Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about a fund and its investments, you can obtain a copy of
the funds' Statement of Additional Information (SAI) dated October
17, 1995. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
LIKE ALL MUTUAL FUNDS,
THESE SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND
EXCHANGE COMMISSION OR
ANY STATE SECURITIES
COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
CTY-pro-1095
Each of these international funds is a growth fund. Each seeks to increase
the value of your investment over the long-term by investing mainly in
equity securities.
FIDELITY'S
COUNTRY AND REGION
FUNDS
COUNTRY FUNDS
Fidelity France Fund
Fidelity Germany Fund
Fidelity Japan Small Companies Fund
REGIONAL FUNDS
Fidelity Hong Kong and China Fund
Fidelity Nordic Fund
Fidelity United Kingdom Fund
PROSPECTUS
OCTOBER 17, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's sales charge (load) and
its yearly operating expenses.
PERFORMANCE
THE FUNDS IN DETAIL CHARTER How each fund is organized.
INVESTMENT PRINCIPLES AND RISKS Each fund's
overall approach to investing.
BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different ways to set up
your account, including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an account and
making additional investments.
HOW TO SELL SHARES Taking money out of and
closing your account.
INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND ACCOUNT POLICIES DIVIDENDS, CAPITAL GAINS, AND TAXES
TRANSACTION DETAILS Share price calculations
and the timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND WAIVERS
</TABLE>
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. Foreign affiliates of FMR may help
choose investments for the funds.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
COUNTRY FUNDS
The single country funds focus on particular countries.
FRANCE FUND
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities of French issuers.
GERMANY FUND
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities of German issuers.
JAPAN SMALL COMPANIES FUND
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities of Japanese issuers with
small market capitalizations.
REGIONAL FUNDS
The regional funds focus on particular regions.
HONG KONG AND CHINA FUND
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities of Hong Kong and Chinese
issuers.
NORDIC FUND
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities of issuers in Denmark,
Finland, Norway, and Sweden.
UNITED KINGDOM FUND
GOAL: Long-term growth of capital.
STRATEGY: Invests mainly in equity securities of British issuers.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors who want to
pursue their investment goals in markets outside the United States by
targeting specific countries or regions . 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.
The value of the funds' investments will vary from day to day, and
generally reflect market conditions, interest rates, and other company,
political , or economic news. In the short-term, stock prices can
fluctuate dramatically in response to these factors. Over time, however,
stocks have shown greater growth potential than other types of securities.
In addition to those general risks, international investing involves
different or increased risks. The performance of international funds
depends upon currency values, the political and regulatory environment, and
overall economic factors in the countries in which a fund invests. These
risks are particularly significant for funds that focus on a single country
or region. See "INVESTMENT PRINCIPLES AND RISKS" on page .
When you sell your shares, they may be worth more or less than what you
paid for them. By themselves, the funds do not constitute a
balanced investment plan.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell or
hold shares of a fund. See page 14 and pages - for an explanation
of how and when these charges apply. Lower sales charges may be available
for accounts over $250,000.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Each fund also incurs other
expenses for services such as maintaining shareholder records and
furnishing shareholder statements and financial reports. A fund's expenses
are factored into its share price or dividends and are not charged directly
to shareholder accounts (see page ).
The following are projections based on estimated expenses and are
calculated as a percentage of average net assets. FMR has voluntarily
agreed to limit the total operating expenses for each fund to
2. 0 0% of average net assets.
EXAMPLES. Let's say, hypothetically, that a fund's annual return is 5% and
that its operating expenses are exactly as described. For every $1,000 you
invested, the examples show how much you would have to pay in total
expenses if you close your account after the number of years indicated.
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
COUNTRY FUNDS
Transaction expenses Operating expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FRANCE FUND Maximum sales charge on 3.00 Management fee (after 0% After 1 $5 0
purchases % reimbursement) year
(as a % of offering price)
Maximum sales charge on None 12b-1 fee None After 3 $ 91
reinvested distributions years
Deferred sales charge on None Other expenses (after 2. 0 0
redemptions reimbursement) %
Redemption fee (as a % of 1.5 % Total fund operating 2. 0 0
amount redeemed on shares expenses %
held less than 90 days)
Exchange fee None
Annual account maintenance $12.
fee 00
(for accounts under $2,500)
GERMANY FUND Maximum sales charge on 3.00 Management fee (after 0% After 1 $5 0
purchases % reimbursement) year
(as a % of offering price)
Maximum sales charge on None 12b-1 fee None After 3 $ 91
reinvested distributions years
Deferred sales charge on None Other expenses (after 2. 0 0
redemptions reimbursement) %
Redemption fee (as a % of 1.5 % Total fund operating 2. 0 0
amount redeemed on shares expenses %
held less than 90 days)
Exchange fee None
Annual account maintenance $12.
fee 00
(for accounts under $2,500)
JAPAN SMALL Maximum sales charge on 3.00 Management fee .76% After 1 $49
COMPANIES FUND purchases % year
(as a % of offering price)
Maximum sales charge on None 12b-1 fee None After 3 $89
reinvested distributions years
Deferred sales charge on None Other expenses 1.18
redemptions %
Redemption fee (as a % of 1.5% Total fund operating 1.94
amount redeemed on shares expenses %
held less than 90 days)
Exchange fee None
Annual account maintenance $12.
fee 00
(for accounts under $2,500)
</TABLE>
REGIONAL FUNDS
Transaction expenses Operating expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
HONG KONG AND Maximum sales charge on 3.00 Management fee (after . 50 % After 1 $ 50
CHINA FUND purchases % reimbursement) year
(as a % of offering price)
Maximum sales charge on None 12b-1 fee None After 3 $9 1
reinvested distributions years
Deferred sales charge on None Other expenses 1.50
redemptions %
Redemption fee (as a % of 1.5 % Total fund operating 2. 00
amount redeemed on shares expenses %
held less than 90 days)
Exchange fee None
Annual account maintenance $12.
fee 00
(for accounts under $2,500)
NORDIC FUND Maximum sales charge on 3.00 Management fee (after 0 % After 1 $5 0
purchases % reimbursement) year
(as a % of offering price)
Maximum sales charge on None 12b-1 fee None After 3 $ 91
reinvested distributions years
Deferred sales charge on None Other expenses (after 2. 00
redemptions reimbursement) %
Redemption fee (as a % of 1.5 % Total fund operating 2. 0 0
amount redeemed on shares expenses %
held less than 90 days)
Exchange fee None
Annual account maintenance $12.
fee 00
(for accounts under $2,500)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
UNITED KINGDOM FUND Maximum sales charge on 3.00 Management fee (after 0% After 1 $50
purchases % reimbursement) year
(as a % of offering price)
Maximum sales charge on None 12b-1 fee None After 3 $91
reinvested distributions years
Deferred sales charge on None Other expenses (after 2.00
redemptions reimbursement) %
Redemption fee (as a % of 1.5% Total fund operating 2.00
amount redeemed on shares expenses %
held less than 90 days)
Exchange fee None
Annual account maintenance $12.
fee 00
(for accounts under $2,500)
</TABLE>
FMR has voluntarily agreed to temporarily limit each fund's operating
expenses to 2. 0 0% of their average net assets. If this agreement
were not in effect, and there were no state expense limitations, the
management fee, other expenses, and total operating expenses would be .76%,
4.92%, and 5.68%, respectively, for France Fund; .76%, 2.70%, and 3.46%,
respectively, for Germany Fund; .76%, 1.50% and 2.26%, respectively, for
Hong Kong and China Fund; .76%, 2.23%, and 2.99%, respectively, for
Nordic Fund; and .76%, 4.76%, and 5.52%, respectively, for United Kingdom
Fund . Expenses eligible for reimbu rse ment do not include
interest, taxes, brokerage commis s ions, or extraordinary expenses.
PERFORMANCE
This section would normally show how each fund has performed over time.
Because these funds were new when this prospectus was printed, their
performance is not included. Twice a year, you will receive a report
detailing the funds' recent strategies, performance, and holdings. For
current performance or a free annual report call 1-800-544-8888.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the
potential for significant growth over time;
however, investing in foreign markets means
assuming greater risks than investing in the
United States. Factors like changes in a
country's financial markets, its local political
and economic climate, and the value of its
currency create these risks. Because these
funds invest in stocks, their performance is
also related to foreign stock markets. For
these reasons an international fund's
performance may be more volatile than that of
a fund that invests exclusively in the United
States.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results. Average annual total returns covering
periods of less than one year assume that performance will remain constant
for the rest of the year.
COMPARATIVE MARKET INDICES reflect the performance of stocks in applicable
regions.
SINGLE COUNTRY INDICES:
(small solid bullet) France: Societe des Bourses Francaises 250 Index (SBF
250)
(small solid bullet) Germany: Deutscher Aktien Index 100 (DAX 100)
(small solid bullet) Japan: Tokyo Stock Exchange Second Section
Index
REGIONAL INDICES:
(small solid bullet) Hong Kong and China: Hang Seng Index
(small solid bullet) Nordic: FT/S&P-Actuaries World Nordic Index
(FT -A -Nordic Index)
(small solid bullet) United Kingdom: FT-SE-Actuaries All-Shares Index
(FT-SE-A All-Shares)
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
Other illustrations of fund performance may show moving averages over
specified periods.
TOTAL RETURNS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF FUTURE
PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, each fund is
currently a non-diversified fund of Fidelity Investment Trust, an open-end,
management investment company organized as a Massachusetts business trust
on April 20, 1984.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
EACH FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. You are entitled to one
vote for each share you own.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which handles their business affairs and,
with the assistance of the foreign affiliates listed below, chooses the
funds' investments.
Affiliates may assist FMR with foreign securities:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR U.K.),
in London, England, serves as sub-adviser for all the funds.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR
Far East), in Tokyo, Japan, serves as sub-adviser for all the funds.
(small solid bullet) Fidelity International Investment Advisors (FIIA), in
Pembroke, Bermuda, serves as sub-adviser for all the funds.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.), in Kent, England, serves as sub-adviser for all the
funds.
(small solid bullet) Fidelity Investment Japan Ltd. (FIJ), in Tokyo, Japan,
serves as sub-adviser for Hong Kong and China Fund and Japan Small
Companies Fund.
Renaud Saleur is manager of France Fund, which he has managed since
November 1995. He also manages several funds for Fidelity International,
Limited. Mr. Saleur joined Fidelity in 1986.
Simon Roberts is manager of Germany Fund, which he has managed since
November 1995. He also manages a fund for Fidelity International, Limited.
Before joining Fidelity as a research analyst in 1992, Mr. Roberts was a
management consultant for Schroder Securities, Limited, in London.
Simon Fraser is manager of Japan Small Companies, which he has managed
since November 1995. Mr. Fraser also manages Pacific Basin and several
funds for United Kingdom, European and Asian investors including Growth,
Japan OTC & Regional Markets and Japan Smaller Companies Trust. He joined
Fidelity in 1981 as an investment analyst.
Joseph Tse is manager of Hong Kong & China Fund, which he has managed since
November 1995. He also is director of investment and research for Fidelity
Investments Management (Hong Kong), Limited. Mr. Tse joined Fidelity as an
analyst in 1990.
FIDELITY FACTS
Fidelity offers the broadest selection of mutual
funds in the world.
(solid bullet) Number of Fidelity mutual funds: over 210
(solid bullet) Assets in Fidelity mutual funds: over $ 328
billion
(solid bullet) Number of shareholder accounts: over 22
million
(solid bullet) Number of investment analysts and portfolio
managers: over 200
(checkmark)
Colin Stone is manager of Nordic Fund, which he managed since November
1995. He also manages funds for Fidelity International, Limited. Mr. Stone
joined Fidelity in 1987.
Samuel Morse is manager of United Kingdom Fund, which he has managed since
November 1995. He also manages funds for Fidelity International, Limited,
and the United Kingdom and European portions of certain funds for Fidelity
Canada. Mr. Morse joined Fidelity in 1990.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR 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.
FMR may use its broker-dealer affiliates and other firms that sell fund
shares to carry out a fund's transactions, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The funds offer investors the ability to concentrate an investment in a
particular country or region that they believe to offer strong long-term
growth potential. The country or region in which each fund focuses is the
fund's "focal area." Each fund's performance is expected to be closely tied
to economic and political conditions within its focal area. Because each
fund invests in one country or a small group of related countries, each
fund's performance is expected to be more volatile than more geographically
diversified funds. Changes in regulatory, tax, or economic policy in a
country could significantly affect the market in that country, and
therefore a fund's performance.
The funds may invest in issuers of all types within their focal
areas. The funds focus on equity securities, but may also invest in debt
securities of any quality.
FMR determines where an issuer is located by looking at such factors as its
country of organization, the primary trading market for its securities, and
the location of its assets, personnel, sales, and earnings.
The value of a 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. The
securities of smaller, less well-known companies may be particularly
volatile. In addition to currency fluctuations, investments in foreign
securities are generally subject to increased economic and political risk.
International funds have increased economic and political risks as they are
exposed to events and factors in the various world markets. This is
especially true for emerging markets. Also, because a substantial portion
of the funds' investments are denominated in foreign currencies, changes in
the value of foreign currencies can significantly affect a fund's share
price. FMR may use a variety of techniques to either increase or decrease a
fund's exposure to any currency.
FMR may use various investment techniques to hedge a portion of a fund's
risks, but there is no guarantee that these strategies will work as FMR
intends. Of course, when you sell your shares of a fund, they may be worth
more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. Each fund also reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
No one mutual fund can provide an appropriate balanced investment plan for
all investors.
The following charts illustrate volatility of the stock market returns
for each fund's focal area as calculated by Morgan Stanley Capital
International (MSCI). The charts measure total return based on the period's
change in price, dividends paid on stocks in the index, and the effect of
reinvesting dividends without adjustments for dividend withholdings by
foreign governments or tax credits.
