.
The value of the 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.
The 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.
The fund is composed of multiple classes of shares. All classes of the
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 23 , 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
20 , and "Sales Charge Reductions and Waivers," page 23 ,
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 11 ,
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 20 ,
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 20 , for conversion information.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy,
sell, or exchange shares of the fund. Lower front-end sales charges
may be available with purchases of $50,000 or more. See "Transaction
Details," page 21 , 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 21 , for information about the CDSC.
Class A Class T Class B Class C
Maximum sales charge on 5.75%A 3.50% None None
purchases (as a % of
offering price)
Maximum CDSC (as a % of the NoneB NoneB 5.00%C 1.00%D
lesser of original purchase
price or redemption proceeds)
Sales charge on reinvested None None None None
distributions
Temporary redemption fee 4%E None None None
(short-term trading fee) on
initial shares held less
than six months
A THE SALES CHARGE IS WAIVED ON CLASS A SHARES RECEIVED IN CONNECTION
WITH THE REORGANIZATION OF FIDELITY ADVISOR EMERGING ASIA FUND, INC.,
AS AN OPEN-END FUND. SEE "THE REORGANIZATION" ON PAGE 7.
B 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 21 .
C DECLINES OVER 6 YEARS FROM 5.00% TO 0%.
D ON CLASS C SHARES REDEEMED WITHIN 1 YEAR OF PURCHASE.
E THE FUND WILL IMPOSE A TEMPORARY 4% REDEMPTION FEE ON CLASS A
SHARES RECEIVED IN CONNECTION WITH THE REORGANIZATION OF FIDELITY
ADVISOR EMERGING ASIA FUND, INC. THAT ARE REDEEMED WITHIN 180 DAYS
AFTER THE REORGANIZATION ON JUNE 15, 1999. SEE "THE
REORGANIZATION" ON PAGE 7.
ANNUAL OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to Fidelity Management & Research Company (FMR).
It 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 fund 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 10 ).
The following figures are based on estimated expenses of Class A,
Class T, Class B, and Class C of the fund and are calculated as a
percentage of average net assets of Class A, Class T, Class B, and
Class C of the fund.
EMERGING ASIA
Class A Class T Class B Class C
Management fee 0.73% A 0.73% A 0.73% A 0.73% A
12b-1 fee (including 0.25% 0.25% 0.50% 1.00% 1.00%
Shareholder Service fee for
Class B and Class C shares)
Other expenses (after 1.02% A 1.02A 1.02A 1.02% A
reimbursement for Class T
and C)
Total operating expenses 2.00% 2.25% 2.75% 2.75%
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.
EMERGING ASIA
1 Year 3 Years
Full Redemption No Redemption Full Redemption No Redemption
Class A $ 77 $ 77 $ 117 $ 117
Class T $ 57 $ 57 $ 103 $ 103
Class B $ 78[A] $ 28 $ 115[A] $ 85
Class C $ 38[A] $ 28 $ 85 $ 85
[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.
Effective June 15, 1999, FMR has voluntarily agreed to
reimburse Class A, Class T, Class B and Class C of the fund to the
extent that total operating expenses (excluding interest, taxes,
brokerage commissions , securities lending fees, and
extraordinary expenses), as a percentage of its average net assets,
exceed the following rates:
Class A Class T Class B Class C
2.00% 2.25% 2.75% 2.75%
If these agreements were not in effect, other expenses and total
operating expenses, as a percentage of average net assets, are
expected to be the following amounts:
<TABLE>
<CAPTION>
<S> <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
[B] 1.09% [B] 1.09% [B] 2.32% [B] 2.82%
</TABLE>
[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
[B] CLASS TOTAL OPERATING EXPENSES ARE NOT EXPECTED TO
EXCEED THE VOLUNTARY EXPENSE CAPS IN EFFECT DURING THE FISCAL
YEAR ENDED OCTOBER 31, 1999.
The reimbursement agreement for Class A, Class T, Class B, and Class C
will continue for a period of not less than 12 months following the
reorganization of Fidelity Advisor Emerging Asia Fund, Inc. as an
open-end fund.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN.
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 fund's recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
PRIOR PERFORMANCE
Prior to June 15, 1999, the fund operated as Fidelity Advisor
Emerging Asia Fund, Inc., a closed-end fund with the same investment
objective and substantially similar investment policies as the fund.
Fidelity Advisor Emerging Asia Fund, Inc. was reorganized as an
open-end fund on June 15, 1999, through a transfer of all of its
assets and liabilities to the fund. See "The Reorganization" on page
8 for a more detailed description of the reorganization.
Presented in the table is the prior performance of the
Fidelity Advisor Emerging Asia Fund, Inc. , not the performance
of the fund offered through this prospectus. Although the fund has
the same investment objective and substantially similar investment
policies and strategies, you should not assume that the fund will have
similar performance. For example, the fund's future performance may be
greater or less due to, among other things, differences in managing a
closed-end fund compared to an open-end fund, and differences in sales
charges, expenses, asset sizes and cash flows between the fund and
Fidelity Advisor Emerging Asia Fund, Inc. Class A, T, B, and C shares
of the fund have higher sales charges and may have higher total
expenses.
AVERAGE ANNUAL TOTAL RETURN
Fiscal periods ended March Past 1 year Past 5 years Life of fund[B]
31, 1999*
Fidelity Advisor Emerging -3.61% -2.33% -2.85%
Asia Fund, Inc.A
CUMULATIVE TOTAL RETURN
Fiscal periods ended March Past 1 year Past 5 years Life of fund[B]
31, 1999*
Fidelity Advisor Emerging -3.61% -11.11% -13.51%
Asia Fund, Inc.A
* ALL FIGURES ARE FOR PERIODS ENDING AT THE MOST RECENT CALENDAR
QUARTER END MARCH 31, 1999.
A INCLUDING ANY CLASS'S APPLICABLE SALES CHARGE AND/OR 12B-1 FEES
IN A PERFORMANCE CALCULATION PRODUCES A LOWER RETURN THAN WOULD RESULT
IF SUCH CHARGES AND FEES WERE NOT INCLUDED.
B LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (MARCH
25, 1994).
THE FUNDS IN DETAIL
CHARTER
EMERGING ASIA FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. The fund
is a non-diversified fund of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business
trust on September 22, 1983.
THE REORGANIZATION. At an Annual Meeting of Stockholders on
November 18, 1998, s tock holders of Fidelity Advisor Emerging
Asia Fund, Inc., a closed-end fund with the same investment objective
and substantially similar investment policies as the fund ,
approved a proposal to reorganize Fidelity Advisor Emerging Asia Fund,
Inc., as an open-end fund. The reorganization was accomplished
by transferring all of the assets and liabilities of Fidelity
Advisor Emerging Asia Fund, Inc. to the fund in exchange for Class A
shares of the fund on June 15, 1999 . F ormer stockholders
of Fidelity Advisor Emerging Asia Fund, Inc. receive d Class A
shares of the fund in exchange for their shares of Fidelity
Advisor Emerging Asia Fund, Inc.'s common stock. Class A shares
received by the former stockholders of Fidelity Advisor Emerging Asia
Fund, Inc. were not subject to any front-end sales charge, but are
subject to the 12b-1 fee payable on all Class A shares. The fund will
impose a temporary redemption fee of 4% on the Class A shares received
in connection with the reorganization that are redeemed within 180
days after the reorganization on June 15, 1999. See "Transaction
Details" on page 22.
THE 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
fund's activities, review contractual arrangements with companies that
provide services to the fund, and review the fund's performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUND 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 fund employs various Fidelity companies to perform
activities required for their operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its 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 the fund.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for the fund.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for the fund.
Currently, FIIA is primarily responsible for choosing investments for
the fund.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA (U.K.) L), in London, England, serves as a sub-adviser
for the fund.
(small solid bullet) Fidelity Investment Japan Ltd. (FIJ), in Tokyo,
Japan, serves as a sub-adviser for the fund.
As of April 3 0 , 199 9 , FMR advised funds having
approximately 43 million shareholder accounts with a total
value of more than $ 715 billion.
The fund could be adversely affected if the computer systems used
by FMR and other service providers do not properly process and
calculate date-related information from and after January 1, 2000. FMR
has advised the fund that it is actively working on necessary changes
to its computer systems and expects that its systems, and those of
other major service providers, will be modified prior to January 1,
2000. However, there can be no assurance that there will be no adverse
impact on the fund.
Peter Phillips is manager of the fund, which he has managed since
inception. Mr. Phillips is also manager of Fidelity Funds Southeast
Asia, which he has managed since November 1993. Mr. Phillips also
manages Hong Kong Institutional Segregated Accounts and serves as
director of Fidelity Investment Management (Hong Kong) Ltd.
Previously, he managed the Fidelity Funds Australia Fund, the Fidelity
Funds Hong Kong & China Fund, and Southeast Asian equities for
Fidelity Pacific Fund. Mr. Phillips joined Fidelity in 1987.
Yosawadee Polcharoen is associate portfolio manager of the
fund. Ms. Polcharoen is a Country Fund Manager for Fidelity
Investments Management (Hong Kong) Ltd. Ms. Polcharoen joined
Fidelity Investments Management (Hong Kong) Ltd. i n 1992. She
currently manages Thailand International Fund, FID Thailand Fund, and
FID Indonesia Fund , Jupiter Trust Fund, Illinois Municipal
Retirement Fund, and FLOR1, an institutional fund.
Fidelity investment personnel may invest in securities for their own
investment 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 the
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 SM , provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EMERGING ASIA FUND seeks long-term capital appreciation by investing
primarily in equity and debt securities of Asian Emerging Market
Issuers. FMR normally invests at least 65% of the fund's total assets
in these securities.
Asian Emerging Market Issuers include issuers that (i) are
organized under the laws of Asian Emerging Market Countries (defined
below), (ii) regardless of where organized, and as determined by FMR,
derive at least 50% of their revenues or profits from goods produced
or sold, investments made, or services performed, in Asian Emerging
Market Countries, or have at least 50% of their assets located in
Asian Emerging Market Countries, (iii) have the primary trading market
for their securities in an Asian Emerging Market Country or (iv) are
governments, or their agencies or other political sub-divisions, of
Asian Emerging Market Countries.
The Asian Emerging Market Countries in which the fund can invest
include Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, the
Philippines, the Peoples Republic of China, Singapore, Sri Lanka,
Taiwan, Thailand, Vietnam and any other emerging market country in the
Asia region (including Burma, Laos and Cambodia).
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 Emerging Asian markets as a whole.
Asian Emerging Market countries are in various stages of economic
development. Each has unique risks. Most Asian economies are
characterized by over-extension of credit, currency devaluations,
rising unemployment, decreased exports, and economic recessions.
Currency devaluations in any one country generally have a significant
affect on the entire region. Recently, the markets in each Asian
country have suffered significant down-turns as well as significant
volatility. Increased political and social unrest in some or all Asian
countries could cause further economic and market uncertainty.
The fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. Although the f und intends to invest
principally in equity securities, it may also invest in debt
securities issued or guaranteed by Asian Emerging Market Issuers.