MSCI FRANCE INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Returns % 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
MSCI FRANCE INDEX 83.21 79.14 -13.4 38.66 36.80 -13.3 18.52 3.41% 21.56 -4.70
% % 2% % % 5% % % %
</TABLE>
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 83.21000000000001
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 79.14
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: -13.42
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 38.66
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 36.8
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: -13.35
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 18.52
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 3.41
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 21.56
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: -4.7
Row: 11, Col: 2, Value: 0.0
%
%
%
%
%
%
%
MSCI GERMANY INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Returns % 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
MSCI GERMANY INDEX 136.4 35.90 -24.3 21.39 47.06 -8.88 8.78% -9.74 36.32 5.11%
5% % 3% % % % % %
</TABLE>
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 136.45
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 35.9
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: -24.33
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 21.39
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 47.06
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: -8.880000000000001
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 8.779999999999999
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: -9.739999999999998
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 36.32
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 5.109999999999999
Row: 11, Col: 2, Value: 0.0
%
%
%
%
%
%
%
%
%
%
MSCI JAPAN INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Returns % 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
MSCI JAPAN INDEX 43.37 99.72 43.18 35.53 1.81% -36.0 9.09% -21.2 25.70 21.62
% % % % 2% 9% % %
</TABLE>
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 43.37
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 99.72
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 43.18
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 35.53
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 1.81
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: -36.02
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 9.09
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: -21.29
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 25.7
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 21.62
Row: 11, Col: 2, Value: 0.0
%
%
%
%
%
%
%
%
MSCI HONG KONG INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Returns % 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
MSCI HONG KONG INDEX 51.69 56.11 -4.11 28.12 8.39% 9.17% 49.52 32.29 116.7 -28.9
% % % % % % 0% 0%
</TABLE>
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 51.69
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 56.11
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: -4.109999999999999
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 28.12
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 8.390000000000001
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 9.17
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 49.52
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 32.29000000000001
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 116.7
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: -28.9
Row: 11, Col: 2, Value: 0.0
%
%
%
%
%
%
%
%
%
%
MSCI NORDIC COUNTRIES FREE INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Returns % 1988 1989 1990 1991 1992 1993 1994
MSCI NORDIC COUNTRIES FREE INDEX 49.06 41.77 -7.22 8.90% -16.7 39.69 20.81
% % % 6% % %
</TABLE>
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 49.06
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 41.77
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: -7.22
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 8.9
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: -16.76
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 39.69
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 20.81
Row: 11, Col: 2, Value: 0.0
%
%
%
%
%
%
%
%
%
MSCI UNITED KINGDOM INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Returns % 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
MSCI UNITED KINGDOM INDEX 53.02 26.95 35.09 5.95% 21.87 10.29 16.02 -3.65 24.44 -1.63
% % % % % % % % %
</TABLE>
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 53.02
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 26.95
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 35.09
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 5.95
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 21.87
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 10.29
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 16.02
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: -3.65
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 24.44
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: -1.63
Row: 11, Col: 2, Value: 0.0
%
%
%
%
%
%
%
%
SINGLE COUNTRY FUNDS
FRANCE FUND seeks long-term growth of capital by investing in securities of
French issuers. FMR normally invests at least 65% of the fund's total
assets in securities of French issuers. The balance, however, may be
invested in securities of other European issuers.
C ommercial, corporate, and securities laws govern the sale and
resale of securities, while contractual and corporate restrictions may also
apply. Planned privatizations and possible government incentives may result
in major changes in the market and increased investments by private
individuals. However, a future change in government, market, or economic
factors could result in an unfavorable change in policy on privatization.
GERMANY FUND seeks long-term growth of capital by investing in securities
of German issuers. FMR normally invests at least 65% of the fund's total
assets in securities of German issuers. The balance, however, may be
invested in securities of other European issuers.
T he German economy has experienced a recession with inflationary
pressure as a result of increased domestic demand and the high cost of the
unification of East and West Germany. The Bundesbank, Germany's central
bank, has maintained relatively high interest rates to counter inflationary
pressures. T he future growth of Germany will depend on its ability
to unite the country successfully.
JAPAN SMALL COMPANIES FUND seeks long-term growth of capital by investing
in securities of Japanese issuers with small market capitalizations. FMR
normally invests at least 65% of the fund's total assets in securities of
these issuers. The balance, however, may be invested in securities of other
Southeast Asian issuers.
FMR defines Japanese small market capitalization companies as those with
market capitalizations of 100 billion Yen (approximately US $1 billion as
of September 30 , 1995) or less at the time of the fund's investment.
Companies whose capitalization exceeds 100 billion Yen after purchase will
continue to be considered small-capitalized for purposes of the 65% policy.
Japan's economic growth has declined significantly since 1990 . The
general government position has deteriorated as a result of weakening
economic growth, and stimulative measures taken to support economic
activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulus packages have helped to contain
recessionary forces, substantial uncertainties remain.
Investing in small capitalization stocks may involve greater risk than
investing in medium and large capitalization stocks, since they can be
subject to more abrupt or erratic movements. Small capitalization companies
may have more limited product lines, markets, or financial resources.
REGIONAL FUNDS
HONG KONG AND CHINA FUND seeks long-term growth of capital by investing in
securities of Hong Kong and Chinese issuers. FMR normally invests at least
65% of the fund's total assets in securities of these issuers. The balance,
however, may be invested in securities of other Southeast Asian issuers.
Currently, the fund anticipates that most of its investments will be in
Hong Kong issuers. In the future, more of its investments may be in shares
of companies listed on mainland Chinese exchanges.
Although China has committed by treaty to preserve the economic and social
freedoms enjoyed in Hong Kong for 50 years after regaining control of Hong
Kong in 1997, the continuation of the current form of the economic system
in Hong Kong after the reversion will depend on the actions of the
government of China. Business confidence in Hong Kong, therefore, can be
significantly affected by such developments, which in turn can affect
markets and business performance. The securities market in China is
relatively new and China has yet to develop comprehensive
securities , or corporate or commercial laws ; or to
adhere to internationally accepted accounting principles. There is
greater risk of expropriation, naturalization, freezes, or confiscation in
China than in many other countries. Foreign ownership limits exist on
all securities. Also, it is important to note that a substantial
portion of the companies listed on the Hong Kong Stock Exchange are
involved in the real estate related business.
NORDIC FUND seeks long-term growth of capital by investing in securities of
Danish, Finnish, Norwegian, and Swedish issuers. FMR normally invests at
least 65% of the fund's total assets in securities of these issuers. The
balance, however, may be invested in securities of other European issuers.
The Nordic region is differentiated from the rest of Europe by its high
exposure to cyclical industries such as oil, shipping, and pulp and paper.
UNITED KINGDOM FUND seeks long-term growth of capital by investing in
securities of British issuers. FMR normally invests at least 65% of the
fund's total assets in securities of these issuers. The balance, however,
may be invested in securities of other European issuers.
T he pace of economic growth in the United Kingdom appears to have
slowed in 1995, while continued tough monetary and fiscal policy helps keep
inflation under control.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective , and a summary of
related risks . Any restrictions listed supplement those discussed
earlier in this section. A complete listing of each fund's limitations
and more detailed information about the funds ' investments
are contained in the funds' SAI. Policies and limitations are
considered at the time of purchase; the sale of instruments is not required
in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help a
fund achieve its goal. Current holdings and recent investment
strategies are described in the funds' financial report s which
are sent to shareholders twice a year. For a free SAI or
financial report call 1-800-544-8888.
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.
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 or economic conditions in foreign countries, fluctuations in
foreign currencies, withholding or other taxes, operational risks,
increased regulatory burdens, and potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign securities may be unwilling to repay
principal and interest when due, and may require that the conditions for
payment be renegotiated. All of these factors can make foreign investments,
especially those in developing countries, more volatile.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") 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 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
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. Each fund currently intends to limit its
investments in lower than Baa-quality debt securities to 35% of its assets.
REPURCHASE AGREEMENTS In a repurchase agre e ment, a fund buys a
security at one price and simultaneously agrees to sell it back at a higher
price. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may
involve greater risk of loss if the counterparty defaults. Some
counterparties in these transactions may be less creditworthy than those in
U.S. markets.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with 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 a fund, or there may be a requirement
that a 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 other securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
15% of its assets would be invested in illiquid securities.
OTHER INSTRUMENTS may include securities of closed-end investment companies
and real estate-related investments.
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. A fund that
is not diversified may be more sensitive to changes in the market value of
a single issuer or industry.
RESTRICTIONS: Each 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 any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. Each fund may not invest more than 25% of its
total assets in any one industry. These limitations do not apply to U.S.
government securities.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions,
including Fidelity Brokerage Services, Inc. ( FBSI ) , an
affiliate of FMR, is a means of earning income. This practice could result
in a loss or a delay in recovering a fund's securities. A fund may also
lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of a fund's total
assets.
FUNDAMENTAL INVESTMENT POLICIES AND
RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
FRANCE FUND seeks long-term growth of capital.
GERMANY FUND seeks long-term growth of capital.
JAPAN SMALL COMPANIES FUND seeks long-term growth of capital.
HONG KONG AND CHINA FUND seeks long-term growth of capital.
NORDIC FUND seeks long-term growth of capital.
UNITED KINGDOM FUND seeks long-term growth of capital.
EACH FUND may not invest more than 25% of its total assets in any one
industry. Each fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets. Loans, in the
aggregate, may not exceed 33% of a fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. Each fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse a fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
Each fund's management fee is calculated and paid to FMR every
month. The fee for each fund is calculated by adding a group fee rate to an
individual fund fee rate, and multiplying the result by the fund's average
net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .52%, and it drops as
total assets under management increase. For July 1995, the group fee
rate was .3129 %. The individual fund fee rate is .45% for each fund.
The total management fee rate for the funds for fiscal 1996 is estimated in
the chart below.
Fund Manageme
nt fee
France Fund .76%
Germany Fund .76%
Hong Kong and China Fund .76%
Japan Small Companies Fund .76%
Nordic Fund .76%
United Kingdom Fund .76%
FMR HAS SUB-ADVISORY AGREEMENTS for each fund with three affiliates: FMR
U.K., FMR Far East, and FIIA. FIIA in turn has a sub-advisory agreement
with FIIAL U.K. In addition, FMR has sub-advisory agreements with FIJ on
behalf of Hong Kong and China Fund and Japan Small Companies Fund. FMR U.K.
focuses on issuers based in Europe. FMR Far East focuses on issuers based
in Asia and the Pacific Basin. FIIA focuses on issuers based in Hong Kong,
Australia, New Zealand, and Southeast Asia (other than Japan). FIIAL U.K.
focuses on issuers based in the United Kingdom and Europe. FIJ focuses on
issuers based in Japan and elsewhere around the world.
The sub-advisers are compensated for providing investment research and
advice. 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 30% of its management fee associated with investments for which the
sub-adviser provided investment advice. FIIA pays FIIAL U.K. a fee equal to
110% of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis. FIIA pays FIIAL U.K. a fee
equal to 110% of the costs of providing these services.
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
The funds contract with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing each fund's investments, and handling securities loans.
The funds also pay other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity. A broker-dealer may use a portion of the
commissions paid by a fund to reduce the fund's custodian or transfer agent
fees.
Each fund's estimated portfolio turnover rate for fiscal 1996 is not
expected to exceed 200% . These rates 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.
FMR has voluntarily agreed to limit each fund's operating expenses to an
annual rate of 2. 0 0% of average net assets.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a leader
in providing tax-sheltered retirement plans for individuals investing on
their own or through their employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 80 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in a fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers a fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
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
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may
be tax deductible. Retirement accounts require special applications and
typically have lower minimums.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age and under
70 with earned income to save up to $2,000 per tax year. Individuals can
also invest in a spouses's IRA if the spouse has earned income of less than
$250.
ROLLOVER IRAS retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS allow
self-employed individuals or small business owners (and their employees) to
make tax deductible contributions for themselves and any eligible employees
up to $30,000 per year.
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.
403(B) CUSTODIAL ACCOUNTS are available to employees of most tax-exempt
institutions, including schools, hospitals, and other charitable
organizations.
401(K) PROGRAMS allow employees of corporations of all sizes to contribute
a percentage of their wages on a tax-deferred basis. These accounts need to
be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS,
INSTITUTIONS, OR OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
ONCE EACH BUSINESS DAY, TWO SHARE PRICES ARE CALCULATED FOR EACH FUND WITH
A SALES CHARGE: the offering price and the net asset value (NAV). The
offering price includes the 3% sales charge, which you pay when you buy
shares, unless you qualify for a reduction or waiver as described on
page . When you buy shares of the funds at the offering price,
Fidelity deducts 3% and invests the rest at the NAV.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described at right. If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
These minimums may vary for investments through Fidelity Portfolio
Advisory Services. Refer to the product materials for details.
Key Information
Phone 1#800#544#7777
S
To open an account, exchange from another Fidelity fund account with the
same
registration, including name, address, and taxpayer ID number.
S
To add to an account, exchange from another Fidelity fund account with the
same registration, including name, address, and taxpayer ID number. You can
also use Fidelity Money Line to transfer from your bank account. Call
before
your first use to verify that this service is in place on your account.
Maximum
Money Line: $50,000.
Mail
S
To open an account, complete and sign the application. Make your check
payable
to the complete name of the fund of your choice. Mail to the address
indicated
on the application.
S
To add to an account, make your check payable to the complete name of the
fund.
Indicate your fund account number on your check. Mail to the address
printed
on your account statement.
S
Exchange by mail: Call 1#800#544#6666 for instructions.
In Person
S
To open an account, bring your application and check to a Fidelity Investor
Center. Call 1#800#544#9797 for the center nearest you.
S
To add to an account, bring your check to a Fidelity Investor Center. Call
1#800#544#9797 for the center nearest you.
Wire
Not available for retirement accounts.
S
To open an account, call 1#800#544#7777 to set up your account and to
arrange
a wire transaction. Wire within 24 hours to the wire address below. Specify
the complete name of the fund and include your new account number and your
name.
S
To add to an account, wire to the wire address below. Specify the complete
name of the fund and include your account number and your name.
S
Wire address: Bankers Trust Company, Bank Routing #021001033, Account #
00163053.
Automatically
New accounts cannot be opened with these services.
S
Use Fidelity Automatic Account Builder or Direct Deposit to automatically
purchase
more shares. Sign up for these services when opening your account, or call
1#800#544#6666.
S
Use Directed Dividends or Fidelity Automatic Exchange Service to
automatically
send money from one Fidelity fund into another. Call 1#800#544#6666 for
instructions.
TDD - Service for the Deaf and Hearing#Impaired: 1#800#544#0118
(null)
How to Sell Shares
You can arrange to take money out of your fund account at any time by
selling
(redeeming) some or all of your shares. Your shares will be sold at the
next
share price calculated after your order is received and accepted. Share
price
is normally calculated at 4 p.m. Eastern time.
To sell shares in a non#retirement account,
you may use any of the methods described on this page.
To sell shares in a Fidelity retirement account,
your request must be made in writing, except for exchanges to other
Fidelity
funds, which can be requested by phone or in writing. Call 1#800#544#6666
for
a retirement distribution form.
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 ($500
for retirement accounts).
To sell shares by bank wire or Fidelity Money Line,
you will need to sign up for these services in advance.
Certain requests must include a signature guarantee.
It is designed to protect you and Fidelity from fraud. Your request must
be
made in writing and include a signature guarantee if any of the following
situations
apply:
S
You wish to redeem more than $100,000 worth of shares,
S
Your account registration has changed within the last 30 days,
S
The check is being mailed to a different address than the one on your
account
(record address),
S
The check is being made payable to someone other than the account owner, or
S
The redemption proceeds are being transferred to a Fidelity account with a
different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including
Fidelity Investor Centers), 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:
S
Your name
S
The fund's name,
S
Your fund account number,
S
The dollar amount or number of shares to be redeemed, and
S
Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address.
Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266#0602
Fees and Key Information
If you sell shares of fund after holding them less than 90 days, the fund
will
deduct a redemption fee equal to 1.5% of the value of those shares.
Phone 1#800#544#7777
All account types except retirement
S
Maximum check request: $100,000.
S
For Money Line transfers to your bank account; minimum: $10; maximum:
$100,000.
All account types
S
You may exchange to other Fidelity funds if both accounts are registered
with
the same name(s), address, and taxpayer ID number.
Mail or in Person
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
S
The letter of instruction must be signed by all persons required to sign
for
transactions, exactly as their names appear on the account.
Retirement account
S
The account owner should complete a retirement distribution form. Call
1#800#544#6666
to request one.
Trust
S
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
S
At least one person authorized by corporate resolution to act on the
account
must sign the letter.
S
Include a corporate resolution with corporate seal or a signature
guarantee.
Executor, Administrator, Conservator, Guardian
S
Call 1#800#544#6666 for instructions.
Wire
All account types except retirement
S
You must sign up for the wire feature before using it. To verify that it is
in place, call 1#800#544#6666. Minimum wire: $5,000.