Under normal market conditions, up to 35% of the fund's total
assets may be invested in such debt securities. These debt securities
may be unrated or rated below investment grade.
Up to 35% of the fund's total assets may be invested in (i) securities
of companies (other than companies meeting the definition of Asian
Emerging Market Issuers, as defined above), regardless of where
organized, including Japan, which FMR believes derives, or will
derive, a significant portion of their revenues or profits from
business in Asian countries generally, or (ii) debt securities of
governments, or their agencies or other political subdivisions (other
than entities meeting the definition of an Asian Emerging Market
Issuer) of Asian countries.
The value of the fund's investments varies in response to many
factors. Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions. Bond
values fluctuate based on changes in interest rates, market
conditions, other economic and political news, and on the bond's
quality and maturity. In general, bond prices rise when interest rates
fall, and fall when interest rates rise. This effect is usually more
pronounced for longer-term securities. Lower-quality securities offer
higher yields, but also carry more risk. 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.
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.
For example, many foreign countries are less prepared than the
United States to properly process and calculate information related to
dates from and after January 1, 2000, which could result in difficulty
pricing foreign investments and failure by foreign issuers to pay
timely dividends, interest or principal. All of these factors can make
foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments. Also,
because a substantial portion of the fund's investments are
denominated in foreign currencies, changes in the value of currencies
can significantly affect the 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 the fund, they may
be worth more or less than what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. The fund may invest in short-term debt securities and money
market instruments for cash management purposes. The fund also
reserves the right to invest without limitation in preferred stocks
and investment-grade debt instruments for temporary, defensive
purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of the fund's limitations and more
detailed information about the fund's investments are contained in the
fund's SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with the 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 the 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.
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 the
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. The fund currently intends to limit its
investments in lower than Baa-quality debt securities (sometimes
called "junk bonds") to up to 35% of its total 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.
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 FUND' S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
THE 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, the 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. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, purchasing indexed securities and selling securities
short.
FMR can use these practices to adjust the risk and return
characteristics of the fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with the 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
the 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 the 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 the fund.
RESTRICTIONS: The 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. The 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. A fund that is not diversified may be
more sensitive to changes in the market value of a single issuer or
industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter, the fund
does not invest more than 25% of its total assets in the securities of
any one issuer and, with respect to 50% of total assets, does not
invest more than 5% of its total assets in the securities of any one
issuer. These limitations do not apply to U.S. Government securities
or to securities of other investment companies.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
the 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: The 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 the fund's securities. The 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
the 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.
EMERGING ASIA FUND seeks long-term capital appreciation.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
The 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, the 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.
The 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. The fund also pays OTHER EXPENSES,
which are explained on this 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, dividing by twelve, and multiplying the result by the fund's
average net assets throughout the month.
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 April 199 9 , the group fee rate was .2824 %.
The individual fund fee rate is 0.45%.
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 the 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 the fund's
annual operating costs, the fund has other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
servicing functions for each class of the fund. Fidelity Service
Company, Inc. (FSC) calculates the net asset value per share (NAV) and
dividends for each class of the fund, maintains the general accounting
records for the fund, and administers the securities lending program
for the fund.
The 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 the fund to
reduce that fund's custodian or transfer agent fees.
Class A and Class T shares of the fund have adopted a DISTRIBUTION AND
SERVICE PLAN. Under the plan, Class A and Class T of the 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 the 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 the fund currently pay 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 fund; 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 the fund have adopted a DISTRIBUTION AND SERVICE
PLAN. Under the plans, Class B of the 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 the
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 the 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 the 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 the fund have adopted a DISTRIBUTION AND SERVICE
PLAN. Under the plan, Class C of the 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 the
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 the 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 the Class C plan, Class C of the 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 has authorized such
payments.
The fund's portfolio turnover rate 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 fund, such as minimum
initial or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed below.
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 the 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 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-employed 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-employed 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 each class 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. Class A shares received in connection with the
reorganization of Fidelity Advisor Emerging Asia Fund, Inc., will not
be subject to a front-end sales charge. 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 30 , and "Sales Charge
Reductions and Waivers," page 33 , 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 30 , 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 the fund may harm fund
performance by disrupting portfolio management strategies and by
increasing fund expenses. Accordingly, the 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 the 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 Fidelity 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,
or
(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* $500
Through regular investment plans** $100
TO ADD TO AN ACCOUNT $100
MINIMUM BALANCE $1,000
For certain Fidelity Advisor retirement accounts * None
* THESE LOWER MINIMUMS APPLY TO FIDELITY ADVISOR 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 26.
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, the 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 (AS DEFINED IN THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT), 403(B) PROGRAM OR PLAN COVERING A
SOLE-PROPRIETOR (FORMERLY KEOGH/H.R. 10 PLAN) .
For further information on opening an account, please consult your
investment professional or refer to the account application.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (small solid bullet) Contact (small solid bullet) Contact
YOUR INVESTMENT your investment professional your investment professional
PROFESSIONAL or, if you are investing or, if you are investing
through a broker-dealer or through a broker-dealer or
insurance representative, insurance representative,
call 1-800-522-7297. If you call 1-800-522-7297. If you
are investing through a bank are investing through a bank
representative, call representative, call
1-800-843-3001. 1-800-843-3001.
(small solid bullet) Exchange (small solid bullet) Exchange
from the same class of from the same class of
another Fidelity Advisor another Fidelity Advisor
fund or from another fund or from another
Fidelity fund account with Fidelity fund account with
the same registration, the same registration,
including name, address, and including name, address, and
taxpayer ID number. taxpayer ID number.
Mail (mail_graphic) (small solid bullet) Complete (small solid bullet) Make
and sign the account your check payable to the
application. Make your check complete name of the fund of
payable to the complete name your choice and note the
of the fund of your choice applicable class. Indicate
and note the applicable your fund account number on
class. Mail to the address your check and mail to the
indicated on the application. address 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 (small solid bullet) Bring
your account application and your check to your
check to your investment investment professional.
professional.
Wire (wire_graphic) (small solid bullet) Not (small solid bullet) Wire
available 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 (small solid bullet) Use
available Fidelity Advisor Systematic
Investment Program. Sign up
for this service when
opening your account, or
call your investment
professional to begin the
program.
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of each Class is the class's NAV, minus
any applicable CDSC. Please note that if you sell Class A shares
received in connection with the reorganization of Fidelity Advisor
Emerging Asia Fund, Inc., within 180 days after the effective date of
the reorganization (June 15, 1999) , the fund will deduct a
redemption fee equal to 4% of the value of the shares being redeemed.
Your shares will be sold at the next NAV calculated after your order
is received in proper form, minus the redemption fee, if applicable,
or 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, signed certificates (if previously issued), and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your investment professional, or mail it to the
following address:
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
YOUR INVESTMENT retirement check request: $100,000.
PROFESSIONAL All account types (small solid bullet) You may
PHONE exchange to the same class
YOUR INVESTMENT of other Fidelity Advisor
PROFESSIONAL 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
Sole Proprietorship, UGMA, letter of instruction (with
UTMA signature guarantee) must be
Retirement account signed by all persons
required to sign for
transactions, exactly as
their names appear on the
account and sent to your
investment professional.
(small solid bullet) The
account owner should
complete a retirement
distribution form. Contact
your investment professional
or, if you purchased your
shares through a
broker-dealer or insurance
representative, call
1-800-522-7297. If you
purchased your shares
through a bank
representative, call
1-800-843-3001.
Trust (small solid bullet) The
trustee must sign the letter
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
Business or Organization (small solid bullet) At least
one person authorized by
corporate resolution to act
on the account must sign the
letter.
Executor, Administrator (small solid bullet) For
Conservator/Guardian instructions, 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.
Wire (wire_graphic) All account types except (small solid bullet) You must
retirement sign up for the wire feature
before using it. To verify
that it is in place, contact
your investment professional
or, if you purchased your
shares through a
broker-dealer or insurance
representative, call
1-800-522-7297. If you
purchased your shares
through a bank
representative, call
1-800-843-3001. Minimum
wire: $500
(small solid bullet) Your
wire redemption request must
be received 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>
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 the 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,
revoked, or subject to a redemption fee, see "Exchange Restrictions,"
on page 34 .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up
periodic redemptions from your Class A, Class T, Class B or Class C
account. Accounts with a value of $10,000 or more in Class A, Class T,
Class B or 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 and 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.
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REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL
Monthly, bimonthly, (small solid bullet) For a
$100 $100 quarterly, or semi-annually new account, complete the
appropriate section on the
application.
(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).
TO DIRECT DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST TO CLASS T OF A
FIDELITY ADVISOR FUND
MINIMUM MINIMUM SETTING UP OR CHANGING
INITIAL ADDITIONAL
Not Not (small solid bullet) For a
Applicable Applicable 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.
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM CERTAIN FIDELITY MONEY MARKET FUNDS OR A
FIDELITY ADVISOR FUND TO ANOTHER FIDELITY ADVISOR FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To
semi-annually, or annually establish, call your
investment professional
after both accounts are
opened.
(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.
</TABLE>
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The 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.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you
want to receive your distributions. The fund offers 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 OPTION . Your dividend s 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.
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge. If you direct Class A
or Class T distributions to a fund with a front-end sales charge, you
will not pay a sales charge on those purchases.
When a 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 or longer for a
December ex-dividend date.
TAXES
As with any investment, you should consider how your investment in the
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, the 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 the 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 the 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, the fund may adjust its dividends to take
currency fluctuations into account, which may cause the dividends to
vary. Any return of capital will reduce the cost basis of your shares,
which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. The statement you
receive in January will specify if any distributions included a return
of capital.
EFFECT OF FOREIGN TAXES. 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,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each class's NAV and offering
price, 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
fund's investments, cash, and other assets, subtracting that class's
pro rata share of the value of the 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.
The 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.
THE OFFERING PRICE of Class A or Class T is its NAV divided by the
difference between one and the applicable front-end sales charge
percentage. Class A has a maximum front-end sales charge of 5.75% of
the offering price for Class T has a maximum front-end sales charge of
3.50% of the offering price.
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A
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Sales Charge
As a % of Offering Price As an approximate % of Net Investment Professional
Amount Invested Concession as a % of
Offering Price
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* *
</TABLE>
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS T
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Sales Charge
As a % of Offering Price As an approximate % of Net Investment Professional
Amount Invested Concession as a % 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* *
</TABLE>
* 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.
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.
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 gain) 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 CDSC
shares that have been held for the longest period of time.
The Class A or Class T CDSC will not apply to the redemption of
shares:
1. Held by insurance company separate accounts;
2. For plan loans or distributions or exchanges to non-Advisor fund
investment options from employee benefit plans (except shares of
SIMPLE IRA, SEP, and SARSEP plans and plans covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)
purchased on or after February 11, 1999) and 403(b) programs; or
3. For disability, payment of death benefits, or minimum required
distributions starting at age 701/2 from Traditional IRAs, Roth IRAs,
SIMPLE IRAs, SEPs, SARSEPs and plans covering a sole-proprietor or
self-employed individuals and their employees (formerly Keogh/H.R. 10
plans).