S
Your wire redemption request must be received by Fidelity before 4 p.m.
Eastern
time for money to be wired on the next business day.
TDD - Service for the Deaf and Hearing#Impaired: 1#800#544#0118
YOUR ACCOUNT
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in a fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. The shares you exchange will
carry credit for any sales charge you previously paid in connection with
their purchase.
Note that exchanges out of the funds are limited to four per calendar year
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page
.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account. Because of sales charges, you may not want to set up a systematic
withdrawal plan during a period when you are buying shares on a regular
basis.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers 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
1-800-544-6666 for more information.
REGULAR INVESTOR PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER SM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account,
quarterly complete the
appropriate section
on the fund
application.
(small solid bullet) For existing
accounts, call
1-800-544-6666 for
an application.
(small solid bullet) To change the
amount or frequency
of your investment,
call 1-800- 544-6666
at least three
business days prior
to your next
scheduled
investment date.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY
FUNDA
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the
period appropriate box on
the fund application,
or call
1-800-544-6666 for
an authorization
form.
(small solid bullet) Changes require a
new authorization
form.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call
bimonthly, 1-800-544-6666
quarterly, or after both accounts
annually are opened.
(small solid bullet) To change the
amount or frequency
of your investment,
call 1-800-544-6666.
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE APPROPRIATE
CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital gains
to shareholders each year. Normally, dividends and capital gains are
distributed in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares 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, but you will be sent a check for each dividend
distribution.
3. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
SHARES PURCHASED THROUGH REINVESTMENT of dividend and capital gain
distributions are not subject to a fund's sales charge. Likewise, if you
direct distributions from one of the funds to a fund with a sales charge,
you will not pay a sales charge on those purchases.
When a fund deducts a distribution from its NAV, the reinvestment price is
the fund's NAV at the close of business that day. Cash distribution checks
will be mailed within seven days.
TAXES
As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications:
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, each fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
UNDERSTANDING DISTRIBUTIONS
As a fund shareholder, you are entitled to your
share of the fund's net income and gains on its
investments. The fund passes these earnings
along to its investors as DISTRIBUTIONS.
Each fund earns dividends from stocks and
interest from bond, money market and other
investments. These are passed along as
DIVIDEND DISTRIBUTIONS. A fund realizes capital
gains whenever it sells securities for a higher
price than it paid for them. These are passed
along as CAPITAL GAIN DISTRIBUTIONS.
(checkmark)
CURRENCY CONSIDERATIONS. If a fund's dividends exceed its taxable income in
any year, which is sometimes the result of currency-related losses, all or
a portion of the fund's dividends may be treated as a return of capital to
shareholders for tax purposes. 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 the fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV and offering price as
of the close of business of the NYSE, usually 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share)is the fund's NAV plus a
sales charge if any. The sales charge is 3% of the offering price, or 3.09%
of the net amount invested for the funds. The REDEMPTION PRICE (price to
sell one share) is the fund's NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY SHARES OF THE FUNDS (AT THE OFFERING PRICE) OR SELL THEM
THROUGH A BROKER, who may charge you a fee for this service. If you invest
through a broker or other institution, read its program materials for any
additional service features or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed on days when the NYSE is closed (other than weekends or
holidays), when trading on the NYSE is restricted, or as permitted by the
SEC.
THE REDEMPTION FEE if applicable, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR, and it does not
apply to shares that were acquired through reinvestment of distributions.
If shares you are redeeming were not all held for the same length of time,
those shares you held longest will be redeemed first for purposes of
determining whether the fee applies.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500 (including any amount paid
as a sales charge), subject to an annual maximum charge of $60.00 per
shareholder. It is expected that accounts will be valued on the second
Friday in November of each year. Accounts opened after September 30 will
not be subject to the fee for that year. The fee, which is payable to the
transfer agent, is designed to offset in part the relatively higher costs
of servicing smaller accounts. The fee will not be deducted from retirement
accounts (except non-prototype retirement accounts), accounts using
regular investment plans, or if total assets in Fidelity funds exceed
$50,000. Eligibility for the $50,000 waiver is determined by aggregating
Fidelity mutual fund accounts maintained by FSC or FBSI which are
registered under the same social security number or which list the same
social security number for the custodian of a Uniform Gifts/Transfers to
Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC collects the proceeds from each fund's sales charge and may pay a
portion of them to securities dealers who have sold the fund's shares, or
to others, including banks and other financial institutions (qualified
recipients), under special arrangements in connection with FDC's sales
activities. The sales charge paid to qualified recipients is 2.25% of a
fund's offering price.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without
reimbursement from the funds. In some instances, these incentives may be
offered only to certain institutions 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 shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each 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) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
funds receive or anticipate simultaneous orders affecting significant
portions of the funds' assets. In particular, a pattern of exchanges that
coincide with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCTIONS. A fund's sales charge may be reduced if you invest directly
with Fidelity or through prototype or prototype-like retirement plans
sponsored by FMR or FMR Corp. The amount you invest, plus the value of your
account, must fall within the ranges shown below. However, purchases made
with assistance or intervention from a financial intermediary are not
eligible. Call Fidelity to see if your purchase qualifies.
Net amount
Ranges Sales charge invested
$0 - 249,999 3% 3.09%
$250,000 - 499,999 2% 2.04%
$500,000 - 999,999 1% 1.01%
$1,000,000 or more none none
The sales charge for any of the funds will also be reduced by the
percentage of any sales charge you previously paid on investments in other
Fidelity funds (not including Fidelity's Foreign Currency Funds).
Similarly, your shares carry credit for any sales charge you would have
paid if the reductions in the table above had not existed. These sales
charge credits only apply to purchases made in one of the ways listed
below, and only if you continuously owned Fidelity fund shares or a
Fidelity brokerage core account, or participated in The CORPORATEplan for
Retirement Program:
1. By exchange from another Fidelity fund.
2. With proceeds of a transaction within a Fidelity brokerage core account,
including any free credit balance, core money market fund, or margin
availability, to the extent such proceeds were derived from redemption
proceeds from another Fidelity fund.
3. With redemption proceeds from one of Fidelity's Foreign Currency Funds,
if the Foreign Currency Fund shares were originally purchased with
redemption proceeds from a Fidelity fund.
4. Through the Directed Dividends Option (see page ).
5. By participants in The CORPORATEplan for Retirement Program when shares
are purchased through plan-qualified loan repayments, and for exchanges
into and out of the Managed Income Portfolio.
WAIVERS. A fund's sales charge will not apply:
1. If you buy shares as part of an employee benefit plan having more than
200 eligible employees or a minimum of $3 million in plan assets invested
in Fidelity mutual funds.
2. To shares in a Fidelity Rollover IRA account purchased with the proceeds
of a distribution from an employee benefit plan, provided that at the time
of the distribution, the employer or its affiliate maintained a plan that
both qualified for waiver (1) above and had at least some of its assets
invested in Fidelity-managed products.
3. If you are a charitable organization (as defined in Section 501(c)(3) of
the Internal Revenue Code) investing $100,000 or more.
4. If you purchase shares for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code).
5. If you are an investor participating in the Fidelity Trust Portfolios
program.
6. To shares purchased through Portfolio Advisory Services.
7. If you are a current or former trustee or officer of a Fidelity fund or
a current or retired officer, director, or regular employee of FMR Corp. or
its direct or indirect subsidiaries (a Fidelity Trustee or employee), the
spouse of a Fidelity trustee or employee, a Fidelity trustee or employee
acting as custodian for a minor child, or a person acting as trustee of a
trust for the sole benefit of the minor child of a Fidelity trustee or
employee.
8. If you are a bank trust officer, registered representative, or other
employee of a qualified recipient, as defined on page 19.
9. To contributions and exchanges to a prototype or prototype-like
retirement plan sponsored by FMR Corp. or FMR and which is marketed and
distributed directly to plan sponsors or participants without any
assistance or intervention from any intermediary distribution channel.
10. If you invest through a non-prototype pension or profit-sharing plan
that maintains all of its mutual fund assets in Fidelity mutual funds,
provided the plan executes a Fidelity non-prototype sales charge waiver
request form confirming its qualification.
11. If you are a registered investment adviser (RIA) purchasing for your
discretionary accounts, provided you execute a Fidelity RIA load waiver
agreement which specifies certain aggregate minimum and operating
provisions. Except for correspondents of National Financial Services
Corporation, this waiver is available only for shares purchased directly
from Fidelity, and is unavailable if the RIA is part of an organization
principally engaged in the brokerage business.
12. If you are a trust institution or bank trust department purchasing for
your non-discretionary, non-retirement fiduciary accounts, provided you
execute a Fidelity Trust load waiver agreement which specifies certain
aggregate minimum and operating provisions. This waiver is available only
for shares purchased either directly from Fidelity or through a
bank-affiliated broker, and is unavailable if the trust department or
institution is part of an organization not principally engaged in banking
or trust activities.
These waivers must be qualified through FDC in advance. More detailed
information about waivers (1), (2), (5), (9), and (11) is contained in the
Statement of Additional Information. A representative of your plan or
organization should call Fidelity for more information.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY FRANCE FUND, FIDELITY GERMANY FUND, FIDELITY HONG KONG & CHINA
FUND,
FIDELITY JAPAN SMALL COMPANIES FUND, FIDELITY NORDIC FUND, AND FIDELITY
UNITED KINGDOM FUND
FUNDS OF FIDELITY INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 17, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated October 17, 1995). Please retain this
document for future reference. To obtain an additional copy of the
Prospectus, please call Fidelity Distributors Corporation at
1-800-544-8888.
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Considerations Affecting Europe
Special Considerations Affecting Japan , The Pacific Basin, and Southeast Asia
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Contracts with FMR Affiliates
Description of the Trust
Appendix
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
Fidelity International Investment Advisors (FIIA)
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.)
Fidelity Investments Japan Ltd. (FIJ) ( Hong Kong and China Fund and Japan
Small Companies Fund only)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company (FSC)
CTY-ptb-1095
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 each 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 each fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940) of the fund. However, except
for the fundamental investment limitations listed below the investment
policies and limitations described in this Statement of Additional
Information are not fundamental and may be changed without shareholder
approval.
THE FOLLOWING ARE EACH FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(8) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company 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 LIMITATIONS FOR EACH FUND ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) With respect to 75% of its total assets, the fund does not currently
intend to purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, the fund would hold more than 10% of
the outstanding voting securities of that issuer.
(iii) The fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and amount
to the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iv) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(v) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(vi) 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.
(vii) The fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(v) would exceed 15% of the fund's net assets.
(viii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(ix) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(x) The fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
(xi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xii) The fund does not currently intend to 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 (x), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the funds' limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
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 Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
CLOSED-END INVESTMENT COMPANIES. A fund may purchase the equity securities
of closed-end investment companies to facilitate investment in certain
countries. Equity securities of closed-end investment companies generally
trade at a discount to their net asset value.
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. 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.
Foreign investments involve a risk of local political, economic, 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 the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
is no assurance that FMR will be able to anticipate these potential events
or counter their effects. These risks are magnified for investments in
developing countries, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade
a small number of securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. Foreign
markets may offer less protection to investors than U.S. markets. It is
anticipated that in most cases the best available market for foreign
securities will be on an exchange or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may result in increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer, and
may involve substantial delays. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions and custodial
costs, are generally higher than for U.S. investors. In general, there is
less overall governmental supervision and regulation of securities
exchanges, brokers, and listed companies than in the United States. It may
also be difficult to enforce legal rights in foreign countries. 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.
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 Depository Receipts (ADRs) as well as other "hybrid" forms of ADRs
including European Depository Receipts (EDRs) and Global Depository
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 an alternative 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.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. The fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a fund at one rate, while offering a lesser rate
of exchange should the fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
A fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by the fund. A fund may also use swap agreements, indexed securities,
and options and futures contracts relating to foreign currencies for the
same purposes.
When a fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." A fund may also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, a fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
may substantially change a fund's investment exposure to changes in
currency exchange rates, and could result in losses to the fund if
currencies do not perform as FMR anticipates. For example, if a currency's
value rose at a time when FMR had hedged a fund by selling that currency in
exchange for dollars, the fund would be unable to participate in the
currency's appreciation. If FMR hedges currency exposure through proxy
hedges, a fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in
tandem. Similarly, if FMR increases a fund's exposure to a foreign
currency, and that currency's value declines, the 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 an appropriate time.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may include
agreements to purchase and sell foreign securities in exchange for fixed
U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of a
security purchased by a fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of
default by the counterparty, the fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the
fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve higher
credit risks than repurchase agreements in U.S. markets, as well as risks
associated with currency fluctuations. In addition, as with other emerging
market investments, repurchase agreements with counterparties located in
emerging markets or relating to emerging markets may involve issuers or
counterparties with lower credit ratings than typical U.S. repurchase
agreements.
FUNDS' RIGHTS AS A SHAREHOLDER. A fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
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 sections pertain to futures and options:
Asset Coverage for Futures and Options Positions, Combined Positions,
Correlation of Price Changes, Futures Contracts, Futures Margin Payments,
Limitations on Futures and Options Transactions, Liquidity of Options and
Futures Contracts, Options and Futures Relating to Foreign Currencies, OTC
Options, Purchasing Put and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A fund will comply with
guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
fund's assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which they typically invest, which
involves a risk that the options or futures position will not track the
performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters 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.
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.
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 market, before engaging in any purchases or sales of futures
contracts or options on futures contracts. The funds intend to comply with
Rule 4.5 under the Commodity Exchange Act, which limits the extent to which
the funds can commit assets to initial margin deposits and option premiums.
In addition, a fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on a fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, 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 for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of 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 a
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains
the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by the funds to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, over-the-counter options, and non-government
stripped fixed-rate mortgage-backed securities. Also, FMR may determine
some restricted securities, government-stripped fixed-rate mortgage-backed
securities, loans and other direct debt instruments, emerging market
securities, and swap agreements to be illiquid. However, with respect to
over-the-counter options a fund writes, all or a portion of the value of
the underlying instrument may be illiquid depending on the assets held to
cover the option and the nature and terms of any agreement the fund may
have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, a fund were in a position where more than 15% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
INDEXED SECURITIES. A fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. Gold-indexed securities, for example, typically
provide for a maturity value that depends on the price of gold, resulting
in a security whose price tends to rise and fall together with gold prices.
Currency-indexed securities typically are short-term to intermediate-term
debt securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies, and
may offer higher yields than U.S. dollar-denominated securities of
equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose
price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
United States and abroad. At the same time, indexed securities are subject
to the credit risks associated with the issuer of the security, and their
values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain U.S. government agencies. Indexed securities may
be more volatile than the underlying instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to, and
borrow money from, other funds advised by FMR or its affiliates. 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
will lend through the program only when the returns are higher than those
available from other short-term instruments (such as repurchase
agreements), and will borrow through the program only when the costs are
equal to or lower than the cost of bank loans. 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 is located by looking at
such factors as its country of organization, the primary trading market for
its securities, and the location of its assets, personnel, sales, and
earnings. The issuer of security is 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 or has its primary trading market in that country; or 2)
the issuer is organized under the laws of the 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 principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If a fund does not receive scheduled interest or
principal payments on such indebtedness, the fund's share price and yield
could be adversely affected. Loans that are fully secured offer a fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to a fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, a fund has direct recourse against the borrower, it may
have to rely on the agent to apply appropriate credit remedies against a
borrower. If assets held by the agent for the benefit of a fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by a fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
The fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
A fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations (4) and (i)
). For purposes of these limitations, the fund generally will treat the
borrower as the "issuer" of indebtedness held by the fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between 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 the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict a fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980s brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession. In fact, from 1989 to 1991, the percentage
of lower-quality securities that defaulted rose significantly above prior
levels, although the default rate decreased in 1992, 1993, and 1994.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-quality debt
securities and a fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by a fund. In considering investments
for the fund, FMR will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
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.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. Real estate-related instruments may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect the
fund from the risk that the original seller will not fulfill its
obligation, the securities are held in an account of the fund at a
bank, marked-to-market daily, and maintained at a value at least equal to
the sale price plus the accrued incremental amount. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to a fund
in connection with bankruptcy proceedings), it is a fund's current policy
to engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. A
fund will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of the fund's assets and may be
viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SECURITIES OF SMALL CAPITALIZATION COMPANIES. Smaller capitalization
companies may have limited product lines, markets, or financial resources.
These conditions may make them more susceptible to setbacks and reversals.
Therefore, their securities may have limited marketability and may be
subject to more abrupt or erratic market movements than securities of
larger companies.
SHORT SALES "AGAINST THE BOX." If a fund enters into a short sale against
the box, it will be required to set aside securities equivalent in kind and
amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The fund will incur
transaction costs, including interest expenses, in connection with opening,
maintaining, and closing short sales against the box.
SOVEREIGN DEBT OBLIGATIONS. A fund may purchase sovereign debt instruments
issued or guaranteed by foreign governments or their agencies, including
debt of Latin American nations or other developing countries. Sovereign
debt may be in the form of conventional securities or other types of debt
instruments such as loans or loan participations. Sovereign debt of
developing countries may involve a high degree of risk, and may be in
default or present the risk of default. Governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and
interest when due, and may require renegotiation or rescheduling of debt
payments. In addition, prospects for repayment of principal and interest
may depend on political as well as economic factors.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long- or
short-term interest rates (in the United States or abroad), foreign
currency values , mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of names. A fund is
not limited to any particular form of swap agreement if FMR determines it
is consistent with the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift 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 expects to be able to eliminate its
exposure under swap agreements either by assignment or other disposition,
or by entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
WARRANTS. Warrants are securities that give the fund the right to purchase
equity securities from the issuer at a specific price (the strike price)
for a limited period of time. The strike price of warrants typically is
much lower than the current market price of the underlying securities, yet
they are subject to similar price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities and 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 securities and do not represent any rights in the assets
if the issuing company. Also, the value of the warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to
have value if it is not exercised prior to expiration date. These factors
can make warrants more speculative than other types of investments.
SPECIAL CONSIDERATIONS AFFECTING EUROPE
New developments surrounding the creation of a unified common market in
Europe have helped to reduce physical and economic barriers promoting the
free flow of goods and services throughout Western Europe. These new
developments could make this new unified market one of the largest in the
world. However, in 1993 Europe's economies began to slow and subsequently
slid into recession as tight monetary conditions and a lack of progress
toward inflation convergence and budgetary consolidation in many countries
weakened consumer and business confidence. More generally, the turbulence
in foreign exchange markets since the middle of 1992 and escalating
tensions over trade contributed to increased uncertainty in many countries.
The U.S. dollar continued on its downward track with respect to both the
German mark and many other of Europe's currencies such as the Italian lira,
the Spanish peseta and the Swedish krona which have been affected by
political uncertainties and fiscal problems.
Subsequently, Europe's economies began to improve in 1995 as continued
growth in the United States and the Southeast Asian countries provided the
foundation for an export-led recovery. This recovery was aided by a sharp
rebound of the U.S. dollar after reaching postwar lows in the spring of
1995.
The Eastern European countries, after several years of declining output,
have generally shown dramatic growth in 1994 and 1995. Despite formidable
obstacles and major differences among countries and regions, many nations
are making substantial progress in their efforts to become market-oriented
economies. However, these economies are becoming increasingly disparate and
the experience of countries in the region varies markedly. Those nations
making the most successful transitions include Poland, the Czech Republic
and Hungary, while some of the former Soviet republics continue to suffer
from the consequences of the break-up of the Union and have not made much
progress in implementing effective market oriented reforms. Key aspects of
the reform and stabilization efforts have not yet been fully implemented,
and there remain risks of policy slippage. In the Russian Federation and
most other countries of the former Soviet Union, economic conditions are of
particular concern because of economic instability due to political unrest
and armed conflicts in many regions.
Notwithstanding the continued economic difficulties in many countries,
recent positive developments offer hope for a cooperative growth strategy
in the near term, which could also permit a strengthening of global
economic performance over the medium term. Many developing countries are
reaping the fruits of sustained reform and stabilization efforts. Efforts
to enhance assistance to countries affected by the transition to
market-based trading systems occurring in central Europe and the former
Soviet Union, and to low-income countries to support strengthened
stabilization and restructuring efforts, are moving forward. In Europe,
exchange market tensions have eased, interest rates have been falling and
may continue to do so as evidence accumulates of the waning of inflationary
pressures.
The European Community (EC) consists of Belgium, Denmark, France, Germany,
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and the
United Kingdom (the member states). In 1986, the member states of the EC
signed the "Single European Act", an agreement committing these countries
to the establishment of a market among themselves, unimpeded by internal
barriers or hindrances to the free movement of goods, persons, services, or
capital. To meet this goal, a series of directives have been issued to the
member states. Compliance with these directives is designed to eliminate
three principal categories of barriers: (1) physical frontiers, such as
customs posts and border controls; (2) technical barriers (which include
restrictions operating within national territories) such as regulations and
norms for goods and services (product standards); discrimination against
foreign bids (bids by other EC members) on public purchases; or
restrictions on foreign requests to establish subsidiaries; and (3) fiscal
frontiers, notably the need to levy value-added taxes, tariffs, or excises
on goods or services imported from other EC states.
The ultimate goal of this project is to achieve a large unified domestic
European market in which available resources would be more efficiently
allocated through the elimination of the above-mentioned barriers and the
added costs associated with those barriers. Elimination of these barriers
would simplify product distribution networks, allow economies of scale to
be more readily achieved, and free the flow of capital and other resources.
The Maastricht Treaty on economic and monetary union (EEMU) attempts to
provide its members with a stable monetary framework consistent with the
EC's broad economic goals. But until the EMU takes effect, which is
intended to occur between 1997 and 1999, the community will face the need
to reinforce monetary cooperation in order to reduce the risk of a
recurrence of tensions between domestic and external policy objectives.
The total European market, as represented by both EC and non-EC countries,
consists of over 370 million consumers, making it larger currently than
either the United States or Japanese markets. European businesses compete
nationally and internationally in a wide range of industries including:
telecommunications and information services, roads and transportation,
building materials, food and beverages, broadcast and media, financial
services, electronics, and textiles. Actual and anticipated actions on the
part of member states to conform to the unified Europe directives have
prompted interest and activity not only by European firms, but also by
foreign entities anxious to establish a presence in Europe that will result
from these changes. Indications of the effect of this response to a unified
Europe can be seen in the areas of mergers and acquisitions, corporate
expansion and development, GNP growth, and national stock market activity.
The early experience of the former centrally planned economies has already
demonstrated the crucially important link between structural reforms,
macroeconomic stabilization, and successful economic transformation. Among
the central European countries, the Czech Republic, Hungary, and Poland
have made the greatest progress in structural reform; inflationary
pressures there have abated following price liberalization, and output has
begun to recover. These achievements will be difficult to sustain, however,
in the absence of strong efforts to contain the large fiscal deficits that
have accompanied the considerable losses of output and tax revenue since
the start of the reform process.
In the Baltic countries there are encouraging signs that reforms are taking
hold and are being supported by strong stabilization efforts. In most other
countries of the former Soviet Union, in contrast, inadequate stabilization
efforts now threaten to lead to hyper-inflation, which could derail the
reform process. Inflation, which had abated following the immediate impact
of price liberalization in early 1992, surged to extremely high levels in
late 1992 and early 1993. The main reason for this development has been
excessive credit expansion to the government and to state enterprises. The
transformation process is being seriously hampered by he widespread
subsidization of inefficient enterprises and the resulting misallocation of
resources. The lack of effective economic and monetary cooperation among
the countries of the former Soviet Union exacerbates other problems by
severely constraining trade flows and impeding inflation control. Partly as
a result of these difficulties, some countries have decided that the
introduction of separate currencies offers the best scope for avoiding
hyper-inflation and for improving economic conditions. This development can
facilitate the implementation of stronger stabilization programs. Economic
conditions in the former Soviet Union have continued to deteriorate. Real
GDP in Russia fell 11.9 percent in 1993, after an 18 percent decline in
1992. In many other countries of the region, output losses have been even
larger. These declines reflect the adjustment difficulties during the early
stages of the transition, high rates of inflation, the compression of
imports, disruption in trade among the countries of the former Soviet
Union, and uncertainties about the reform process itself. Large-scale
subsidies are delaying industrial restructuring and are exacerbating the
fiscal situation. A reversal of these adverse factors is not anticipated in
the near term and output is expected to decline further in most of these
countries.
Economic conditions appear to have improved for some of the transition
economies of central Europe during the past year. Following three
successive years of output declines, there has been a turnaround in the
former Czech and Slovak Federal Republic, Hungary and Poland: growth in
private sector activity and strong exports, especially to Western Europe,
now appear to have contained the fall in output. Most central European
countries in transition have achieved positive real growth in 1994 and
early 1995 as market reform depend. The strength of the projected output
gains will depend crucially on the ability of the reforming countries to
contain fiscal deficits and inflation and on their continued access to, and
success in, export markets. A number of their governments, including those
of Hungary, and Poland, are currently implementing or considering reforms
directed at political and economic liberalization, including efforts to
foster multi-party political systems, decentralize economic planning, and
move toward free market economies. At present, no Eastern European country
has developed stock markets but Poland, Hungary and the Czech Republic have
small securities markets in operation. Ethnic and civil conflict continued
to rate throughout the former Yugoslavia. The outcome is uncertain.
Both the EC and Japan, among others, have made overtures to establish
trading arrangements and assist in the economic development of the Eastern
European nations. In the rest of Europe, monetary policy and financial
market developments have been dominated by the currency turmoil that began
in September 1992. At the same time, conditions are improving for
significant reductions of official interest rates in Europe, which should
help to contain recessionary forces and provide support to the overall
economic recovery in the region by early 1996. With the passage of the
General Agreement on Trade and Tariffs (GATT) earlier this year, Europe has
taken a step forward to resist protectionist pressures. Interest rates
continue to decline, but some countries' tight monetary conditions remain
an obstacle to stronger growth and a threat to exchange market stability.
However, in the long-term, economic unification of Europe could prove to be
an engine for domestic and international growth.
FRANCE has welcomed foreign trade and foreign investment and, along with
Germany, has emerged as a driving force within the Union. More than a
quarter of France's total sales, and 22% of its employment, derive from
foreign-owned companies. The country ranks high in manufacturing
productivity, while its unionization rate of 12% is the lowest in the
Union. The workforce is well-educated, yet labor is cheaper than in
Germany. Both national and local officials have been actively soliciting
international companies, particularly those with technological businesses
encouraging them to build factories and subsidiaries in France. Recognizing
the need for decentralization, the country has taken steps to build up
industrial and technological areas away from Paris, in cities such as
Marseilles. The government of prime minister Edouard Balladur has
drastically cut the corporate tax rate from one-half to one-third, and has
pledged to keep inflation at its current very low levels. Its successor
under Alain Juppe is expected to continue with these policies. However,
France faces two problems that are not uncommon in Europe: persistent high
unemployment (currently around 12%) and a high budget deficit. These
problems, although apparently not out of control, serve to hamper
prosperity and will probably not be solved anytime soon.
As of the end of 1994, France had the fourth largest Gross Domestic Product
in the world and was the fifth largest market, with market capitalization
equal to U.S. $265 billion. There are nearly a thousand listed companies in
the equity markets, and trading is on a par with capitalization by world
standards.
The French equity securities market is relatively small compared to the
United States' market. Trading practices are regulated by the French
securities exchange authorities and the sale and resale of securities are
generally less regulated than in the United States. Issuers of securities
in France are not subject to the same degree of regulation as are U.S.
issuers with respect to such matters as insider trading rules, tender offer
regulation, shareholder proxy requirements, and the timely disclosure of
information. In addition, accounting, auditing, and financial reporting
standards are not comparable to United States standards and, therefore,
less information may be available to investors investing in French
securities than would be available in respect of investments in the
securities of U.S. issuers in the United States. The French securities
market may be more volatile and is less liquid than the major U.S. markets.
As in the case of all foreign investments, the fund's investments may be
adversely affected by any increase in applicable foreign taxes or by
political, economic, or diplomatic developments.
A significant number of French enterprises are owned, directly or
indirectly, in whole or in part, by the French state. In 1986, the French
government announced an extensive privatization program, which was
discontinued following the parliamentary elections of June 1988, after 31
state-controlled enterprises had been sold to the public. Recently, the
previous French government had announced a new program of privatization
which is expected to continue under the current government. However,
investors should be aware that a future change of government, market, or
economic factors in France could result in a change in policy on
privatization.
Under current law, subject to certain exceptions, shares of French
companies may be owned by, and transferred to, non-residents of France
without limitation for portfolio investment. However, existing foreign
direct investment regulations provide that the acquisition by any
non-resident of the European Union of a controlling interest in a French
company is subject to prior approval of the Treasury Department of the
French Ministry of Economy. Under existing administrative rulings,
ownership of 20% or more of a listed company's share capital or, in the
case of unlisted companies, ownership of 33 1/3% or more, is regarded as a
controlling interest in such company, but a lower percentage might be held
to constitute a controlling interest in certain circumstances. Direct
investments by non-European Union residents, including the acquisition,
creation or expansion of French companies, and the increase in control of
French companies engaged in agricultural, industrial, or commercial,
financial, or real estate activities, require prior approval by French
authorities. In general, prior approval by French authorities is always
necessary (even if the investor is a European Union resident) if the
investment is to be made in certain specific industries such as the defense
and health industries. Pursuant to current legislation relating to
privatization of certain state-controlled companies, transfer by the French
authorities directly or indirectly to non-European Union persons and
entities under non-European Union control of equity shares of a French
company in connection with its privatization may not exceed a total of 20%
of such company's share capital. A lower percentage may be adopted if
considered vital to protect national interests. Furthermore, the Ministry
of Economy has the power to transfer an ordinary share of such company's
stock held by the French State into a "special share," thereby possibly
giving the Ministry of Economy a right of approval for an unlimited period
with respect to the ownership by any single person, or group of persons
acting together, or an equity interest representing more than 10% of such
company's share capital and/or the right to designate one or two
representatives of the French State to the board of directors of such
company, and/or the right of refusal with respect to decisions to sell
assets or grant guarantees which are considered against national interests.