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 ,
403(b) program or plan covering a sole-proprietor (formerly Keogh/H.R.
10 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 gain)
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 gain, 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 the 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
the 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 the 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.
THE 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) The 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 the fund or
Fidelity has incurred.
AUTOMATED PURCHASE ORDERS. Class A, Class T, Class B or 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 the redemption fee, if applicable, or 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 the fund, it may take up to seven days to pay you.
(small solid bullet) The 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.
A TEMPORARY REDEMPTION FEE of 4% will be deducted from the
redemption amount if you sell any Class A shares received in
connection with the reorganization of Fidelity Advisor Emerging Asia
Fund, Inc., within 180 days after June 15, 1999, the effective
date of the reorganization. This fee is paid to the fund, rather than
Fidelity, and is designed to offset the brokerage commissions, market
impact and other costs associated with fluctuations in fund asset
levels and cash flow caused by the potentially high level of
redemptions that may occur after the reorganization.
The redemption fee, if applicable, will be charged on exchanges
out of the fund. The redemption fee, if applicable, will also apply to
shares redeemed from the fund either pursuant to the Fidelity Advisor
Systematic Exchange program or the Fidelity Advisor Systematic
Withdrawal Program. The redemption fee will apply only to Class A
shares received in connection with the reorganization .
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 the redemption fee, if applicable, or any applicable
CDSC, on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents .
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 the fund for the same class of shares
of other Fidelity Advisor funds (at NAV for Class A and Class
T) ; 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 address and taxpayer identification number.
(small solid bullet) Before exchanging into a or class, read its
prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, the 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) The 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.
(small solid bullet) If you exchange Class A shares received in
connection with the reorganization of Fidelity Advisor Emerging Asia
fund, Inc., within 180 days after the effective date of the
reorganization, you will pay a redemption fee equal to 4% of the value
of the shares redeemed.
Although the fund will attempt to give you prior notice whenever
reasonably able to do so, it may impose these restrictions at any
time. The fund reserves the right to terminate or modify the exchange
privilege in the future.
Other funds may have different exchange restrictions, and may
impose trading fees of up to 1.00% of the amount exchanged. Check the
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/Class T shares according to the Sales Charge
schedule shown on page 39 . Please refer to the fund's 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 the 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.) Purchase 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 (except a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b) program
with at least $25 million or more in plan assets;
2. Purchased for an employee benefit plan (except a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b) program
investing through an insurance company separate account used to
fund annuity contracts;
3. Purchased for an employee benefit plan (except a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b) program
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 (except a SIMPLE IRA, SEP, or
SARSEP plans and plans covering self-employed individuals and their
employees (formerly Keogh/H.R. 10 plans)) and 403(b) programs that
participate in the Advisor Retirement Connection do not qualify for
this waiver;
4. Purchased for an employee benefit plan (except a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b) program
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 (except SIMPLE IRA, SEP, and SARSEP plans and plans covering
self-employed individuals and their employees (formerly Keogh/H.R. 10
plans)), 403(b) programs 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 (except a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b) program
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 (except a SIMPLE IRA, SEP,
or SARSEP plan or a plan covering self-employed individuals and their
employees (formerly Keogh/H.R. plans )) or 403(b) program do not
qualify for this waiver;
8. Purchased with the proceeds from the sale of front-end load
shares of a Non-Advisor mutual fund for an account participating in
the FundSelect by Nationwide program;
9. 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
10. Shares received in connection with the reorganization of Fidelity
Advisor Emerging Asia Fund, Inc.
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 (except SIMPLE IRA,
SEP, and SARSEP plans and plans covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b)
programs ;
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 a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or 403(b) program
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 ,
403(b) programs or plans covering sole-proprietors (formerly
Keogh/H.R. 10 plans) that are invested in Fidelity Advisor or
Fidelity funds, or (ii) an employee benefit plan , 403(b) program or
plan covering a sole-proprietor (formerly Keogh/H.R. 10 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 Fidelity International Limited 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);
or
13. Purchased with distributions of income, principal, and capital
gains from Fidelity Defined Trusts .
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 fund's SAI.
If you are investing through an insurance company separate account, if
your 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 (1), (2), (3) and (4), above), Class T shares without a
sales charge (as described in (1), (2), (3) and (4) above), 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. For 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 (other than shares purchased for Traditional IRAs, Roth IRAs,
and Rollover IRAs) ;
3. For disability, payment of death benefits, or minimum required
distributions starting at age 701/2 from Traditional IRAs, Roth IRAs,
and Rollover IRAs; or
4. In connection with redemptions through the Fidelity Advisor
Systematic Withdrawal Program.
5 . (APPLICABLE TO CLASS C ONLY) In connection with any
redemptions from an employee benefit plan , 403(b) program or plan
covering a sole proprietor (formerly Keogh/H.R. 10 plan) . Employee
benefit plan investors must meet additional requirements specified in
the fund's 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 fund or FDC. This prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell shares of the
fund to or to buy shares of the fund from 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.
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a
copy of the Statement of Additional Information (SAI) dated June
15 , 1999. 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.
AEAI-pro-0699
1.713487.100
FIDELITY ADVISOR
EMERGING ASIA FUND
INSTITUTIONAL CLASS
Fund 759 (Institutional Class)
A FUND OF FIDELITY ADVISOR SERIES VIII
FIDELITY ADVISOR EMERGING ASIA FUND seeks long-term capital
appreciation by investing primarily in equity and debt securities
of Asian Emerging Market Issuers.
PROSPECTUS
JUNE 15 , 1999
(FIDELITY_LOGO_GRAPHIC)(registered trademark)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 2 WHO MAY WANT TO INVEST
3 EXPENSES Institutional
Class's yearly operating
expenses.
4 PERFORMANCE
THE FUND IN DETAIL 4 CHARTER How the fund is
organized.
5 INVESTMENT PRINCIPLES AND
RISKS The fund's overall
approach to investing.
7 BREAKDOWN OF EXPENSES How
operating costs are
calculated and what they
include.
YOUR ACCOUNT 8 TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-advantaged
retirement plans.
8 HOW TO BUY SHARES Opening an
account and making
additional investments.
11 HOW TO SELL SHARES Taking
money out and closing your
account.
12 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND ACCOUNT 14 DIVIDENDS, CAPITAL GAINS, AND
POLICIES TAXES
15 TRANSACTION DETAILS Share
price calculations and the
timing of purchases and
redemptions.
16 EXCHANGE RESTRICTIONS
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 (as defined in the Employee Retirement Income
Security Act), 403(b) programs and plans covering sole-proprietors
(formerly Keogh/H.R. 10 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, accounts other than an employee benefit plan, 403(b) program
or plan covering sole-proprietors (formerly a Keogh/H.R. 10 plan) 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 programs for employee benefit plan s,
403(b) programs or plans covering sole-proprietors (formerly
Keogh/H.R. 10 plans) that (i) charge an asset-based fee and (ii)
will have at least $1 million invested in the Institutional Class of
the Advisor funds. I nsurance company programs for employee
benefit plan s, 403(b) programs and plans covering
sole-proprietors (formerly Keogh/H.R. 10 plans) 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 fund's SAI.
The fund 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.
This non-diversified fund is designed for investors seeking to target
opportunities in emerging Asian markets. Non-diversified funds may
invest a greater portion of their assets in securities of individual
issuers than diversified funds. As a result, changes in the market
value of a single issuer could cause greater fluctuations in share
value than would occur in a more diversified fund.
The value of the 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.
The 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.
The fund is composed of multiple classes of shares. All classes of
the 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 the fund. See "Transaction
Details," page 17 , for an explanation of how and when these
charges apply.
Sales charge on purchases and NONE
reinvested distributions
Deferred sales charge on NONE
redemptions
ANNUAL OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to Fidelity Management & Research Company (FMR).
The fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and
financial reports.
The fund's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page 9 ).
The following figures are based on estimated expenses of Institutional
Class of the fund and are calculated as a percentage of average net
assets of Institutional Class of the fund.
EMERGING ASIA
Management fee 0.73%[A]
12b-1 fee (Distribution Fee) None
Other expenses 1.02%[A]
Total operating expenses 1.75%
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 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.
EMERGING ASIA
1 Year 3 Years
Institutional Class $ 18 $ 55
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED EXPENSES OR RETURNS, ALL OF WHICH MAY VARY.
Effective June 15, 1999 FMR has voluntarily agreed to reimburse
Institutional Class of the fund to the extent that total operating
expenses (excluding interest, taxes, brokerage commissions ,
securities lending fees, and extraordinary expenses), as a
percentage of its average net assets, exceed 1.75%.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN.
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 fund's recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
PRIOR PERFORMANCE
Prior to June 15, 1999, the fund operated as Fidelity
Advisor Emerging Asia Fund, Inc., a closed-end fund with the
same investment objective and substantially similar investment
policies as the fund. Fidelity Advisor Emerging Asia Fund, Inc. was
reorganized as an open-end fund on June 15, 1999, through the transfer
of all of its assets and liabilities to the fund. See "The
Reorganization" on page 6 for a more detailed description of the
reorganization.
Presented b elow is the prior performance of Fidelity
Advisor Emerging Asia Fund, Inc. , not the performance of the fund
offered through this prospectus. Although the fund has the same
investment objective and substantially similar investment
policies and strategies, you should not assume that the fund will have
similar performance. For example, the fund's future
performance may be greater or less due to, among other things,
differences in managing a closed-end fund compared to an open-end
fund, and differences in sales charges, expenses, asset sizes and cash
flows between the fund and Fidelity Advisor Emerging Asia Fund,
Inc .
AVERAGE ANNUAL TOTAL RETURN
Fiscal periods ended March Past 1 year Past 5 years Life of fundA
31, 1999*
Fidelity Advisor Emerging -3.61% -2.33% -2.85%
Asia Fund, Inc.
CUMULATIVE TOTAL RETURN
Fiscal periods ended March Past 1 year Past 5 years Life of fundA
31, 1999*
Fidelity Advisor Emerging -3.61% -11.11% -13.51%
Asia Fund, Inc.
* ALL FIGURES ARE FOR PERIODS ENDING AT THE MOST RECENT CALENDAR
QUARTER END MARCH 31, 1999.
A LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (MARCH
25, 1994).
THE FUNDS IN DETAIL
CHARTER
EMERGING ASIA FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. The fund
is a non-diversified fund of Fidelity Advisor Series VIII, an open-end
management investment company organized as a Massachusetts business
trust on September 22, 1983.