GERMANY is generally regarded as the chief player in the Union. Germany is
highly integrated into the world's economy and capital markets, and should
continue to benefit from an ongoing world recovery from recession. From
1988 through 1992, real Gross National Product in Germany grew at a healthy
average of 3.5%. But 1993, which saw GNP down 2.1%, was the worst year
since the beginning of the postwar WIRTSCHAFTSWUNDER. In 1994, Germany
began to recover from recession, but rising interest rates kept the lid on
market advances. As of the end of 1993, Germany was the fourth largest
market in the world, with market capitalization equal to U.S. $450 billion
(the U.S. market for that year was the largest , with $5.2 trillion
in capitalization). In terms of the number of listed companies, Germany
ranked further down, at number 14 with 426 listed companies (by comparison,
the U.S. had over 7,600 listed companies). It follows that the average size
of German companies is large: over $1 billion in 1993, which placed it
number 3 in that category. Exports, a key part of the German economy, may
be poised to increase, although the weak U.S. dollar means that German
goods will be more expensive in the important U.S. market, thus reducing
demand.
While Germany's equity market appears to be highly valued by some measures,
the market as a whole is small compared to the economy. European investors
have lagged their U.S. counterparts in making equity investments, although
this has been changing. The high valuations of German stocks may also prove
supportable by the country's central role in the Union and its success in
developing the Eastern part of the country and the former Eastern bloc
countries for its manufacturing purposes.
In Germany the progress of the European Union continues to be the slow but
steady and the costs of assimilating the former East German states
continues to pose the greatest financial pressure. Costs for this project
were greatly underestimated: since unification in 1990, the government has
had to transfer money to the east in the amount of 4% - 5% of Gross
Domestic Product. To raise this money, the government has had to levy extra
taxes. These taxes have effectively offset advances in consumer income, and
have lead to the political necessity of down sizing government and
maintaining a tight monetary policy. In order to comply with the terms of
Maastricht, Germany must cut government debt from a projected 64% of GDP
next year to less than 60%. The failure, either political or economic, of
Germany's ability to cut spending while also finding the money to restore
the east to fiscal health could have repercussions for the German stock
market.
Germany is also facing pressures to reform its welfare and social security
programs, and must also comply with a court order to reform its tax system.
While the country does not appear to be in any risk of governmental crisis,
all of the factors mentioned above could lead to a shift in domestic
policies, with a potential shift in the political landscape not out of the
question.
Much of Germany's fiscal health and prosperity over the next few years
depends on the continued growth of capitalism in the former Eastern bloc
states. If this growth does not materialize, or if political events
intercede, there could be negative financial repercussions for Germany.
In 1995, Germany could be at risk of over expansion. Rapid growth of
production could bring the economy to the limits of current capacity, which
would likely prompt the central bank to tighten the money supply. However,
if Germany opts for slow growth in the short term in order to pave the way
for longer-term stability, profits over the short term could suffer.
NORDIC COUNTRIES. Denmark is a member of the Union. Sweden, Finland, and
Norway recently agreed to join the Union. These Nordic countries have a
combined total population of only 23 million, roughly equal to that of the
state of California. Productivity, as measured by Gross Domestic Product
per capita, is well above the European average in all countries except
Finland, where it stands at about 90% of the average. The Nordic countries
appear poised to embark on a path of rapid growth. Real GDP in Sweden is
expected to increase by 2.5% for 1995, and by 4.0% to 4.5% in Denmark,
Finland, and Norway. At the end of 1993, all four Nordic countries ranked
in the top 35 worldwide in terms of market capitalization and total market
value traded per year, meaning that the Nordic markets tend to be fairly
liquid for their size. The chief industries in the region are machinery,
textiles, furniture, electronics, dairy, metals, ship building, clothing,
engineering, chemicals, food processing, fishing, paper, oil and gas,
autos, and shipping. The number of listed companies is small; in 1993
Denmark had more than 250, but no other Nordic country had more than 125,
fewer even than such countries as Peru, Sri Lanka, and Iran. As a result of
the high level of market capitalization and the low number of listed
companies, Sweden, Finland, and Norway rank among the top 25 countries in
the world for average company size.
Foreign ownership of Nordic stocks has increased dramatically, growing from
U.S. $316 million in 1992 to $7.4 billion in 1994. One reason for the
appeal of Nordic stocks is that the companies in these countries tend to be
widely diversified in the geographic areas in which they do business; thus
the performance of a company may not be as closely linked to the state of
the local economy as it is in many countries. There are, however, potential
disincentives to foreign investors.
The establishment of stronger links with their neighbors to the south will
likely be accompanied by substantial change in several aspects of the
Nordic countries' economies, particularly in the area of government
spending. The extensive social welfare system that was the envy of much of
the world in the 1960s and 1970s has proved to be extremely costly during
the subsequent decades of more modest prosperity. In Norway, these benefits
were financed through oil and gas exports, but in other Nordic countries
they have tended to result in growing government debts and deficits.
The populations of the Nordic countries have become accustomed to generous
benefits for unemployment, sick leave, child care, elder care, and general
public welfare, along with state-provided medical care. With the exception
of Denmark, each country also has a history of supporting an inefficient
agricultural sector with subsidies ranging up to 75% (the recent average
for Europe has been approximately 35% - 45%). Public spending on social
programs in Sweden accounted for a full one-third of GDP during the 1980s.
Unemployment remains fairly high, ranging from 6% in Norway to 19% in
Finland. The income scale in the Nordic countries tends to be comparatively
flat, both with regard to age and skill; thus there is little income
advantage to be gained by career advancement. Almost half of personal
disposable income received by Swedes was the result of transfer payments, a
system for redistributing wealth. In Norway, the number of industrial jobs
has fallen by 100,000 since 1972, while government employment has doubled.
Once the Nordic countries become members of the Union, and once the full
terms of the Maastricht Treaty and other Union agreements are implemented,
there will be strong pressures on the Nordic countries to bring their
government spending more closely into line with those of Europe. Farms,
particularly those closest to the European continent, will either be forced
to improve efficiency or close down, while exports of Norwegian oil and gas
and Finnish timber and mineral resources will need to find a place in the
Union's trade policies if the Nordic countries are to prosper. National
debts, which are high in Finland and Sweden, will need to be reduced. How
well these goals can be accomplished without reversing the long-awaited
growth trends that are now emerging in the Nordic countries remains to be
seen.
The Nordic countries will also be challenged to keep their most skilled
workers. Such workers are essential to the region's significant
manufacturing and engineering businesses, but the implementation of the
Union will make it easier for Nordic workers to seek employment in other
member states. And while a favorable corporate tax structure has aided the
largest Nordic companies in amassing the capital to make investments, many
of them have been investing outside the region rather than domestically.
While these problems are not insurmountable, a failure to address them
could impair the prosperity of the Nordic countries, and with it the
performance of their markets.
UNITED KINGDOM. Occupying most of the land area of the British Isles, the
U.K. includes England, Wales, Scotland, and Northern Ireland. As of the end
of 1993, the U.K. was the third largest market in the world, with market
capitalization equal to U.S. $1.2 trillion (the U.S. market for that year
was the world's largest market, with $5.2 trillion in capitalization).
There are 1,650 listed companies in the U.K. equity markets, and trading
volume is on a par with capitalization by world standards. The U.K. ranks
tenth worldwide in terms of average company size. The relatively high
number of listings and the relatively low average company size mean that
the behavior of the U.K. stock market is less likely to be dominated by the
trading actions of a few large stocks.
The U.K. experienced a long post-war recession which ended in 1992;
however, it did not escape the effects of worldwide recession in 1993 and
1994. Exports were hurt by the lack of demand from depressed foreign
markets. Still, the U.K. was one of a very few European economies to post
positive GDP numbers for 1993, with a 2% growth rate.
Foreign investment is strong in the U.K., particularly in Wales and
Scotland, which have made international efforts to attract investors and
development by foreign companies. At the end of 1992, more than 3,500 U.S.
companies had made investments in the U.K., for a total of $78 billion, a
number that represents nearly 40% of all U.S. investment in the member
states. This far exceeds U.S. investment in Germany, which was $35 billion
in 1992. The companies of other nations have been attracted to the U.K. for
investing as well, drawn by low labor costs, relative political stability,
and tax incentives. Foreign investment is crucial to the continued economic
strength of the U.K.
While foreign investment has been high, there are signs that it may not
continue to grow at the same rate. Other Union members are actively
recruiting investors, advertising their increased level of participation in
the Union as a key to important trade benefits. Even some major British
corporations, such as British Petroleum and Pilkington, have moved their
headquarters onto the European continent. The U.K. lags in the percentage
of its population that goes on to higher education, an important factor for
technology-based businesses. Despite the opening of the new English Channel
tunnel rail link to the continent, the government's spending on railways
and other parts of the transportation infrastructure is well behind that of
France and Germany.
Going forward, the U.K. appears poised for continued growth. Business
investment has risen since 1992, and as asset utilization approaches
current capacity, investment should continue to rise, with businesses
needing to expand beyond their current size in order to meet increasing
demand. Unemployment began to fall in early 1993, and employment growth
resumed.
While the U.K. is a member of the Union, domestic sentiment has not been
wholly favorable towards Union involvement. A failed bid to tie the pound
to the European Currency Unit (ECU), the proposed single currency for the
Union, resulted in higher inflation and almost forced British Prime
Minister John Major out of office. This event did not discourage negative
sentiments. As a result, the U.K. has not been as actively involved in
working with the architects of Union policies as it might have been, and
has thus been less successful in ensuring that its needs and viewpoints
were reflected in these policies. So far, the U.K. has allowed Germany and
France to play the major roles in shaping the Union framework.
The Conservative government, which was strongly entrenched during the 1980s
under Margaret Thatcher, has not been as powerful since that time and
currently faces the possibility that it may lose control of the government.
A shift of sentiment towards the Labour Party, or a further weakening of
the Conservative's power, could produce a government that lacks the focus
or the political will to address domestic issues and to play a strong role
in the Union.
Like many European countries, the U.K. has been plagued with persistent
high inflation, and it has run a current account trade deficit for many
years. Both of these factors have been a hindrance to prosperity, and both
are likely to continue to exist in some form in the future.
The conditions that have given rise to these developments are
changeable, and there is no assurance that reforms will continue or that
their goals will be achieved.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1994
Denmark 4.6
Finland 3.9
France 2.5
G e rmany 2.9
Ita ly 2.5
Net herlands 2.4
Norway 5.5
S pain 1.9
Sweden 2.2
Sw itzerland 2.0
Un ited Kingdom 3.8
Source: World Economic Outlook, May 199 5
(International Monetary Fund)
For national stock market index performance, please see the section on
Performance beginning on page .
SPECIAL CONSIDERATIONS AFFECTING JAPAN, THE PACIFIC BASIN, AND SOUTHEAST
ASIA
Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the United States
and Western European countries. Such instability may result from (i)
authoritarian governments or military involvement in political and economic
decision-making; (ii) popular unrest associated with demands for improved
political, economic, and social conditions; (iii) internal insurgencies;
(iv) hostile relations with neighboring countries; and (v) ethnic,
religions, and racial disaffection.
The economies of most of the Asian countries continue to depend heavily
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners,
principally, the United States, Japan, China and the European Community.
The enactment by the United States or other principal trading partners of
projectionist trade legislation, reduction of foreign investment in the
local economies, and general declines in the international securities
markets could have a significant adverse effects upon the securities
markets of the Asian countries.
The success of market reforms, a surge in infrastructure spending have
fueled rapid growth in many developing countries in Asia. Rapidly rising
household incomes have fostered large middle classes and new waves of
consumer spending. Increases in infrastructure spending and consumer
spending have made domestic demand the growth engine for these countries.
Thus their growth now depends less upon exports to OECD countries. While
exports may no longer be the sole source of growth for developing
economies, improved competitiveness in exports markets has contributed to
growth in many of these nations. The increased productivity of many Asian
countries has enabled them to achieve, or continue, their status as top
exporters while improving their national living standards.
Thailand has one of the fastest-growing stock markets in the world. The
manufacturing sector is becoming increasingly sophisticated and is
benefiting from export-oriented investing. The manufacturing and service
sectors continue to account for the bulk of Thailand's economic growth. The
agricultural sector continues to become less important. The government has
followed fairly sound fiscal and monetary policies, aided by increased tax
receipts from a fast moving economy. The government also continues to move
ahead with new projects - especially telecommunications, roads and port
facilities - needed to refurbish the country's overtaxed infrastructure.
The country enjoys an able bureaucracy, which has maintained economic
policy during the country's many coups. In recent years, the risk of a coup
has diminished, but corruption remains widespread.
In terms of GDP, industrial standards and level of education, South Korea
is second only to Japan in Asia. It enjoys the benefits of a diversified
economy with well-developed sectors in electronics automobiles, textiles
and shoe manufacture steel and shipbuilding among others. The driving force
behind the economy's dynamic growth has been the planned development of an
export-oriented economy in a vigorously entrepreneurial society. Real GDP
grew about 8.3% in 1994. Both Koreas joined the United Nations separately
in late 1991, creating another forum for negotiation and joint cooperation.
Reunification of North Korea and South Korea could have a detrimental
effect on the economy of South Korea.
Indonesia is a mixed economy with many socialist institutions and central
planning but with a recent emphasis on deregulation and private enterprise.
Like Thailand, Indonesia has extensive natural wealth yet with a large and
rapidly increasing population. Dependent on oil exports during the 1980s,
its manufactured products now predominate, contributing 21% of GDP.
Indonesia's development is progressing smoothly, and it has become the
world's 12 largest economy.
Malaysia has one of the fastest-growing economies in the Asian-Pacific
region. Malaysia has become the world's third-largest producer of
semiconductor devices (after the U.S. and Japan) and the world's largest
exporter of semiconductor devices. More remarkable is the country's ability
to achieve rapid economic growth with relative price stability as the
government followed prudent fiscal/monetary policies. Malaysia's high
export dependence level leaves it vulnerable to a recession in the
Organization for Economic Cooperation and Development countries or a fall
in world commodity prices.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its history. During the 1970s and the early 1980s the economy expanded
rapidly, achieving an average annual growth rate of 9%. Per capita GDP is
among the highest in Asia. Singapore holds a position as a major oil
refining and services center.
JAPAN. Japan currently has the second-largest GDP in the world. The
Japanese economy has grown substantially over the last three decades. Its
growth rate averaged over 5% in the 1970s and 1980s. However in 1994, the
growth rate in Japan slowed to 0.6% and their budget showed a deficit of
7.8% of GDP. Despite small rallies and market gains Japan has been plagued
with economic sluggishness. Economic conditions have weakened considerably
in Japan since October 1992. The boom in Japan's equity and property
markets during the expansion of the late 1980's supported high rates of
investment and consumer spending on durable goods, but both of these
components of demand have now retreated sharply following the decline in
asset prices. It is suffering through its worst recession in two decades.
Profits have fallen sharply, unemployment has reached a historical high of
3.2% and consumer confidence is low. The banking sector continues to suffer
from non-performing loans. Nine discount rate cuts since its 6% peak in
1991, a succession of fiscal stimulus packages, support plans for the
debt-burdened financial system and spending for reconstruction following
the Kobe earthquake should help to contain the recessionary forces, but
substantial uncertainties remain. The general government position has
deteriorated as a result of weakening economic growth, as well as
stimulative measures taken recently to support economic activity and to
restore financial stability.
In addition to a cyclical downturn, Japan is suffering through structural
adjustments. Like the Europeans, the Japanese have seen a deterioration of
their competitiveness due to high wages, a strong currency and structural
rigidities. Japan has also become a mature industrial economy and, as a
result, will see its long-term growth rate slow down over the next ten
years. Finally, Japan is reforming its political process and deregulating
its economy. This has brought about turmoil, uncertainty and a crisis of
confidence.
Japan is heavily dependent upon international trade and, accordingly, has
been and may continue to be adversely affected by trade barriers and other
protectionist or retaliatory measures of, as well as economic conditions in
the U.S. and other countries with which they trade. Industry, the most
important sector of the economy is heavily dependent on imported raw
materials and fuels. Japan's major industries are in the engineering,
electrical, textile, chemical, automobile fishing and telecommunication
fields. Japan imports iron ore, copper, and many forest products. Only 19%
of its land is suitable for cultivation. Japan's agricultural economy is
subsidized and protected. It is about 50% self-sufficient in food
production. Even though Japan produces a minute rice surplus, it is
dependent upon large imports of wheat, sorghum and soybeans from other
countries. Japan's high volume of exports such as automobiles machine tools
and semiconductors have caused trade tensions with other countries,
particularly the United States. Some trading agreements between the
countries have reduced the friction caused by the current trade imbalance.
A record high value of the yen in first half of 1995 threatened to derail
Japan's recovery from a long economic downturn, mainly because it made
Japanese products more expensive overseas and eroded the value of foreign
earnings when repatriated to Japan. However, the recent ease of the yen has
created expectations that Japanese earnings will improve for the fiscal
year ending March 1996.
The relaxing of official and de facto barriers to imports, or hardships
created by any pressures brought by trading partners, could adversely
affect Japan's economy. A substantial rise in world oil or commodity prices
could also have a negative affect. The strength of the yen itself may prove
an impediment to strong continued exports, because of the high prices it
means for Japanese goods sold in other countries. Because the Japanese
economy is so dependent on exports, any fall-off in exports may be seen as
a sign of economic weakness, which may adversely affect the market and the
fund.
The Tokyo Stock Exchange is the largest of eight exchanges in Japan which
has very well developed primary and secondary equity markets. The Tokyo
Stock Exchange is followed by the Osaka Stock Exchange and the Nagoya Stock
Exchange. These three exchanges divide the market for domestic stocks into
two sections, with newly listed companies and smaller companies assigned to
the second section and larger companies assigned to the first section.
However, the growth of the Japanese securities market has not been without
its setbacks. In 1990, the Japanese stock market, as measured by the Toyko
Stock Price Index (TOPIX), began a spectacular decline which lasted through
the middle of 1992. During this period the TOPIX lost over 55% of its
value. Since then, the market has failed to rebound substantially, and the
TOPIX remains far closer today to its bottom in 1992 than to its peak in
1989 and 1990.
The decline in the Japanese securities markets has contributed to a
weakness in the Japanese economy, and the impact of a further decline
cannot be ascertained. The common stocks of many Japanese companies
continue to trade at high price-earnings ratios in comparison with those in
the United States, even after recent market decline. Differences in
accounting methods make it difficult to compare the earnings of Japanese
companies with those of companies in other countries, especially the United
States.
While the Japanese governmental system itself seems stable, the dynamics of
the country's politics have been unpredictable in recent years. The
economic crisis of 1990-92 brought the downfall of the conservative Liberal
Democratic Party, which had ruled since 1955. Since then, the country has
seen a series of unstable multi-party coalitions and several prime
ministers come and go, because of politics as well as personal scandals.
While there appears to be no reason for anticipating civic unrest, it is
impossible to know when the political instability will end and what trade
and fiscal policies might be pursued by the government that emerges.
With the general economic sluggishness of the past few years, banks have
seen an increase in non-performing assets. While at the moment these do not
appear to pose any major threat to the health of the institutions, any
continued or intensified decline in the Japanese economy could throw
additional strain onto the country's banking institutions.
Geologically, Japan is located in a volatile area of the world, and has
historically been vulnerable to earthquakes, volcanoes and other natural
disasters. As demonstrated by the Kobe earthquake in January of 1995, in
which 5,000 people were killed and billions of dollars of damage was
sustained, these natural disasters can be significant enough to affect the
country's economy.
As in the U.S. and other markets, small company stocks are typically more
volatile than large company stocks, reacting more extremely to good or bad
news. Since Japan's market is dominated by large stocks (the average
company size in Japan is the largest anywhere in the world), the behavior
of the Japanese stock market in general and of the small-stock segment in
particular also may be affected by the trading activity on a relatively
small number of large-company stocks to a much greater degree than is
typically seen in the U.S. Further, during periods of economic difficulty,
small companies can find it harder to compete or survive. Since August
1990, the shares of smaller Japanese companies have underperformed those of
larger companies, as they tend to do in periods of declining industrial
production. However, the reverse tends to apply in periods of economic
recovery.
There are two factors that may influence the future corporate structure of
Japan, to the benefit of smaller Japanese companies. First, Japan is likely
to follow the pattern set by the economies of the United Kingdom and
Germany in reducing its dependence on manufacturing and increasing the
contribution of service industries to the economy. This should benefit
small companies, many of which are less capital intensive and often more
entrepreneurial. Also, many sectors of the Japanese economy, such as food,
retail, distribution, and financial services, are subject to regulations
which are in the process of being released or removed. Deregulation should
provide opportunities for smaller, more flexible companies. In addition,
the removal of artificial price restrictions and reductions in personal
taxes could lead to an upturn in Japanese domestic consumption as a
percentage of Gross Domestic Product, which is currently significantly
lower than in the United States. This increase in spending could also
benefit smaller Japanese firms. However, the continuation of economic
weakness could make it difficult for small companies to prosper, or could
make their stocks appear unattractive to investors.
The influence of the factors mentioned above, against a background of
potential recovery in the Japanese economy, may result in an attractive
long-term opportunity for selective investment in smaller Japanese
companies, and that such companies may outperform larger Japanese companies
over the longer term if economic recovery is realized.
Australia has a prosperous Western-style capitalist economy, with a per
capita GDP comparable to levels in industrialized Western European
countries. Economic growth accelerated markedly in 1994 as robust domestic
spending boosted activity. It is rich in natural resources and is the
world's largest exporter of beef and wool, second-largest for mutton, and
it is among the lop wheat exporters. Australia is also a major exporter of
minerals, metals and fossil fuels. Due to the nature of its exports, a
downturn in world commodity prices can have a big impact on its economy.
HONG KONG AND CHINA. Hong Kong's impending return to Chinese dominion in
1997 has not initially had a positive effect on its economic growth which
was vigorous in the 1980s. Although China has committed by treaty to
preserve the economic and social freedoms enjoyed in Hong Kong for 50 years
after regaining control of Hong Kong, the continuation of the current form
of the economic system in Hong Kong after the reversion will depend on the
actions of the government of China. Business confidence in Hong Kong,
therefore, can be significantly affected by such developments, which in
turn can affect markets and business performance. In preparation for 1997,
Hong Kong has continued to develop trade with China, where it is the
largest foreign investor, while also maintaining its long-standing export
relationship with the United States (U.S.). Spending on infrastructure
improvements is a significant priority of the colonial government while the
private sector continues to diversify abroad based on its position as an
established international trade center in the Far East. It is important to
note that a substantial portion of the companies listed on the Hong Kong
Stock Exchange are involved in real estate related business.
China's economy may be described as transitional. While the government
still controls the production and pricing in a major portion of the
country's economy, the country has also seen a sharp rise in capitalist
activities. The opening of China to U.S. trade by President Nixon in 1972
marked an important step towards capitalism, but the most significant step
was the liberalization brought about by Deng Xiaoping, who assumed power in
the late 1970s. Deng believed that the advancement of the economy was
essential to the advancement of socialism an argument which effectively
neutralized the traditional Party objections to capitalism and foreign
investment. Under Deng's rule, China has prospered. At the time he came to
power, more than a quarter of the population was living in absolute
poverty; today, less than 10% of the population is in that category. The
real incomes of many workers have doubled and tripled, and some 80 million
urban dwellers are able to afford middle-class luxuries such as cosmetics
and Western-style fast food.
China's economy has grown at the extraordinary rate of 10% per year on
average over the past decade, with the industrial segment leading the way:
industrial growth in China exceeded 20% a year in 1992 and 1993. China's
economic growth itself has not been smooth, however, being characterized by
spurts of almost uncontrolled growth alternating with periods of harsh
austerity measures. Both the speed and the erratic nature of the growth
have caused inefficiencies and dislocations within China, including
troublesome inflation rates of 20% - 30% per year over the past five years.
Most of China's trading activity is funnelled through Hong Kong. The value
of the Hong Kong market has grown from U.S. $54 million in 1986 to more
than $380 million in 1993, with China estimated as being the largest
investor in the market. Among Asian markets, only the Japanese market is
larger than Hong Kong, worldwide, Hong Kong ranked 6th at the end of 1993.
China itself 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 1994, there were 54 companies with Class B shares on the two
exchanges, for a total Class B market capitalization of U.S. $2.1 billion.
In Shanghai, all "B" shares are denominated in Chinese renminbi but all
transactions in "B" shares must be settled in US dollars, and all
distributions made on "B" shares are 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.
Since 1978, China has designated certain areas of the country where
overseas investors can receive special investment incentives and tax
concessions in order to attract foreign investment. There are five Special
Economic Zones (Shenzhen, Shanton, and Zhuhai in Guangdong Province, Xiamen
in Fujiam Province, and Hainan Island, which itself is a province).
Fourteen coastal cities have been designated as "open cities" and certain
Open Economic Zones have been established in coastal areas. Shanghai has
established the Pudong New Area. Twenty seven High and New Technology
Industrial Development Zones have been approved where preferential
treatment is given to enterprises which are confirmed as technology
intensive.
Economically and financially, China is categorized as an emerging nation,
and thus presents the investor with many of the general risks that are
typical of such markets. However, in the case of China, there are two main
risk factors than eclipse all others: the political uncertainty surrounding
the succession to Deng and the 1997 relinquishment of Hong Kong to China by
Great Britain.
If economic growth and market liberalization have been the major positive
results of Deng's tenure, the drawbacks include a significant potential for
political instability. Deng's policies have had the effect of making the
Communist Party, and indeed much of the government, obsolete, however, both
the Party and the government remain firmly entrenched. There is little
possibility of predicting what type of government will eventually stabilize
itself in post-Deng China, but the possibilities range from old-line
conservative to ambitiously pro-growth. Even if the latter type should
prevail, there is no assurance that such a government would succeed in
controlling growth or inflation even to the fairly crude degree that Deng's
government has managed.
In the meantime, the economic weight of government entities is one of the
significant factors driving inflation in China and acting to impede
commerce and economic efficiency. The Party does not govern directly, but
only by controlling access to official government positions and by
monitoring government and private activities. Thus each governmental body
has its own corresponding body within the Party, leading to a double
bureaucracy which is both inefficient and highly prone to corruption.
While the fact of economic growth has been the result of planning, the
nature, speed, and extent of that growth have not been tightly controlled
or carefully planned. The combination of a burgeoning economy, a weakened
central government, and a power vacuum left by the demise of Deng may prove
volatile in the coming years, however bright China's long-term future may
be. Nor does China have a unified legal system or a set of national laws
governing business and securities trading practices on which to fall back.
There is still no free press, no viable opposition party, and no right to
freedom of expression. The massacre in Tienanmen Square in June of 1989 is
only the most recent reminder of this.
Much speculation centers around what China will do when it comes back into
possession of Hong Kong. Naturally, much of the answer will depend on who
is in power in China at that time, which is unknown. However, tensions that
have arisen between the current governor, Chris Patten, and the Chinese
government have led to speculation that China may try to punish Hong Kong
by sabotaging it economically, an option which is considered a real
possibility even though it would not necessarily be to China's economic
advantage to do so. The Hong Kong market's spectacular growth over the past
decade has not come without much volatility, and there is no reason to
doubt that volatility will continue to characterize the market, not only
because of political uncertainties but because the market has traditionally
been dominated by the actions of a few large trading blocs.
China is greatly dependent on foreign trade, particularly with Japan, the
U.S., and Germany. If political events become severe in China, there is
always the danger that the U.S. or other nations could alter their trade
stance towards China, which could hurt its economy by reducing exports.
However, China's exports continue to rise strongly while imports are also
expected to rise and may outstrip exports in terms of growth rates.
The strength of the economy and the weakness of the government could lead
to substantially higher inflation in coming years, which would erode
investors' earnings through the mechanism of changing rates of currency
exchange. Even under the most favorable circumstances, inflation is likely
to remain very high by Western standards. At the other extreme, a
tightening of government-imposed austerity measures could choke economic
growth and serve to discourage foreign investment, which would likely
result in lower prices for Class B shares.
A particularly significant factor within the region over the last 13 years
has been the increasing influence which China has had in the determination
of the economic development of certain countries. This influence has been
principally in providing manufacturing facilities, in providing a market
for goods and services, and in creating a demand for export outlets, both
directly and indirectly, through Hong Kong.
The effect of China's economic development has been an increase in economic
integration among the countries in the China region. The links between
China and Hong Kong and China and other countries within the region, where
there is a significant Chinese element of the population, have by now been
strengthened to a degree which makes a reversal unlikely. Moreover,
although these links have been developed to a stage where economic
co-operation in trade operates smoothly, the full potential of the market,
both in terms of domestic consumption and of export growth, has hardly
begun to be realized.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1994
C hina 12.0
Ho ng Kong 5.7
I n dia 4.9
Ind o nesia 7.0
Ja pa n 0.6
Kor ea 8.3
Malay sia 8.5
Ph ilipp ines 4.5
Sin gapor e 7.0
Taiw an 6.2
Th ai land 8.5
Source: World Economic Outlook, May 1995 (International Marketing
Fund)
For national stock market index performance, please see the section on
Performance beginning on page .
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to the
sub-advisers (see the section entitled "Management Contract"), the
sub-advisers are authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. FMR is also responsible for the placement of transaction
orders for other investment companies and accounts for which it or its
affiliates act as investment adviser. In selecting broker-dealers, subject
to applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to: the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and arrangements for payment of fund
expenses. 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 funds 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; effect securities transactions, and perform
functions incidental thereto (such as clearance and settlement). The
selection of such broker-dealers generally is made by FMR (to the extent
possible consistent with execution considerations) in accordance with a
ranking of broker-dealers determined periodically by FMR's investment staff
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services (FBS), subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. From
September 1992 through December 1994, FBS operated under the name Fidelity
Brokerage Services Limited, Inc. (FBSL). As of January 1995, FBSL was
converted to an unlimited liability company and assumed the name FBS. Prior
to September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members, and various trusts for the benefit of
the Johnson family own, directly or indirectly, more than 25% of the voting
common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by the fund toward payment of the fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of
each fund and review the commissions paid by each fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to a fund.
Each fund's estimated portfolio turnover rate for fiscal 1996 is not
expected to exceed 200%. 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.
A fund pays both commissions and spreads in connection with the placement
of portfolio transactions. FBSI is paid on a commission basis.
From time to time the Trustees will review whether the recapture for the
benefit of a 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 each fund to seek such recapture.
Although the Trustees and officers of a fund are substantially the same as
those of other funds managed by FMR, investment decisions for the fund are
made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of each fund to participate in volume transactions
will produce better executions and prices for each fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for which
the primary market is the U.S. are valued at last sale price or, if no sale
has occurred, at the closing bid price. Most equity securities for which
the primary market is outside the U.S. are valued using the official
closing price or the last sale price in the principal market where they are
traded. If the last sale price (on the local exchange) is unavailable, the
last evaluated quote or last bid price is normally used. Short-term
securities are valued either at amortized cost or at original cost plus
accrued interest, both of which approximate current value. Convertible
securities and fixed-income securities are valued primarily by a pricing
service that uses a vendor security valuation matrix which incorporates
both dealer-supplied valuations and electronic data processing techniques.