THE REORGANIZATION. At an Annual Meeting of Stockholders on
November 18, 1998, s tock holders of Fidelity Advisor Emerging
Asia Fund, Inc., a closed-end fund with the same investment objective
and substantially similar investment policies as the fund ,
approved a proposal to reorganize Fidelity Advisor Emerging Asia Fund,
Inc., as an open-end fund. The reorganization was accomplished
by transferring all of the assets and liabilities of Fidelity
Advisor Emerging Asia Fund , Inc. to the fund in exchange for
Class A shares of the fund on June 15, 1999. T he former
stockholders of Fidelity Advisor Emerging Asia Fund, Inc.
receive d Class A shares of the fund in exchange for
their shares of Fidelity Advisor Emerging Asia Fund, Inc.'s common
stock. Class A shares received by the former stockholders of
Fidelity Advisor Emerging Asia Fund, Inc. were not subject to any
front-end sales charge, but are subject to the 12b-1 fee payable on
all Class A shares. The fund will impose a temporary redemption fee of
4% on the Class A shares received in connection with the
reorganization that are redeemed within 180 days after the
reorganization on June 15, 1999. See "Transaction Details" on page
17.
THE 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
fund's activities, review contractual arrangements with companies that
provide services to the fund, and review the fund's performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUND 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 fund employs various Fidelity companies to perform
activities required for their operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its 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 the fund.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as a sub-adviser for the fund.
(small solid bullet) Fidelity International Investment Advisors
(FIIA), in Pembroke, Bermuda, serves as a sub-adviser for the fund.
Currently, FIIA is primarily responsible for choosing investments for
the fund.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIA (U.K.) L), in London, England, serves as a sub-adviser
for the fund.
(small solid bullet) Fidelity Investment Japan Ltd. (FIJ), in Tokyo,
Japan, serves as a sub-adviser for the fund.
As of April 30 , 199 9 , FMR advised funds having
approximately 43 million shareholder accounts with a total
value of more than $ 715 billion.
The fund could be adversely affected if the computer systems used
by FMR and other service providers do not properly process and
calculate date-related information from and after January 1, 2000. FMR
has advised the fund that it is actively working on necessary changes
to its computer systems and expects that its systems, and those of
other major service providers, will be modified prior to January 1,
2000. However, there can be no assurance that there will be no adverse
impact on the fund.
Peter Phillips is manager of the fund, which he has managed since
inception. Mr. Phillips is also manager of Fidelity Funds Southeast
Asia, which he has managed since November 1993. Mr. Phillips also
manages Hong Kong Institutional Segregated Accounts and serves as
director of Fidelity Investment Management (Hong Kong) Ltd.
Previously, he managed the Fidelity Funds Australia Fund, the Fidelity
Funds Hong Kong & China Fund, and Southeast Asian equities for
Fidelity Pacific Fund. Mr. Phillips joined Fidelity in 1987.
Yosawadee Polcharoen is associate portfolio manager of the
fund. Ms. Polcharoen is a Country Fund Manager for Fidelity
Investments Management (Hong Kong) Ltd. Ms. Polcharoen j oined
Fidelity Investments Management (Hong Kong) Ltd. in 1992. She
currently manages Thailand International Fund, FID Thailand Fund and
FID Indonesia Fund, Jupiter Trust Fund, Illinois Municipal Retirement
Fund and FLOR1, an institutional fund.
Fidelity investment personnel may invest in securities for their own
investment 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 the
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 SM , provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EMERGING ASIA FUND seeks long-term capital appreciation by investing
primarily in equity and debt securities of Asian Emerging Market
Issuers. FMR normally invests at least 65% of the fund's total assets
in these securities.
Asian Emerging Market Issuers include issuers that (i) are
organized under the laws of Asian Emerging Market Countries (defined
below), (ii) regardless of where organized, and as determined by FMR,
derive at least 50% of their revenues or profits from goods produced
or sold, investments made, or services performed, in Asian Emerging
Market Countries, or have at least 50% of their assets located in
Asian Emerging Market Countries, (iii) have the primary trading market
for their securities in an Asian Emerging Market Country or (iv) are
governments, or their agencies or other political sub-divisions, of
Asian Emerging Market Countries.
The Asian Emerging Market Countries in which the fund can invest
include Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, the
Philippines, the Peoples Republic of China, Singapore, Sri Lanka,
Taiwan, Thailand, Vietnam and any other emerging market country in the
Asia region (including Burma, Laos and Cambodia).
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 Emerging Asian markets as a whole.
Asian Emerging Market countries are in various stages of economic
development. Each has unique risks. Most Asian economies are
characterized by over-extension of credit, currency devaluations,
rising unemployment, decreased exports, and economic recessions.
Currency devaluations in any one country generally have a significant
affect on the entire region. Recently, the markets in each Asian
country have suffered significant down-turns as well as significant
volatility. Increased political and social unrest in some or all Asian
countries could cause further economic and market uncertainty.
The fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. Although the f und intends to invest
principally in equity securities, it may also invest in debt
securities issued or guaranteed by Asian Emerging Market Issuers.
Under normal market conditions, up to 35% of the fund's total
assets may be invested in such debt securities. These debt securities
may be unrated or rated below investment grade.
Up to 35% of the fund's total assets may be invested in (i) securities
of companies (other than companies meeting the definition of Asian
Emerging Market Issuers, as defined above), regardless of where
organized, including Japan, which FMR believes derives, or will
derive, a significant portion of their revenues or profits from
business in Asian countries generally, or (ii) debt securities of
governments, or their agencies or other political subdivisions (other
than entities meeting the definition of an Asian Emerging Market
Issuer) of Asian countries.
The value of the fund's investments varies in response to many
factors. Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions. Bond
values fluctuate based on changes in interest rates, market
conditions, other economic and political news, and on the bond's
quality and maturity. In general, bond prices rise when interest rates
fall, and fall when interest rates rise. This effect is usually more
pronounced for longer-term securities. Lower-quality securities offer
higher yields, but also carry more risk. 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.
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.
For example, many foreign countries are less prepared than the
United States to properly process and calculate information related to
dates from and after January 1, 2000, which could result in difficulty
pricing foreign investments and failure by foreign issuers to pay
timely dividends, interest or principal. All of these factors can make
foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S. investments. Also,
because a substantial portion of the fund's investments are
denominated in foreign currencies, changes in the value of currencies
can significantly affect the 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 the fund, they may
be worth more or less than what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. The fund may invest in short-term debt securities and money
market instruments for cash management purposes. The fund also
reserves the right to invest without limitation in preferred stocks
and investment-grade debt instruments for temporary, defensive
purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of the fund's limitations and more
detailed information about the fund's investments are contained in the
fund's SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with the 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 the 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.
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 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 FUND'S SAI FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
THE FUND DOES NOT NECESSARILY RELY ON THE RATINGS OF MOODY'S OR S&P TO
DETERMINE COMPLIANCE WITH ITS DEBT QUALITY POLICY.
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 the
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. The fund currently intends to limit its
investments in lower than Baa-quality debt securities (sometimes
called "junk bonds") to up to 35% of its total 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.
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, the 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. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, purchasing indexed securities and selling securities
short.
FMR can use these practices to adjust the risk and return
characteristics of the fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with the 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
the 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 the 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 the fund.
RESTRICTIONS: The 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. The 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. A fund that is not diversified may be
more sensitive to changes in the market value of a single issuer or
industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter, the fund
does not invest more than 25% of its total assets in the securities of
any one issuer and, with respect to 50% of total assets, does not
invest more than 5% of its total assets in the securities of any one
issuer. These limitations do not apply to U.S. Government securities
or to securities of other investment companies.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
the 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: The 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 the fund's securities. The 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 the
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.
EMERGING ASIA FUND seeks long-term capital appreciation.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
The 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, the 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.
The 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. The fund also pays OTHER EXPENSES,
which are explained on page 15 .
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, dividing by twelve, and multiplying the result by the fund's
average net assets throughout the month.
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 April 199 9 , the group fee rate was .2824 % for
the fund. The individual fund fee rate is 0.45%.
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 the 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 the 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 the fund. Fidelity
Service Company, Inc. (FSC) calculates the net asset value per share
(NAV) and dividends for the Institutional Class of the fund, maintains
the general accounting records for the fund, and administers the
securities lending program for the fund.
The 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 the fund has adopted a DISTRIBUTION AND
SERVICE PLAN. The 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 the fund has authorized such payments.
The fund ' s 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 fund, such as minimum
initial or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed below.
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 the 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.
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 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-employed 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-employed 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 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 the fund may harm fund
performance by disrupting portfolio management strategies and by
increasing fund expenses. Accordingly, the 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 the 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 Fidelity 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 1-800-7843-3001
or your investment professional.
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** $500
Through regular investment plans* $100
TO ADD TO AN ACCOUNT $100
MINIMUM BALANCE $1,000
For certain Fidelity Advisor retirement accounts** None
* 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 21 .
** THESE LOWER MINIMUMS APPLY TO FIDELITY ADVISOR TRADITIONAL IRA,
ROTH IRA, ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH
ACCOUNTS.
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, the 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 (small solid bullet) Exchange
1-800-843-3001 OR from the same class of from the same class of
YOUR INVESTMENT another Fidelity Advisor another Fidelity Advisor
PROFESSIONAL fund or from another fund or from another
Fidelity fund account with Fidelity fund account with
the same registration, the same registration,
including name, address, and including name, address, and
taxpayer ID number. taxpayer ID number.
Mail (mail_graphic) (small solid bullet) Complete (small solid bullet) Make
and sign the account your check payable to the
application. Make your check complete name of the fund of
payable to the complete name your choice and note the
of the fund of your choice applicable class. Indicate
and note the applicable your fund account number on
class. Mail to the address your check and mail to the
indicated on the application. address printed on your
account statement.
(small solid bullet) Exchange
by mail: call 1-800-843-3001
or your investment
professional for instructions.
In Person (hand_graphic) (small solid bullet) Bring (small solid bullet) Bring
your account application and your check to your
check to your investment investment professional.
professional.
Wire (wire_graphic) (small solid bullet) Call (small solid bullet) Not
1-800-843-3001 to set up available for retirement
your account and to arrange accounts.
a wire transaction. Not (small solid bullet) Wire
available for retirement to: Banker's Trust Co.
accounts. Routing # 021001033
(small solid bullet) Wire to: Fidelity DART Depository
Banker's Trust Co. Routing Account # 00159759 FBO:
# 021001033 Fidelity DART (Account name) (Account
Depository Account number) Specify the
#00159759 FBO: (account complete name of the fund of
name) (account number) your choice, note the
Specify the complete name of applicable class, and
the fund of your choice, include your account number
note the applicable class and your name.
and include your new account
number and your name.
Automatically (automatic_graphic) (small solid bullet) Not (small solid bullet) Use
available 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
following table.
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
1-800-843-3001 OR retirement check request: $100,000.
YOUR INVESTMENT All account types (small solid bullet) You may
PROFESSIONAL exchange to the same class
of other Fidelity Advisor
funds or to other Fidelity
funds if both accounts are
registered with the same
name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant, (small solid bullet) The
Sole Proprietorship, UGMA, letter of instruction must
UTMA be signed by all persons
Retirement account required to sign for
transactions, exactly as
their names appear on the
account.
(small solid bullet) The
account owner should
complete a retirement
distribution form. Call
1-800-843-3001 or your
investment professional to
request one.