This two-fold approach is believed to more accurately reflect fair value
because it takes into account appropriate factors such as institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data,
without exclusive reliance upon quoted, exchange, or over-the counter
prices. Use of pricing services has been approved by the Board of Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by each fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the NYSE. The values of any such securities held by a fund are
determined as of such time for the purpose of computing the fund's net
asset value. Foreign security prices are furnished by independent brokers
or quotation services which express the value of securities in their local
currency. 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 currency into U.S. dollars.
Any changes in the value of forward contracts due to exchange rate
fluctuations and days to maturity are included in the calculation of net
asset value. If an extraordinary event that is expected to materially
affect the value of a portfolio security occurs after the close of an
exchange on which that security is traded, then the security will be valued
as determined in good faith by a committee appointed by the Board of
Trustees.
PERFORMANCE
A fund may quote performance in various ways. All performance information
supplied by a fund in advertising is historical and is not intended to
indicate future returns. The fund's share price, yield, and total return
fluctuate in response to market conditions and other factors, and the value
of fund shares when redeemed may be more or less than their original cost.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's net asset
value (NAV) over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and then calculating
the annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual return of 7.18%, which is the steady annual rate
of return that would equal 100% growth on a compounded basis in ten years.
Average annual returns covering periods of less than one year are
calculated by determining a fund's total return for the period, extending
that return for a full year (assuming that return remains constant over the
year), and quoting the result as an annual return. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that a fund'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 the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking each
fund's 3% maximum sales charge into account and may or may not include the
effect of each fund's 1.5% redemption fee on shares held less than 90 days.
Excluding a fund's sales charge or redemption fee from a total return
calculation produces a higher total return figure. Total returns, yields,
and other performance information may be quoted numerically or in a table,
graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. A fund may illustrate performance using moving averages. A
long-term moving average is the average of each week's adjusted closing NAV
for a specified period. A short-term moving average is the average of each
day's adjusted closing NAV for a specified period. Moving Average Activity
Indicators combine adjusted closing NAVs from the last business day of each
week with moving averages for a specified period to produce indicators
showing when an NAV has crossed, stayed above, or stayed below its moving
average.
A fund may compare its performance to the record of the Standard and Poor's
Composite Index of 500 Stocks (S&P 500(registered trademark)), the Dow
Jones Industrial Average (DJIA), its respective comparative indices listed
below, and the cost of living (measured by the Consumer Price Index, or
CPI) over the same period. The S&P 500 and the DJIA comparisons would show
how a fund's total return compared to the record of a broad average of
common stock prices and a narrower set of stocks of major industrial
companies, respectively. Each fund has the ability to invest in securities
not included in the indices, and its investment portfolio may or may not be
similar in composition to the indices. Figures for the S&P 500, DJIA, and
the comparative indices listed below are based on the prices of
unmanaged groups of stocks and, unlike each fund's returns, do not include
the effect of paying brokerage commissions and other costs of investing.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Comparative Index Description of Index
France Fund Societe des Bourses Francaises 250 An unmanaged capitalization weighted index of
Index (SBF 250) the top 250 stocks on the Paris Stock Exchange
Compagne Nationale des Agents de An unmanaged index of 40 of the largest
Change 40 Index (CAC 40) companies listed on the forward segment of the
official list
Morgan Stanley Capital International An unmanaged index of 900 foreign common
Europe, Australia, Far East Index stocks
(EAFE)
Germany Fund Deutscher Akteinindex 100 (DAX An unmanaged capitalization weighted index of the
100) top 100 stocks on the German Securities Market
Deutscher Akteinindex 30 (DAX 30) An unmanaged index of the top 30 stocks on the
German Securities Market
Morgan Stanley Capital International An unmanaged index of 900 foreign common
Europe, Australia, Far East Index stocks
(EAFE)
Hong Kong and
China Hang Seng Index An unmanaged capitalization weighted index of
Fund total return performance of the top 33 companies
on the Hang Seng
Hong Kong All Ordinaries Index An unmanaged capitalization weighted index of
all shares trading on the Hong Kong Stock
Exchange
Morgan Stanley Capital International An unmanaged index of more than 350 companies
Pacific Index (MSCI Pacific) from Australia, Hong Kong, Japan, Singapore, and
Malaysia.
Japan Small
Companies Tokyo Stock Exchange Second An unmanaged capitalization weighted index of
Fund Section Index all stocks listed on the second section of the Tokyo
Stock Exchange
Tokyo Price Index (TOPIX) Includes over 1,200 companies representing over
90% of the total market capitalization in Japan
JASDAQ An unmanaged capitalization weighted-index of
all OTC stocks except the Bank of Japan and all
managed issues
Nordic Fund FT/S&P-Actuaries World Nordic An unmanaged index of 90 stocks from Denmark,
Index (FT - A - Nordic Index) Finland, Norway and Sweden. The index is
designed to provide coverage of approximately
85% of investable equity available in each market.
Morgan Stanley Capital International An unmanaged index of common stocks from
Nordic Index (MSCI Nordic) Denmark, Finland, Norway and Sweden
Morgan Stanley Capital International An unmanaged index of 900 foreign common
Europe, Australia, Far East Index stocks
(EAFE)
United Kingdom
Fund FT - SE - Actuaries All-Shares An unmanaged capitalization weighed,
(FT - SE - A All-Shares) broad-based index that includes more than 900
U.K. domiciled stocks. The index covers more
than 90% of the total capitalization of the U.K.
market
FT - SE 100 Index An unmanaged index of the 100 largest U.K.
companies in terms of market capitalization.
</TABLE>
MARKET CAPITALIZATION AND NATIONAL
STOCK MARKET RETURN
The following tables show the total market capitalization of certain
countries according to the International Finance Corporation as of June
30, 1995 and the performance of national stock markets as measured in
U.S. dollars by the Morgan Stanley Capital International stock market
indices for the 1, 5 and ten year periods ending July 31, 1995 . Of
course, these results are not indicative of future stock market performance
or the funds' performance. Market conditions during the periods measured
fluctuated widely. Brokerage commissions and other fees are not factored
into the values of the indices.
MARKET CAPITALIZATION. Companies outside the U.S. 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 $2,011 billion in 1982 to $8,512 billion in 1995.
TOTAL MARKET CAPITALIZATION (MILLIONS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Au strali a $226 ,000 J apan $3,542 ,000
A ustria 33 ,000 Ne th erlands 288 ,000
Bel gi um 98 ,000 No rw ay 44 ,000
Can ad a 324 ,000 Sing apor e 138 ,000
Denmark 57 ,000 Malaysia 208 ,000
France 516 ,000 Sp ain 144 ,000
Germany 590 ,000 Sw e den 159 ,000
Hong Kong 251 ,000 Switz erland 350 ,000
Italy 193 ,000 United K ingdom 1,239 ,000
Unit ed States 5,634 ,000
</TABLE>
NATIONAL STOCK MARKET INDEX PERFORMANCE. Certain national stock
markets have outperformed the U.S. stock market. The table below
represents the performance of national stock market indices as
measured in U.S. dollars by the Morgan Stanley Capital International stock
market indices for the one, five, and 10 year periods ending July
31, 1995. The table measures total return based on the period's
change in price, dividends paid on stocks in the index, and the effect of
reinvesting dividends net of withholding taxes for foreigners not
benefiting from any double taxation treaty . These are unmanaged indices
composed of a sampling of selected companies representing an approximation
of the market structure of the designated country.
NATIONAL STOCK MARKET INDEX PERFORMANCE
1 year 5 years 10 years
Argentina -21.45% 24.15% N/A
Australia 9.46% 9.95% 15.02%
Austria 5.11% -6.02% 16.23%
Belgium 19.84% 10.55% 25.24%
Brazil -1.23% 25.93% N/A
Canada 17.95% 4.44% 8.16%
Chile 31.09% 38.64% N/A
Colombia -26.76% N/A N/A
Denmark 12.44% 3.83% 15.28%
Finland 67.32% 16.67% N/A
France 9.99% 6.55% 19.88%
Germany 20.85% 5.54% 16.60%
Greece 27.89% -12.28% N/A
Hong Kong 0.02% 24.95% 23.78%
India -22.13% N/A N/A
Indonesia 5.86% -8.32% N/A
Ireland 24.34% 6.15% N/A
Israel 11.40% N/A N/A
Italy -5.58% -2.29% 12.47%
Japan -3.93% 2.37% 15.22%
Jordan -1.30% 10.05% N/A
Korea 9.50% 6.11% N/A
Malaysia 8.73% 13.61% N/A
Mexico -46.17% 12.55% N/A
Netherlands 29.07% 16.68% 21.24%
New Zealand 28.09% 12.50% N/A
Norway 18.08% -0.00% 14.36%
Pakistan -24.91% N/A N/A
Peru 56.60% N/A N/A
Philippines 1.81% 27.18% N/A
Portugal 11.41% -4.78% N/A
Singapore 12.07% 14.00% 17.41%
Spain 13.03% 2.68% 19.87%
Sri Lanka -26.38% N/A N/A
Sweden 30.92% 6.70% 22.75%
Switzerland 30.77% 16.64% 19.81%
Taiwan -21.09% 0.78% N/A
Thailand 0.02% 9.47% N/A
Turkey 57.48% -11.41% N/A
United Kingdom 19.43% 9.31% 16.35%
USA 27.32% 13.32% 15.03%
Venezuela -13.61% N/A N/A
PERFORMANCE COMPARISONS . A fund'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. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. In addition to the mutual fund
rankings, a fund's performance may be compared to stock, bond, and money
market mutual fund performance indices prepared by Lipper or other
organizations. When comparing these indices, it is important to remember
the risk and return characteristics of each type of investment. For
example, while stock mutual funds may offer higher potential returns, they
also carry the highest degree of share price volatility. Likewise, money
market funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation based on the CPI, and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include other Fidelity funds; retirement investing;
brokerage products and services; model portfolios or allocations; saving
for college or other goals; charitable giving; and the Fidelity credit
card. 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. Fidelity may also reprint,
and use as advertising and sales literature, articles from Fidelity Focus,
a quarterly magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund 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
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOMENTUM INDICATORS indicate a fund's price movements over specific periods
of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of July 31, 1995, FMR advised over $ 25 billion in tax-free
fund assets, $ 77 billion in money market fund assets, $ 214
billion in equity fund assets, $ 52 billion in international fund
assets, and $ 22 billion in Spartan fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the Investment Company Act of 1940 (the 1940
Act), FDC exercises its right to waive a fund's front-end sales charge on
shares acquired through reinvestment of dividends and capital gain
distributions or in connection with the fund's merger with or acquisition
of any investment company or trust. In addition, FDC has chosen to waive
the fund's sales charge in certain instances because of efficiencies
involved in those sales of shares. The sales charge will not apply:
1. to shares purchased in connection with an employee benefit plan
(including the Fidelity-sponsored 403(b) and corporate IRA programs but
otherwise as defined in the Employee Retirement Income Security Act)
maintained by a U.S. employer and having more than 200 eligible employees,
or a minimum of $3,000,000 in plan assets invested in Fidelity mutual
funds, or as part of an employee benefit plan maintained by a U.S. employer
that is a member of a parent-subsidiary group of corporations (within the
meaning of Section 1563(a)(1) of the Internal Revenue Code, with "50%"
substituted for "80%") any member of which maintains an employee benefit
plan having more than 200 eligible employees, or a minimum of $3,000,000 in
plan assets invested in Fidelity mutual funds, or as part of an employee
benefit plan maintained by a non-U.S. employer having 200 or more eligible
employees, or a minimum of $3,000,000 in assets invested in Fidelity mutual
funds, the assets of which are held in a bona fide trust for the exclusive
benefit of employees participating therein;
2. to shares purchased by an insurance company separate account used to
fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in the Employee Retirement Income
Security Act), which, in the aggregate, have either more than 200 eligible
employees or a minimum of $3,000,000 in assets invested in Fidelity funds;
3. to shares in a Fidelity IRA account purchased (including purchases by
exchange) with the proceeds of a distribution from an employee benefit plan
provided that: (i) at the time of the distribution, the employer, or an
affiliate (as described in exemption 1 above) of such employer, maintained
at least one employee benefit plan that qualified for exemption 1 and that
had at least some portion of its assets invested in one or more mutual
funds advised by FMR, or in one or more accounts or pools advised by
Fidelity Management Trust Company; and (ii) the distribution is transferred
from the plan to a Fidelity Rollover IRA account within 60 days from the
date of the distribution;
4. to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
5. to shares purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined by
Section 501(c)(3) of the Internal Revenue Code);
6. to shares purchased by an investor participating in the Fidelity Trust
Portfolios program (these investors must make initial investments of
$100,000 or more in the Trust Portfolios funds and must, during the initial
six-month period, reach and maintain an aggregate balance of at least
$500,000 in all accounts and subaccounts purchased through the Trust
Portfolios program);
7. to shares purchased through Portfolio Advisory Services;
8. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Fidelity Trustee or employee;
9. to shares purchased by a bank trust officer, registered representative,
or other employee of a qualified recipient. Qualified recipients are
securities dealers or other entities, including banks and other financial
institutions, who have sold the fund's shares under special arrangements in
connection with FDC's sales activities;
10. to shares purchased by contributions and exchanges to the following
prototype or prototype-like retirement plans sponsored by FMR Corp. or FMR
and that are marketed and distributed directly to plan sponsors or
participants without any intervention or assistance from any intermediary
distribution channel: The Fidelity IRA, the Fidelity Rollover IRA, The
Fidelity SEP-IRA and SARSEP, The Fidelity Retirement Plan, Fidelity Defined
Benefit Plan, The Fidelity Group IRA, The Fidelity 403(b) Program, The
Fidelity Investments 401(a) Prototype Plan for Tax-Exempt Employers, and
The CORPORATEplan for Retirement (Profit Sharing and Money Purchase Plan);
11. to shares purchased as part of a pension or profit-sharing plan as
defined in Section 401(a) of the Internal Revenue Code that maintains all
of its mutual fund assets in Fidelity mutual funds, provided the plan
executes a Fidelity non-prototype sales charge waiver request form
confirming its qualification;
12. to shares purchased by a registered investment adviser (RIA) for his or
her discretionary accounts, provided he or she executes a Fidelity RIA load
waiver agreement which specifies certain aggregate minimum and operating
provisions. This waiver is available only for shares purchased directly
from Fidelity, without a broker, unless purchased through a brokerage firm
which is a correspondent of National Financial Services Corporation (NFSC).
The waiver is unavailable, however, if the RIA is part of an organization
principally engaged in the brokerage business, unless the brokerage firm in
the organization is an NFSC correspondent; or
13. to shares purchased by a trust institution or bank trust department for
its non-discretionary, non-retirement fiduciary accounts, provided it
executes a Fidelity Trust load waiver agreement which specifies certain
aggregate minimum and operating provisions. This waiver is available only
for shares purchased either directly from Fidelity or through a
bank-affiliated broker, and is unavailable if the trust department or
institution is part of an organization not principally engaged in banking
or trust activities.
Each fund's sales charge may be reduced to reflect sales charges previously
paid, or that would have been paid absent a reduction for some purchases
made directly with Fidelity as noted in the prospectus, in connection with
investments in other Fidelity funds. This includes reductions for
investments in prototype-like retirement plans sponsored by FMR or FMR
Corp., which are listed above.