Trust (small solid bullet) The
trustee must sign the letter
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
Business or Organization (small solid bullet) At least
one person authorized by
corporate resolution to act
on the account must sign the
letter.
Executor, Administrator (small solid bullet) Call
Conservator/Guardian 1-800-843-3001 or your
investment professional for
instructions.
Wire (wire_graphic) All account types except (small solid bullet) You must
retirement sign up for the wire feature
before using it. To verify
that it is in place, 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.
</TABLE>
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
that affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed, even if you have more than one account in
the fund. Call your investment professional if you need additional
copies of financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and
buy Institutional Class shares of other Fidelity Advisor funds or
shares of other Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see "Exchange Restrictions," page 25 .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up
periodic redemptions from your account. Accounts with a value of
$10,000 or more Institutional Class shares are eligible for this
program.
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.
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REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL
Monthly, bimonthly, (small solid bullet) For a
$100 $100 quarterly, or semi-annually new account, complete the
appropriate section on the
application.
(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, call
1-800-843-3001. Call at
least 10 business days prior
to your next scheduled
investment date.
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MO NEY FROM CERTAIN FIDELITY M ONEY MARKET FUNDS OR A
FIDELITY ADVISOR FUND TO ANOTHER FIDELITY ADVISOR FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To
semi-annually, or annually establish, call your
investment professional
after both accounts are
opened.
(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.
</TABLE>
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The 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.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you
want to receive your distributions. The fund offers 4 options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the same
class of the fund. If you do not indicate a choice on your
application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS OPTION. Your dividends will be automatically
invested in Institutional Class 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 options 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 a fund 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, or longer for a
December ex-dividend date.
TAXES
As with any investment, you should consider how your investment in the
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, the 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 the 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 the 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, the fund may adjust its dividends to take
currency fluctuations into account, which may cause the dividends to
vary. Any return of capital will reduce the cost basis of your shares,
which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. The statement you
receive in January will specify if any distributions included a return
of capital.
EFFECT OF FOREIGN TAXES. 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,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS 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.
The 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 the 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.
THE 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) The 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 the 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 the fund, it may take up to seven days to pay you.
(small solid bullet) The 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.
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.
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 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) Because excessive trading can hurt fund
performance and shareholders, the 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) The 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) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any
time. The fund reserves the right to terminate or modify the exchange
privilege in the future.
Other funds may have different exchange restrictions, and may impose
trading fees of up to 3.00% of the amount exchanged. Check the fund's
prospectus for details.
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 fund or FDC. This prospectus and
the related S AI do not constitute an offer by the fund or by FDC to
sell shares of th e fund to or to buy shares of the fund from 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 and Fidelity Advisor Funds are
servicemarks of FMR Corp.
FIDELITY ADVISOR EMERGING ASIA FUND
A FUND OF FIDELITY ADVISOR SERIES VIII
CLASS A, CLASS T, CLASS B, CLASS C, AND INSTITUTIONAL CLASS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 15 , 1999
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current
prospectuses (dated June 15 , 1999) 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 1-888-622-3175 .
TABLE OF CONTENTS PAGE
Investment Policies and 19
Limitations
Special Considerations 24
Regarding Asia
Portfolio Transactions 30
Valuation 31
Performance 32
Additional Purchase, Exchange 38
and Redemption Information
Distributions and Taxes 41
FMR 41
Trustees and Officers 42
Management Contract 44
Distribution and Service Plans 46
Contracts with FMR Affiliates 47
Description of the Trust 48
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.
(fidelity_logo_graphic)(REGISTERED TRADEMARK)
82 Devonshire Street, Boston, MA 02109
AEA -ptb- 0699
1.713488.100
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.
The fund's fundamental investment policies and limitations
cannot be changed without approval by a "majority of the outstanding
voting securities" (as defined in the Investment Company Act of 1940
(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.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) 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;
(2) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in companies whose principal business
activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or representing interests in real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by or indexed to, or representing interests in, physical commodities
or investing or trading in domestic derivative investments); or
(7) make any loan if, as a result, more than 33 1/3% of its total
assets would be lent to other parties, but this limitation does not
apply to purchases of debt securities or to repurchase agreements.
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by Fidelity
Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(ii) The fund does not currently intend to sell securities short,
unless its owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(iii) The fund does not currently intend to purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (2)).
(v) The fund does not currently intend to purchase any security if, as
a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money up to
1 5% of the fund's net assets to a registered investment company
or portfolio for which FMR or an affiliate serves as investment
adviser or (b) acquiring loans, loan participations, or other forms of
direct debt instruments and, in connection therewith, assuming any
associated unfunded commitments of the sellers. (This limitation does
not apply to purchases of debt securities or to repurchase
agreements.)
(vii) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
managed by Fidelity Management & Research Company or an affiliate or
successor with substantially the same fundamental investment
objective, policies, and limitations as the fund.
For purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
With respect to limitation (v), if through a change in values, net
assets, or other circumstances, the fund were in a position where more
than 15% of its net assets were invested in illiquid
securities, it would 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 35.
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the 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 the 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.
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.
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. For example, many
foreign countries are less prepared than the United States to properly
process and calculate information related to dates from and after
January 1, 2000. As a result, some foreign markets, brokers, banks or
securities depositories could experience at least temporary
disruptions, which could result in difficulty buying and selling
securities in certain foreign markets and pricing foreign investments,
and foreign issuers could fail to pay timely dividends, interest or
principal. 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.
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.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does 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: Combined Positions, Correlation of Price Changes, Futures
Contracts, Futures Margin Payments, Limitations on Futures and Options
Transactions, Liquidity of Options and Futures Contracts, Options and
Futures Relating to Foreign Currencies, OTC Options, Purchasing Put
and Call Options, and Writing Put and Call Options.
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. 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. The fund intends to
file a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets, before engaging in any purchases or
sales of futures contracts or options on futures contracts. The fund
intends to comply with Rule 4.5 under the Commodity Exchange Act,
which limits the extent to which the fund can commit assets to initial
margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of
the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options
if, as a result, the fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets 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 fund's investments in futures contracts
and options, and the fund's policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible 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.
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 SECURITIES cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they
are valued. Difficulty in selling securities may result in a loss
or may be costly to the fund. 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
securities . 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, and (4) the nature of the security and the
market in which it trades (including any demand , put or
tender features , the mechanics and other requirements for transfer,
any letters of credit or other credit enhancement features, any
ratings, the number of holders, the method of soliciting offers, the
time required to dispose of the security, and the ability to assign or
offset the rights and obligations of the security ) .
INDEXED SECURITIES are instruments whose prices are indexed to the
prices of other securities, securities indices, currencies, 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.
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.
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.
The fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry (see the 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.
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. 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.
Because 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.
REPURCHASE AGREEMENTS involve an agreement to purchase a
security and 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. The value of the security purchased
may be more or less than the price at which the counter
party has agreed to purchase the security. In addition, delays or
losses could result if the other party to the agreement defaults or
becomes insolvent. The fund will engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed and
found satisfactory by FMR.
RESTRICTED SECURITIES are subject to legal restrictions on their
sale. Difficulty in selling securities may result in a loss or be
costly to a fund. Restricted securities generally can be sold in
privately negotiated transactions, pursuant to an exemption from
registration under the Securities Act of 1933, or in a registered
public offering. Where registration is required, the holder of a
registered security may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted
to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop,
the holder 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. The fund 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 OF OTHER INVESTMENT COMPANIES, including shares of
closed-end investment companies, unit investment trusts, and open-end
investment companies, represent interests in professionally managed
portfolios that may invest in any type of instrument. Investing in
other investment companies involves substantially the same risks as
investing directly in the underlying instruments, but may involve
additional expenses at the investment company-level, such as portfolio
management fees and operating expenses. Certain types of investment
companies, such as closed-end investment companies, issue a fixed
number of shares that trade on a stock exchange or over-the-counter at
a premium or a discount to their net asset value. Others are
continuously offered at net asset value, but may also be traded in the
secondary market.
The extent to which a fund can invest in securities of other
investment companies is limited by federal securities laws.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or other 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. The
borrower provides the fund with collateral in an amount at least equal
to the value of the securities loaned. The fund maintains the ability
to obtain the right to vote or consent on proxy proposals involving
material events affecting securities loaned. If the borrower defaults
on its obligation to return the securities loaned because of
insolvency or other reasons, a fund could experience delays and costs
in recovering the securities loaned or in gaining access to the
collateral. These delays and costs could be greater for foreign
securities. If a fund is not able to recover the securities loaned, a
fund may sell the collateral and purchase a replacement investment in
the market. The value of the collateral could decrease below the value
of the replacement investment by the time the replacement investment
is purchased. Loans will be made only to parties deemed by FMR to
be of good standing and when, in FMR's judgment, the
income earned would justify the risk s .
Cash received as collateral through loan transactions may be
invested in other eligible securities. Investing this cash subjects
that investment, as well as the securit ies loaned, to market
appreciation or depreciation.
SHORT SALES "AGAINST THE BOX" are short sales of securities
that a fund owns or has the right to obtain ( equivalent
in kind or amount to the securities sold short ) . 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.
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. The fund
currently intends to hedge no more than 15% of its total assets with
short sales on equity securities underlying its convertible security
holdings under normal circumstances.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to the securities sold short
(or securities convertible or exchangeable into such securities) and
will be required to hold them aside while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales.
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.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in the interest rate paid on the security. Variable rate securities
provide for a specified 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.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS involve a
commitment to purchase or sell specific securities at a predetermined
price or yield in which payment and delivery take place after the
customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered.
When purchasing securities pursuant to one of these transactions,
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 a purchase is outstanding,
the purchases may result in a form of leverage. When a fund has sold a
security pursuant to one of these transactions, 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 when-issued or forward transaction and may
sell the underlying securities before delivery, which may result in
capital gains or losses for the fund.
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 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 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 country's 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
as 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 manufacturers'
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 country's 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.
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 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 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; warships and the military-related areas of
aircraft; atomic energy; and associated minerals. Although recent
measure 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, whit 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 help. 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 th 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,
notable 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 its 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 the 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 joined 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 communications. While
there are 87 languages spoken throughout the Philippines, the official
language is Filipino, 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 an 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 markets 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
its exports, its 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
widespread 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 gunfire. 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 country's 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 $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 had 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 managers 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.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment 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 Contract"), 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.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; 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, the
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 the fund to pay such higher commissions,
FMR must determine in good faith that such commissions are reasonable
in relation to the value of the brokerage and research services
provided by such executing broker-dealers, viewed in terms of a
particular transaction or FMR's overall responsibilities to 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 the research services of 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 the 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 fund's annualized turnover rate for its first fiscal period is not
expected to exceed 150%. 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 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 fund 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 fund could
purchase in the underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the fund of some portion of the brokerage commissions
or similar fees paid by the fund on portfolio transactions is legally
permissible and advisable. The fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the
same as those of other funds managed by FMR or its affiliates,
investment decisions for the fund are made independently from those of
other funds managed by FMR or accounts managed by FMR affiliates. It
sometimes happens that the same security is held in the portfolio of
more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds and accounts are managed by the same
investment adviser, particularly when the same security is suitable
for the investment objective of more than one fund or account.
When two or more 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 the fund is
concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
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 fund 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.
I ndependent brokers or quotation services provide prices
of foreign 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
event that is expected to materially affect the value of a portfolio
security occurs after the close of an exchange or market 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.
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. For
example, 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. In making a good faith
determination of the value of a security the committee may review
price movements in futures contracts and ADRs, market and trading
trends, the bid/ask quotes of brokers and off-exchange institutional
trading.
PERFORMANCE
A class may quote performance in various ways. All performance
information supplied by the fund in advertising is historical and is
not intended to indicate future returns. Each class's share price and
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.
RETURN CALCULATIONS. R eturns 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 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. A cumulative
return reflects actual performance over a stated period of time.
Average annual 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 return of 100% over ten years would produce an
average annual return of 7.18%, which is the steady annual rate of
return that would equal 100% growth on a compounded basis in ten
years. Average annual returns covering periods of less than one year
are calculated by determining a class's return for the period,
extending that return for a full year (assuming that return remains
constant over the year), and quoting the result as an annual return.
While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that a class's
performance is not constant over time, but changes from year to year,
and that average annual returns represent averaged figures as opposed
to the actual year-to-year performance of a class.
In addition to average annual returns, a class may quote unaveraged or
cumulative returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative 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. R eturns 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 return.
R eturns may be quoted on a before-tax or after-tax basis .
Returns may or may not include the effect of a class's maximum sales
charge, and may or may not include the effect of the temporary 4%
redemption fee imposed on Class A shares redeemed within 180 days of
the effective date of the reorganization of the Fidelity Advisor
Emerging Asia Fund, Inc. Excluding a class's sales charge from a
return calculation produces a higher return figure. R eturns,
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 NAVs ,
adjusted NAVs , and benchmark ind ex es 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 n equity 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.
PRIOR PERFORMANCE. Because the fund was new when this SAI was
printed, it has no previous operating history. However, pursuant to a
plan of reorganization, the fund succeeded to the operations of
Fidelity Advisor Emerging Asia Fund, Inc., a closed-end fund on June
15, 1999.
Included below is prior performance information of Fidelity Advisor
Emerging Asia Fund, Inc., not the performance of the fund described in
this SAI. The returns are expressed below in terms of its Net Asset
Value (NAV) returns, not on the basis of its market returns.
Closed-end funds are not subject to redemptions and may be able to
invest a greater percentage of assets in securities or hold a greater
proportion of illiquid securities in order to meet their investment
objective. The performance data is net of advisory fees and other
expenses.
Although the fund has the same investment objective, and
substantially similar investment policies and strategies as Fidelity
Advisor Emerging Asia Fund, Inc., you should not assume that the fund
will have the same performance. For example, the fund's future
performance may be greater or less due to, among other things,
differences in managing closed-end funds as compared to open-end
funds, and differences in sales charges, expenses, asset sizes and
cash flows.
CALCULATING HISTORICAL FUND RESULTS. The following tables show
performance for Fidelity Advisor Emerging Asia Fund, Inc. calculated
including certain expenses for the period ended March 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Returns Cumulative Returns
One Year Five Years Life of Fund* One Year Five Years Life of Fund*
Fidelity Advisor
Emerging -3.61% -2.33% -2.85% -3.61% -11.11% -13.51%
Asia Fund, Inc.
</TABLE>
* From Commencement of Operations (3/25/94)
The following tables show the income and capital elements of
Fidelity Advisor Emerging Asia Fund, Inc.'s cumulative return. The
tables compare Fidelity Advisor Emerging Asia Fund, Inc.'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
Consumer Price Index (CPI), over the same period. The CPI information
is as of the month-end closest to the initial investment date for
Fidelity Advisor Emerging Asia Fund, Inc. The S&P 500 and DJIA
comparisons are provided to show how Fidelity Advisor Emerging Asia
Fund, Inc.'s 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. The fund has the
ability to invest in securities not included in either index, and its
investment portfolio may or may not be similar in composition to the
indexes. The S&P 500 and DJIA returns are based on the prices of
unmanaged groups of stocks and, unlike the Fidelity Advisor Emerging
Asia Fund, Inc.'s returns, do not include the effect of brokerage
commissions or other costs of investing.
The following table shows the growth in value of a hypothetical
$10,000 investment in Fidelity Advisor Emerging Asia Fund, Inc.,
during the past 5 fiscal years ended on the most recent fiscal year,
assuming all distributions were reinvested. 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.
During the period from March 25, 1994 (commencement of operations)
to October 31, 1998, a hypothetical $10,000 investment in Fidelity
Advisor Emerging Asia Fund, Inc., would have grown to $6,952 assuming
all distributions were reinvested.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FIDELITY ADVISOR EMERGING
ASIA FUND, INC.
Period Ended October 31 Value of Initial $10,000 Value of Reinvested Dividend Value of Reinvested Capital Total Value
Investment Distributions Gain Distributions
1998 $ 6,407 $ 166 $ 379 $ 6,952
1997 $ 7,727 $ 110 $ 287 $ 8,124
1996 $ 10,627 $ 144 $ 94 $ 10,865
1995 $ 9,293 $ 88 $ 82 $ 9,463
1994* $ 10,673 $ 0 $ -15 $ 10,658
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INDEXES
Period Ended October 31 S&P 500 DJIA Cost of Living**
1998 $ 26,368 $ 25,113 $ 11,141
1997 $ 21,615 $ 21,386 $ 10,978
1996 $ 16,361 $ 17,010 $ 10,754
1995 $ 13,184 $ 13,130 $ 10,442
1994* $ 10,427 $ 10,524 $ 10,156
</TABLE>
* From March 25, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in
Fidelity Advisor Emerging Asia Fund, Inc., on March 25, 1994, assuming
the maximum sales charge had been in effect, the net amount invested
in fund shares was $9,400. 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 $10,683. 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 $193 for dividends and $473 for capital
gains distributions.
INTERNATIONAL IND EX ES, 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
i nd ex es database and the performance of national stock
markets as measured in U.S. dollars by the Morgan Stanley Capital
International stock market ind ex es for the twelve months ended
December 31, 1998. Of course, these results are not indicative of
future stock market performance or the fund's performance. Market
conditions during the periods measured fluctuated widely. Brokerage
commissions and other fees are not factored into the values of the
ind ex es.
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 $ 6,206.9 billion
in 19 97 to $ 8,045.9 billion in 1998 .
The following table measures the total market capitalization of
certain countries according to the Morgan Stanley Capital
International i nd ex es database. The value of the markets
are measured in billions of U.S. dollars as of December 31, 1998.
TOTAL MARKET CAPITALIZATION
Australia $ 191.10 Japan $ 1,566.90
Austria 24.60 Netherlands 484.80
Belgium 143.90 Norway 28.50
Canada 286.00 Singapore/Malaysia 51.40
Denmark 66.20 Spain 250.10
France 701.80 Sweden 196.50
Germany 795.10 Switzerland 600.30
Hong Kong 154.10 United Kingdom 1,585.90
Italy 389.20 United States 8,045.90
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
indexes for the twelve months ended December 31, 1998. The second
table shows the same performance as measured in local currency. Each
table measures 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 indexes
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 6.1% Japan 5.1%
Austria 0.4% Netherlands 23.21%
Belgium 67.7% Norway -30.1%
Canada -6.1% Singapore/Malaysia -12.9%
Denmark 9.0% Spain 49.9%
France 41.5% Sweden 14.0%
Germany 29.4% Switzerland 23.5%
Hong Kong -2.9% United Kingdom 17.8%
Italy 52.5% United States 30.1%
STOCK MARKET PERFORMANCE
MEASURED IN LOCAL CURRENCY
Australia 12.7% Japan -8.9%
Austria -7.0% Netherlands 14.1%
Belgium 55.5% Norway -27.7%
Canada 0.7% Singapore/Malaysia -14.7%
Denmark 1.3% Spain 39.4%
France 31.4% Sweden 16.4%
Germany 19.9% Switzerland 16.3%
Hong Kong -2.9% United Kingdom 16.5%
Italy 42.2% United States 30.1%
The following table shows the average annualized stock market
returns measured in U.S. dollars as of December 31, 1998.
STOCK MARKET PERFORMANCE
Five Years Ended December 31, Ten Years Ended December 31,
1998 1998
Germany 17.91% 15.12%
Hong Kong -2.89% 15.92%
Japan -3.69% -5.33%
Spain 27.60% 14.77%
United Kingdom 17.03% 15.17%
United States 24.30% 18.89%
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 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 ind ex es prepared by Lipper
or other organizations. When comparing these ind ex es, 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 class may quote Morningstar, Inc.
in its advertising materials. Morningstar, Inc. is a mutual fund
rating service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising.
A class's performance may also be compared to that of the index
representing the universe of securities in which the fund may invest.
The return of the 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 f und may compare its performance to that of the Morgan
Stanley Capital International Combined All-Country Asia Free ex-Japan
Index, a market capitalization weighted index of 11 Asian
countries .
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
ind ex es.
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 returns in the
same method as the funds. The fund may also compare performance to
that of other compilations or ind ex es 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.
The 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.
The 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
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.
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.
The 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.
The fund may be available for purchase through retirement plans
or other programs offering deferral of, or exemption from, income
taxes, which may produce superior after-tax returns over time. For
example, a $1,000 investment earning a taxable return of 10% annually
would have an after-tax value of $1,949 after ten years, assuming tax
was deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of April 3 0 , 199 9 , FMR advised over $ 33
billion in municipal fund assets, $125 billion in taxable
fixed-income fund assets, $ 128 billion in money market fund
assets, $ 544 billion in equity fund assets, $ 14 billion
in international fund assets, and $ 38 billion in Spartan fund
assets. The fund 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.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to
waive Class A's and 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 A's and Class T'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 (as defined in
the Employee Retirement Income Security Act) (except a SIMPLE IRA,
SEP, or SARSEP plan or a plan covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) or a 403(b) program
with at least $25 million or more in plan assets;
2. to shares purchased for an employee benefit plan (except a
SIMPLE IRA, SEP, or SARSEP plan or a plan covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)) or a
403(b) program investing through an insurance company separate account
used to fund annuity contracts;
3. to shares purchased for an employee benefit plan (except a
SIMPLE IRA, SEP, or SARSEP plan or a plan covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)) or a
403(b) program 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 (except
SIMPLE IRA, SEP, and SARSEP plans and plans covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)) and
403(b) programs that participate in the Advisor Retirement Connection
do not qualify for this waiver;
4. to shares purchased for an employee benefit plan (except a
SIMPLE IRA, SEP, or SARSEP plan or a plan covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)) or a
403(b) program 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 (except SIMPLE IRA, SEP, and SARSEP plans and
plans covering self-employed individuals and their employees (formerly
Keogh/H.R. 10 plans)), 403(b) programs 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 (except
SIMPLE IRA, SEP, and SARSEP plans and plans covering self-employed
individuals and their employees (formerly Keogh/ H.R. 10 plans)) and
403(b) programs do not qualify for this waiver;
7. 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. Employee benefit plans (except SIMPLE
IRA, SEP, and SARSEP plans and plans covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)) and
403(b) programs do not qualify for this waiver;
8. to shares purchased with proceeds from the sale of front-end
load shares of a non-Advisor mutual fund for an account participating
in the FundSelect by Nationwide program; or
9. 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.