Each Fund is open for business and its 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 1995: New Year's
Day (observed), Presidents' Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Although FMR expects the same holiday schedule to be observed in the
future, the NYSE may modify its holiday schedule at any time. In addition,
the funds will not process wire purchases and redemptions on days when the
Federal Reserve Wire System is closed.
FSC normally determines a fund'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 Securities and Exchange
Commission (SEC). To the extent that portfolio securities are traded in
other markets on days when the NYSE is closed, a fund'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 the 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 a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), a fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. Because each fund invests significantly in foreign securities,
corporate shareholders should not expect fund dividends to qualify for the
dividends-received deduction. Short-term capital gains are distributed as
dividend income, but do not qualify for the dividends-received deduction.
The fund will notify corporate shareholders annually of the percentage of
fund dividends that qualify for the dividends-received deduction. Gains
(losses) attributable to foreign currency fluctuations are generally
taxable as ordinary income, and therefore will increase (decrease) dividend
distributions. The fund will send each shareholder a notice in January
describing the tax status of dividend and capital gain distributions for
the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by a fund on the
sale of securities and distributed to shareholders are federally taxable as
long-term capital gains, regardless of the length of time shareholders have
held their shares. If a shareholder receives a long-term capital gain
distribution on shares of a fund, and such shares are held six months or
less and are sold at a loss, the portion of the loss equal to the amount of
the long-term capital gain distribution will be considered a long-term loss
for tax purposes. 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 a fund's
total assets are invested in securities of foreign issuers, the fund may
elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
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. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some forward currency contracts, futures contracts, and options
are included in this 30% calculation, which may limit a fund's investments
in such instruments.
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.
Each fund is treated as a separate entity from the other funds of Fidelity
Investment Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the Investment Company Act of 1940 (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 three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades 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 and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. T he
business address of each Trustee and officer who is an "interested
person" (as defined in the Investment Company Act of 1940) is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. The business address of all the other Trustees is Fidelity
Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235. Those
Trustees who are "interested persons" by virtue of their affiliation
with either the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (65), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD (54), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX (63), Trustee (1991), is a consultant to Western Mining
Corporation (1994). Prior to February 1994, he was President of Greenhill
Petroleum Corporation (petroleum exploration and production, 1990). Until
March 1990, Mr. Cox was President and Chief Operating Officer of Union
Pacific Resources Company (exploration and production). He is a Director of
Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University and
the University of Texas at Austin.
PHYLLIS BURKE DAVIS (63), Trustee (1992). Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of BellSouth
Corporation (telecommunications), Eaton Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail stores, 1990), and previously served as
a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The
University of Vermont School of Business Administration.
RICHARD J. FLYNN (71), Trustee, is a financial consultant. Prior to
September 1986, Mr. Flynn was Vice Chairman and a Director of the Norton
Company (manufacturer of industrial devices). He is currently a Trustee of
College of the Holy Cross and Old Sturbridge Village, Inc., and he
previously served as a Director of Mechanics Bank (1971-1995).
E. BRADLEY JONES (67), Trustee (1990). 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),
Cleveland-Cliffs Inc (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products, 1990),
and he previously served as a Director of NACCO Industries, Inc. (mining
and marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc.
(1985-1995). In addition, he serves as a Trustee of First Union Real Estate
Investments, a Trustee and member of the Executive Committee of the
Cleveland Clinic Foundation, a Trustee and member of the Executive
Committee of University School (Cleveland), and a Trustee of Cleveland
Clinic Florida.
DONALD J. KIRK (62), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Vice Chairman of the Board of Directors of the
National Arts Stabilization Fund, Vice Chairman of the Board of Trustees of
the Greenwich Hospital Association, and as a Member of the Public Oversight
Board of the American Institute of Certified Public Accountants' SEC
Practice Section (1995).
*PETER S. LYNCH (52), Trustee (1990) is Vice Chairman of FMR (1992). Prior
to his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH (66), Trustee (1989), is Chairman of G.M. Management
Group (strategic advisory services). Prior to his retirement in July 1988,
he was Chairman and Chief Executive Officer of Leaseway Transportation
Corp. (physical distribution services). Mr. McDonough is a Director of
ACME-Cleveland Corp. (metal working, telecommunications and electronic
products), Brush-Wellman Inc. (metal refining), York International Corp.
(air conditioning and refrigeration, 1989), Commercial Intertech Corp.
(water treatment equipment, 1992), and Associated Estates Realty
Corporation (a real estate investment trust, 1993).
EDWARD H. MALONE (70), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of Corporate
Property Investors, the EPS Foundation at Trinity College, the Naples
Philharmonic Center for the Arts, and Rensselaer Polytechnic Institute, and
he is a member of the Advisory Boards of Butler Capital Corporation Funds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (62), Trustee (1993) is Chairman of the Board, President,
and Chief Executive Officer of Lexmark International, Inc. (office
machines, 1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign
Vice Chairman of the Tri-State United Way (1993) and is a member of the
University of Alabama President's Cabinet (1990).
THOMAS R. WILLIAMS (67), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc. (1989), and
AppleSouth, Inc. (restaurants, 1992).
WILLIAM J. HAYES (61), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ROBERT H. MORRISON (55), Manager of Security Transactions of Fidelity's
equity funds is Vice President of FMR.
ARTHUR S. LORING (48), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (48), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
JOHN H. COSTELLO (49), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (49), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity Funds, Mr.
Rush was Chief Compliance of Officer of FMR Corp. (1993-1994); Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993); and
Vice President, Assistant Controller, and Director of the Accounting
Department - First Boston Corp. (1986-1990).
The following table sets forth information estimating the compensation of
each current trustee of the fund for his or her services as trustee for the
fiscal year ended October 31, 1995.
COMPENSATION TABLE
Aggregate Compensation +
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Gary Ralph F. Phyllis Richard Edward C. E. Donald Peter S. Gerald C. Edward Marvin L. Thomas
Burkhead** Cox Burke J. Flynn Johnson 3d** Bradley J. Kirk Lynch** McDonough H. Mann R.
Davis Jones Malone Williams
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
France Fund $ 3 $ 3 $ 5 $ 3 $ 3 $ 3 $ 3 $ 3 $ 3
Germany 5 5 7 5 5 5 5 5 5
Fund
Hong Kong 25 25 30 25 25 25 25 25 25
and China
Fund
Japan Small 25 25 30 25 25 25 25 25 25
Companies
Fund
Nordic Fund 10 10 15 10 10 10 10 10 10
United 3 3 5 3 3 3 3 3 3
Kingdom
Fund
</TABLE>
Trustees Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead** $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
Edward C. Johnson 3d** 0 0 0
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Peter S. Lynch** 0 0 0
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
* Information is as December 31, 1994 for 206 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
+ Estimated
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
As of the effective date of this Statement of Additional Information, FMR
owned the majority of the outstanding shares of each fund.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of 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 trust 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 each fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, each fund pays all of its expenses, without limitation, 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. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund has entered into a revised transfer agent agreement with FSC,
pursuant to which FSC bears the costs of providing these services to
existing shareholders. Other expenses paid by the fund include interest,
taxes, brokerage commissions, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. The fund is also
liable for such non-recurring expenses as may arise, including costs of any
litigation to which a fund may be a party, and any obligation it may have
to indemnify its officers and Trustees with respect to litigation.
FMR is each fund's manager pursuant to management contracts dated September
14, 1995 which were approved by FMR as the then sole shareholder of the
fund on October 17, 1995.
For the services of FMR under the contracts, each fund pays FMR a
monthly management fee composed of the sum of two elements: a group fee
rate and an individual fund fee rate.
COMPUTING THE MANAGEMENT FEE. For each fund, the group fee rate is based on
the monthly average net assets of all of the registered investment
companies with which FMR has management contracts and is calculated on a
cumulative basis pursuant to the graduated fee rate schedule shown below on
the left. The schedule below 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 $333 billion of group net assets - the approximate level
for July 1995 - was .3129%, which is the weighted average of the
respective fee rates for each level of group net assets up to $333 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets Rate
0 - $3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
Each fund's individual fund fee rate is .45%. Based on the average group
net assets of the funds advised by FMR for July 1995, the annual
management fee rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.31% + .45% = .76%
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
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase a fund's total returns and repayment of the
reimbursement by the fund will lower its total return.
FMR has voluntarily agreed to reimburse each fund to the extent that the
funds' aggregate operating expenses exceed 2. 0 0% of their average
net assets.
To comply with the California Code of Regulations, FMR will reimburse a
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its custodian fees attributable to
investments in foreign securities.
SUB-ADVISERS. On behalf of each fund, FMR has entered into sub-advisory
agreements with FMR U.K., FMR Far East, and FIIA. FIIA, in turn, has
entered into a sub-advisory agreement with FIIAL U.K. On behalf of Hong
Kong and China Fund and Japan Small Companies Fund, FMR also has entered
into sub-advisory agreements with FIJ. Pursuant to the sub-advisory
agreements, FMR may receive investment advice and research services outside
the United States from the sub-advisers. 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 FIIAL U.K. each focus on
issuers in countries other than the United States such as those in Europe,
Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly owned
subsidiaries of FMR. FIJ and FIIA are wholly owned subsidiaries of Fidelity
International Limited (FIL), a Bermuda company formed in 1968 which
primarily provides investment advisory services to non-U.S. investment
companies and institutional investors investing in securities throughout
the world. Edward C. Johnson 3d, Johnson family members, and various trusts
for the benefit of the Johnson family owns, directly or indirectly, more
than 25% of the voting common stock of FIL. FIJ was organized in Japan in
1986. FIIA was organized in Bermuda in 1983. FIIAL U.K. was organized in
the United Kingdom in 1984, and is a wholly owned subsidiary of Fidelity
International Management Holdings Limited, an indirect wholly owned
subsidiary of FIL.
Under the sub-advisory agreements FMR pays the fees of FMR U.K., FMR Far
East, FIJ, and FIIA. FIIA, in turn, pays the fees of FIIAL U.K. For
providing non-discretionary investment advice and research services the
sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K. and FMR Far East fees equal to 110%
and 105%, respectively, of FMR U.K.'s and FMR Far East's costs incurred in
connection with providing investment advice and research services.
(small solid bullet) FMR pays FIIA and FIJ fees equal to 30% of FMR's
monthly management fee with respect to the average net assets held by the
fund for which the sub-adviser has provided FMR with investment advice and
research services.
(small solid bullet) FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL
U.K.'s costs incurred in connection with providing investment advice and
research services.
For providing discretionary investment management and executing portfolio
transactions, the sub-advisers are compensated as follows:
(small solid bullet) FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee
equal to 50% of its monthly management fee (including any performance
adjustment) with respect to the fund's average net assets managed by the
sub-adviser on a discretionary basis.
(small solid bullet) FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL
U.K.'s costs incurred in connection with providing discretionary investment
management services.
CONTRACTS WITH FMR AFFILIATES
FSC is transfer, dividend disbursing, and shareholder servicing agent for
each fund. FSC receives annual account fees and asset-based fees for each
retail account and certain institutional accounts based on account size. In
addition, the fees for retail accounts are subject to increase based on
postal rate changes. With respect to certain institutional retirement
accounts, FSC receives asset-based fees only. With respect to certain
other institutional retirement accounts, FSC receives annual account
fees and asset based fees based on fund type. The asset-based
fees are subject to adjustment if the year-to-date total return of the
Standard & Poor's Composite Index of 500 Stocks is greater than positive or
negative 15%. FSC also collects small account fees from certain accounts
with balances of less than $2,500.
FSC pays out-of-pocket expenses associated with providing transfer agent
services. In addition, FSC bears the expense of typesetting, printing, and
mailing prospectuses, statements of additional information, and all other
reports, notices, and statements to shareholders, with the exception of
proxy statements.
FSC also performs the calculations necessary to determine the fund's net
asset value per share and dividends, and maintains the fund's accounting
records. The annual fee rates for these pricing and bookkeeping services
are based on the fund's average net assets, specifically, .06% for the
first $500 million of average net assets and .03% for average net assets in
excess of $500 million. The fee is limited to a minimum of $45,000 and a
maximum of $750,000 per year.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The 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 FDC.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Each fund is a fund of Fidelity Investment Trust (the
trust), an open-end management investment company originally organized as a
Massachusetts business trust on April 20, 1984. On November 3, 1986, the
trust's name was changed from Fidelity Overseas Fund to Fidelity Investment
Trust. Currently, there are twenty-three funds of the trust: Fidelity
Overseas Fund, Fidelity Europe Fund, Fidelity Europe Capital Appreciation
Fund, Fidelity Pacific Basin Fund, Fidelity New Markets Income Fund,
Fidelity International Growth & Income Fund, Fidelity Global Bond Fund,
Fidelity Canada Fund, Fidelity Worldwide Fund, Fidelity Short-Term World
Income Fund, Fidelity Diversified International Fund, Fidelity Diversified
Global Fund, Fidelity Japan Fund, Fidelity Emerging Markets Fund, Fidelity
Latin America Fund, Fidelity Southeast Asia Fund, Fidelity International
Value Fund, Fidelity France Fund, Fidelity Germany Fund, Fidelity Hong Kong
and China Fund, Fidelity Japan Small Companies Fund, Fidelity Nordic Fund,
and Fidelity United Kingdom Fund. The Declaration of Trust permits the
Trustees to create additional funds. There is a remote possibility that one
fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
In the event that FMR ceases to be the investment adviser to a trust or a
fund, the right of the trust or fund to use the identifying name "Fidelity"
may be withdrawn. There is a remote possibility that one fund might become
liable for any misstatement in its prospectus or statement of additional
information about another fund.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of the
fund are segregated on the books of account, and are to be charged with the
liabilities with respect to such fund and with a share of the general
liabilities of the trust. Expenses with respect to trust are to be
allocated in proportion to the asset value of their respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds of the
trust. In the event of the dissolution or liquidation of the trust,
shareholders of each fund are entitled to receive as a class the underlying
assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or its Trustees shall include a provision limiting the obligations
created thereby to the trust and its assets. The Declaration of Trust
provides for indemnification out of the fund's property of any shareholder
held personally liable for the obligations of the fund. The Declaration of
Trust also provides that its funds shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protect 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.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of a trust or fund may, as set
forth in the Declarations of trust, call meetings of a trust or fund for
any purpose related to the trust or fund, as the case may be, including, in
the case of a meeting of an entire trust, the purpose of voting on removal
of one or more Trustees. The trust or fund may be terminated upon the sale
of its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the
holders of a majority of the outstanding shares of the trust or the fund.
If not so terminated, the trust and its funds will continue indefinitely.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of each fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
the subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of a fund or in deciding which
securities are purchased or sold by a fund. However, the fund may invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian. Morgan Guaranty Trust Company of New York, The
Bank of New York, and Chemical Bank, each headquartered in New York, also
may serve as a special purpose custodian of certain assets in connection
with pooled repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain funds advised by FMR. The
Boston branch of the funds' 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. Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts
serves as each fund's independent accountant. The auditor examines
financial statements for the funds and provides other audit, tax, and
related services.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds which 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 edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA - Bonds which 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 in the Aaa securities.
A - Bonds which 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 which 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 which are rated Ba are judged to have speculative
elements ; th eir 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 which 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 which 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 which 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 which are rated C are the lowest-rated class of bonds and
issue s so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions then 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 rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal
payments. The BB rating 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 - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