10 . to shares received in connection with the reorganization of
Fidelity Advisor Emerging Asia Fund, Inc.
A sales load waiver form must accompany these transactions.
CLASS T SHARES ONLY
1. to shares purchased for an insurance company separate account
used to fund annuity contracts for employee benefit plans (except
SIMPLE IRA, SEP, and SARSEP plans and plans covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)) or
403(b) programs;
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 (except a
SIMPLE IRA, SEP, or SARSEP plan or a plan covering
self-employed individuals and their employees (formerly Keough/H.R. 10
plans) ) or a 403(b) program);
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, 403(b) programs or plans
covering sole-proprietors (formerly Keogh/H.R. 10 plans) that are
invested in Fidelity Advisor or Fidelity funds or (ii) an employee
benefit plan, 403(b) program or plan covering a sole-proprietor
(formerly Keogh/H.R. 10 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. 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); or
13. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined Trusts.
A sales load waiver form must accompany these transactions.
CLASS B AND CLASS C SHARES ONLY
The Class B or Class C contingent deferred sales charge (CDSC) will
not apply to the redemption of shares:
1. For disability or death, provided that the shares are sold
within one year following the death or the initial determination of
disability;
2. That are permitted without penalty at age 70 1/2 pursuant to the
Internal Revenue Code from retirement plans or accounts (other than of
shares purchased on or after February 11, 1999 for Traditional IRAs,
Roth IRAs and Rollover IRAs);
3. For disability, payment of death benefits, or minimum required
distributions starting at age 70 1/2 from Traditional IRAs, Roth IRAs
and Rollover IRAs purchased on or after February 11, 1999;
4. Through the Fidelity Advisor Systematic Withdrawal Program;
or
5. (Applicable to Class C only) From an employee benefit plan,
403(b) program or plan covering a sole-proprietor (formerly Keogh/H.R.
10 plan).
A waiver form must accompany these transactions.
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 , 403(b) programs, and plans covering
sole-proprietors (formerly Keogh/H.R. 10 plans) must have at least
$50 million in plan assets;
2. Registered investment advis e r managed account programs,
provided the registered investment advis e r 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, accounts other than an employee benefit plan, 403(b)
program or plan covering a sole-proprietor (formerly a Keogh/H.R. 10
plan) 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 programs for employee benefit plans,
403(b) programs or plans covering sole-proprietors (formerly
Keogh/H.R. 10 plans) 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 programs for employee benefit
plans, 403(b) programs and plans covering sole-proprietors (formerly
Keogh/H.R. 10 plans) 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 programs for employee
benefit plans, 403(b) programs or plans covering sole-proprietors
(formerly Keogh/H.R. 10 plans), Fidelity 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. For all funds, o n 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 (except a SEP or SARSEP plan or a plan covering
self-employed individuals and their employees (formerly a Keogh/H.R.
10 plan )) or 403(b) program) past $25 million; a load
waived trade that brings the value of the accumulated account(s) of an
investor (including an employee benefit plan (except a SEP or
SARSEP plan or a plan covering self-employed individuals and their
employees (formerly a Keogh/H.R. 10 plan)) or 403(b) program) 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 (except a SEP or SARSEP plan or a plan covering
self-employed individuals and their employees (formerly a Keogh/H.R.
10 plan)) or 403(b) program) 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."
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.
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 th ose 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 will be redeemed first, followed by those Class A
or Class T shares that have been held for the longest period of
time.
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.
The Class A or Class T CDSC will not apply to the redemption of
shares:
1. Held by insurance company separate accounts;
2. For plan loans or distributions or exchanges to non-Advisor fund
investment options from employee benefit plans (except shares of
SIMPLE IRA, SEP, and SARSEP plans and plans covering self-employed
individuals and their employees (formerly Keogh/H.R. 10 plans)
purchased on or after February 11, 1999) and 403(b) programs; or
3. For disability, payment of death benefits, or minimum required
distributions starting at age 70 1/2 from Traditional IRAs, Roth IRAs,
SIMPLE IRAs, SEPs, SARSEPS and plans covering a sole proprietor or
self-employed individuals and their employees (formerly Keogh/H.R. 10
plans).
A waiver form must accompany these transactions.
CLASS A AND CLASS T SHARES ONLY
COMBINED PURCHASE, RIGHTS OF ACCUMULATION AND LETTER OF INTENT
PROGRAMS. The following qualify as an "individual" or "company" for
the purposes of determining eligibility for the Combined Purchase,
Rights of Accumulation or Letter of Intent program: 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 parent-subsidiary group of "employee benefit plans" (except
SEP and SARSEP plans and plans covering self-employed individuals and
their employees (formerly Keogh/H.R. 10 plans)) and 403(b) programs;
and tax-exempt organizations (as defined in Section 501(c)(3) of the
Internal Revenue Code).
COMBINED PURCHASE. For your purchases to be aggregated for the
purpose of qualifying for the Combined Purchase program, they must be
made on the same day through one investment professional.
RIGHTS OF ACCUMULATION. The current value of your holdings is
determined at the NAV at the close of business on the day you purchase
the Class A or Class T shares to which the current value of your
holdings will be added. For your purchases and holdings to be
aggregated for the purpose of qualifying for the Rights of
Accumulation program, they must have been made through one investment
professional.
LETTER OF INTENT. You must file your Letter of Intent (Letter) with
Fidelity within 90 days of the start of your purchases toward
completing your Letter. For your purchases to be aggregated for the
purpose of completing your Letter, they must be made through one
investment professional. Your initial purchase toward completing your
Letter must be at least 5% of the total investment specified in your
Letter. Fidelity will register Class A or Class T shares equal to 5%
of the total investment specified in your Letter in your name and will
hold those shares in escrow. You will earn income, dividends and
capital gain distributions on escrowed Class A and Class T shares. The
escrow will be released when you complete your Letter. You are not
obligated to complete your Letter. If you do not complete your Letter,
Fidelity will provide you with 30-days' written notice to pay the
increased front-end sales charges due. If you do not pay the increased
front-end sales charges within 30 days, Fidelity will redeem
sufficient escrowed Class A or Class T shares to pay any applicable
front-end sales charges. If you purchase more than the amount
specified in your Letter and qualify for additional Class A or Class T
front-end sales charge reductions, the front-end sales charge will be
adjusted to reflect your total purchase at the end of 13 months and
the surplus amount will be applied to your purchase of additional
Class A or Class T shares at the then-current offering price
applicable to the total investment.
ALL CLASSES
The 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 1999: 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 (observed).
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, the fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an 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, the fund has notified shareholders that it reserves
the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
DISTRIBUTIONS AND TAXES
DIVIDENDS. Short-term capital sums are distributed as dividend income,
but do not qualify for the dividends-received deduction. Because the
fund invests significantly in foreign securities, corporate
shareholders should not expect fund dividends to qualify for the
dividends-received deduction. The fund will notify corporate
shareholders annually of the percentage of fund dividends that
qualifies for the dividends-received deduction. Gains (losses)
attributable to foreign currency fluctuations are generally taxable as
ordinary income, and therefore will increase (decrease) dividend
distributions. If 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. The fund will send each shareholder a
notice in January describing the tax status of dividends and capital
gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund
on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of the fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by the fund are taxable to shareholders as dividends, not
as capital gains.
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 the 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 FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, the 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.
The fund is treated as a separate entity from the other funds of
Advisor Series VIII 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, the 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 the 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 the 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 investment accounts pursuant to a code of ethics that sets forth
all employees' fiduciary responsibilities regarding the fund,
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. The Board of Trustees governs the fund
and is responsible for protecting the interests of shareholders. The
Trustees are experienced executives who meet periodically throughout
the year to oversee the fund's activities, review contractual
arrangements with companies that provide services to the fund, and
review the fund's performance. 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 or its affiliates . The business
address of each Trustee, Member of the Advisory Board, and officer who
is an "interested person" (as defined in the 1940 Act) is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the
address of FMR. The business address of all the other Trustees is
Fidelity Investments (registered trademark) , 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. ; and a Director of FDC. Abigail
Johnson, Member of the Advisory Board of Fidelity Advisor Series
VIII , is Mr. Johnson's daughter.
ABIGAIL P. JOHNSON (37), Member of the Advisory Board of Fidelity
Advisor Series VIII (1999), 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.
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 (6 7 ), 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
previously served as a Director of General Re Corporation
(reinsurance , 1987-1988 ) and Director of Valuation Research
Corp. (appraisals and valuations, 1993-1995). H e 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).
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. (4 8 ), 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.
PETER F. PHILIPS (39), is Vice President of Advisor Emerging Asia Fund
(1994). Prior to his current responsibilities, Mr. Philips managed a
number of Fidelity funds.
ERIC D. ROITER (50), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998) and Vice President and Clerk of FDC
(1998) . Prior to joining Fidelity, Mr. Roiter was with
the law firm of Debevoise & Plimpton , as an associate
(1981-1984) and as a partner (198 5 -1997) and served as an
Assistant General Counsel of the U.S. Securities and Exchange
Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty
of Law, at Columbia University Law School (1996-1997).
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 & Trust
(1991-1996).
JOHN H. COSTELLO (5 2 ), 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 the fund for his
or her services for the calendar year ended December 31, 199 8 .
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C>
Trustees and Members of the Aggregate Compensation from Total Compensation from the
Advisory Board the FundB,+ Fund Complex*,A
Edward C. Johnson 3d** $ 0 $ 0
Abigail P. Johnson 0 0
J. Gary Burkhead** 0 0
Ralph F. Cox 25 223,500
Phyllis Burke Davis 24 220,500
Robert M. Gates 25 223,500
E. Bradley Jones 25 222,000
Donald J. Kirk 25 226,500
Peter S. Lynch** 0 0
William O. McCoy 25 223,500
Gerald C. McDonough 30 273,500
Marvin L. Mann 24 200,500
Robert C. Pozen** 0 0
Thomas R. Williams 25 223,500
</TABLE>
* Information is for the calendar year ended December 31, 199 8
for 23 7 funds in the complex.
** Interested Trustees of the fund , Ms. Johnson and Mr.
Burkhead , are compensated by FMR.
+ Figures presented are estimated for the fund's first fiscal year
ending October 3 1 , 199 9 .
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, 1998, the
Trustees accrued required deferred compensation from the funds as
follows: Ralph F. Cox, $ 75,000 ; Phyllis Burke Davis,
$ 75,000 ; Robert M. Gates, $ 75,000 ; 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, $ 55,039 ; Marvin
L. Mann, $ 55,039 ; Thomas R. Williams, $ 63,433; and William
O. McCoy, $55,039 .
B Compensation figures include cash , and may include amounts
required to be deferred and amounts deferred at the election of
Trustees.
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 Class T, Class B, Class C, and
Institutional Class shares of the 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 , Mr. Edward C. Johnson 3d,
President and Trustee of the fund, may be deemed to be a beneficial
owner of these shares.
MANAGEMENT CONTRACT
The 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
the fund, FMR acts as investment adviser and, subject to the
supervision of the Board of Trustees, directs the investments of the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides the fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of the fund and all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel of the
fund or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and the fund; preparing all general
shareholder communications and conducting shareholder relations;
maintaining the fund's records and the registration of the fund's
shares under federal securities laws and making necessary filings
under state securities laws; developing management and shareholder
services for the 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, the fund or each class thereof, as
applicable, pays all of its expenses that are not assumed by those
parties. The 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. The 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 the 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 the
fund include interest, taxes, brokerage commissions, the fund's
proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal
securities laws and making necessary filings under state securities
laws. The 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, the 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 Assets Annualized Rate Group Net Assets Effective Annual 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
</TABLE>
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 $ 748 billion of group net assets - the approximate
level for April 199 9 - was 0.2824 %, which is the
weighted average of the respective fee rates for each level of group
net assets up to $748 billion.
The 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 April 199 9 , the fund's annual management fee
rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
0.2824% + 0.45% = 0.7324%
One-twelfth of this annual management fee rate is applied to the
fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
FMR may, from time to time, voluntarily reimburse all or a portion of
a class's operating expenses (exclusive of interest, taxes,
securities lending fees, 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 June 15 , 1999, FMR voluntarily agreed to reimburse
Class A, Class T, Class B, Class C and Institutional Class if and to
the extent that its aggregate operating expenses, including management
fees, were in excess of an annual rate of 2.00%, 2. 2 5%, 2.75%,
2. 7 5% and 1.75%, respectively of their average net assets.
Total operating expenses for Class A and Class B are not expected
to exceed the voluntary expense caps in effect during the fiscal year
ended October 31, 1999.
SUB-ADVISERS. On behalf of the fund, FMR has entered into sub-advisory
agreements with FMR U.K., FMR Far East. FIJ and FIIA. FIIA, in turn,
has entered into a sub-advisory agreement with FIIA(U.K.)L. 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 the 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 fund.
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:
(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.
(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.
(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:
(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. Currently, FIIA is primarily responsible for choosing
investments for the fund.
(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.
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
the 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 and FMR to incur certain
expenses that might be considered to constitute direct or indirect
payment by the fund of distribution expenses.
Pursuant to the Class A Plan for the fund, FDC is paid a monthly
12b-1 fee at an annual rate of up to 0.75% of Class A's average net
assets determined at the close of business on each day throughout the
month. Currently, the Trustees have approved a monthly 12b-1 fee for
Class A at an annual rate of 0.25% of its average net assets. This fee
rate 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.
Currently, FDC may reallow to intermediaries (such as banks,
broker-dealers and other service-providers), including its affiliates,
up to the full amount of 12b-1 fees paid by Class A for providing
services intended to result in the sale of Class A shares and/or
shareholder support services.
Pursuant to the Class T Plan for the fund, FDC is paid a monthly
12b-1 fee at an annual rate of up to 0.75% of Class T's average net
assets determined at the close of business on each day throughout the
month. Currently, the Trustees have approved a monthly 12b-1 fee for
Class T at an annual rate of 0.50% of its average net assets. This fee
rate 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.
Currently, FDC may reallow to intermediaries (such as banks,
broker-dealers and other service-providers), including its affiliates,
up to the full amount of 12b-1 fees paid by Class T for providing
services intended to result in the sale of Class T shares and/or
shareholder support services.
Pursuant to the Class B Plan for the fund, FDC is paid a monthly
12b-1 (distribution) fee at an annual rate of up to 0.75% of Class B's
average net assets determined at the close of business on each day
throughout the month. Currently, the Trustees have approved a monthly
12b-1 (distribution) fee for Class B at an annual rate of 0.75% of its
average net assets. This fee rate may be increased only when, in the
opinion of the Trustees, it is in the best interests of the
shareholders of the class to do so.
Pursuant to the Class B Plan for the fund, FDC is also paid a
monthly 12b-1 (service) fee at an annual rate of 0.25% of Class B's
average net assets determined at the close of business on each day
throughout the month.
Currently, FDC retains the full amount of 12b-1 (distribution) fees
paid by Class B as compensation for providing services intended to
result in the sale of Class B shares, and FDC may reallow up to the
full amount of 12b-1 (service) fees paid by Class B to intermediaries
(such as banks, broker-dealers and other service-providers) for
providing shareholder support services.
Pursuant to the Class C Plan for the fund, FDC is paid a monthly
12b-1 (distribution) fee at an annual rate of up to 0.75% of Class C's
average net assets determined at the close of business on each day
throughout the month. Currently, the Trustees have approved a monthly
12b-1 (distribution) fee for Class C at an annual rate of 0.75% of its
average net assets. This fee rate 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.
Pursuant to the Class C Plan for the fund, FDC is also paid a
monthly 12b-1 (service) fee at an annual rate of 0.25% of Class C's
average net assets determined at the close of business on each day
throughout the month.
Currently and except as provided below, for the first year of
investment, FDC retains the full amount of 12b-1 (distribution) fees
paid by Class C as compensation for providing services intended to
result in the sale of Class C shares and retains the full amount of
12b-1 (service) fees paid by Class C for providing shareholder support
services. Normally, after the first year of investment, FDC may
reallow up to the full amount of 12b-1 (distribution) fees paid by
Class C to intermediaries (such as banks, broker-dealers and other
service-providers) for providing services intended to result in the
sale of Class C shares and may reallow up to the full amount of 12b-1
(service) fees paid by Class C to intermediaries for providing
shareholder support services. For purchases of Class C shares made for
an employee benefit plan, 403(b) program or plan covering a
sole-proprietor (formerly Keogh/H.R. 10 plan) or through reinvestment
of dividends or capital gain distributions, during the first year of
investment and thereafter, FDC may reallow up to the full amount of
12b-1 (distribution) fees paid by such Class C shares to
intermediaries, including its affiliates, for providing services
intended to result in the sale of Class C shares and may reallow up to
the full amount of 12b-1 (service) fees paid by such Class C shares to
intermediaries, including its affiliates, for providing shareholder
support services.
Under the 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. The 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 providing services intended to
result in the sale of Institutional Class shares and/or
shareholder support services . In addition, the
Institutional Class Plan provides that FMR, directly or through
FDC, may pay intermediaries , such as banks ,
broker-dealers and other service providers that provide
those 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 providing services
intended to result in the sale of Class A, Class T, Class B, and Class
C shares and/or shareholder support services , including payments
made to intermediaries that provide those 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 the 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 or stabilization of cash flows
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 fund might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. 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.
The fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each class of the 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 the 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 and 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.
The 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 the fund, maintains the fund's
portfolio and general accounting records, and administers the fund's
securities lending program.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on the fund's average daily net assets throughout the month.
The annual fee rates for pricing and bookkeeping services are
0.0 5 50% of the first $500 million of average net assets ,
0.0 42 5% of average net assets between $500 million
and $3 billion, and 0.0010% of average net assets in excess of $3
billion . The fee, not including reimbursement for out-of-pocket
expenses, is limited to a minimum of $60,000 per year.
For administering the fund's securities lending program, FSC receives
fees based on the number and duration of individual securities loans.
The 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 TRUST
TRUST ORGANIZATION. Fidelity Advisor Emerging Asia Fund is a fund of
Fidelity Advisor Series VIII, an open-end management investment
company organized as a Massachusetts business trust on
September 23, 1983, as amended and restated October 1, 1986. On
April 15, 1993, Fidelity Advisor Series VIII changed its
name from Fidelity Special Situations Fund to Fidelity Advisor
Series VIII. Currently there are nine funds in the trust:
Fidelity Advisor Emerging Asia Fund, Fidelity Advisor Diversified
International Fund, Fidelity Advisor Europe Capital Appreciation Fund,
Fidelity Advisor Japan Fund, Fidelity Advisor Latin America Fund,
Fidelity Advisor Global Fund, Fidelity Advisor Emerging Markets Income
Fund, Fidelity Advisor International Capital Appreciation Fund, and
Fidelity Advisor Overseas Fund. The Trustees are permitted to
create additional funds in the trust and to create additional classes
of the fund.
The assets of the trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject to the rights of creditors, are allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets
of each fund in the trust shall be charged with the liabilities and
expenses attributable to such fund, except that liabilities and
expenses may be allocated to a particular class. Any general expenses
of the trust shall be allocated between or among any one or more of
the funds or classes.
SHAREHOLDER LIABILITY. The trust is an entity commonly known as
"Massachusetts business trust." Under Massachusetts law, shareholders
of such a trust may, under certain circumstances, be held personally
liable for the obligations of the trust.
The Declaration of Trust provides that the trust shall not have any
claim against shareholders except for the payment of the purchase
price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or the Trustees
relating to the trust shall include a provision limiting the
obligations created thereby to the trust and its assets.
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund solely by reason of
his or her being or having been a shareholder and not because of his
or her acts or omissions or for some other reason. The Declaration of
Trust also provides that each fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a 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. Claims asserted against one class of shares may subject
holders of another class of shares to certain liabilities.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the 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 are entitled to one vote for each
dollar of net asset value that you own. The voting rights of
shareholders can be changed only by a shareholder vote. Shares may be
voted in the aggregate, by fund and by class.
The shares have no preemptive or, for Class A, Class T, Class C and
Institutional Class shares, conversion rights. Shares are fully paid
and nonassessable, except as set forth under the heading "Shareholder
Liability" above.
The trust or any of its funds 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 a vote of
shareholders of the trust or the fund. In the event of the dissolution
or liquidation of the trust, shareholders of each of its funds are
entitled to receive the underlying assets of such fund available for
distribution. In the event of the dissolution or liquidation of a
fund, shareholders of that fund are entitled to receive the underlying
assets of the fund available for distribution.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of the fund. The custodian
is responsible for the safekeeping of a fund's assets and the
appointment of any subcustodian banks and clearing agencies.
FMR, its officers and directors, its affiliated companies, and
members of 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. The Boston branch of the
fund's custodian leases its office space from an affiliate of FMR at a
lease payment which, when entered into, was consistent with prevailing
market rates. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. PricewaterhouseCoopers LLP, 160 Federal Street ,
Boston, Massachusetts , serves as independent accountant for
the fund . The auditor examines financial statements for the fund
and provides other audit, tax, and related services.
APPENDIX
The descriptions that follow are examples of eligible ratings for the
fund. The fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations
when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE 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 and Fidelity Focus are registered trademarks of FMR Corp.
THE THIRD PARTY MARKS APPEARING ABOVE ARE THE MARKS OF THEIR
RESPECTIVE OWNERS.
