SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-6516)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 35 [X]
and
REGISTRATION STATEMENT (No. 811-4707)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 35 [X]
Fidelity Advisor Series II Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
( ) on ( ) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
(X) on (February 28, 1997) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the Notice required by
such Rule before December 31, 1996.
FIDELITY ADVISOR CLASS A, CLASS T & CLASS B PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b,c .............................. *
3 a .............................. *
b .............................. *
c .............................. Performance, Appendix
d .............................. Cover Page
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. FMR and Its Affiliates
d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates; Breakdown of Expenses
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. FMR and Its Affiliates
c .............................. Charter
d .............................. Cover Page; Who May Want to Invest
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Transaction Details; Breakdown of Expenses
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy
of each fund's most recent financial report and portfolio listing, or a
copy of the Statement of Additional Information (SAI) dated February 28,
1997. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov) . The SAI is incorporated herein
by reference (legally forms a part of the prospectus). For a free copy of
either document, contact Fidelity Distributors Corporation (FDC), 82
Devonshire Street, Boston, MA 02109, or your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
HIGH YIELD, STRATEGIC INCOME, AND HIGH INCOME MUNICIPAL MAY EACH INVEST
WITHOUT LIMITATION IN LOWER-QUALITY DEBT SECURITIES, SOMETIMES CALLED "JUNK
BONDS." INVESTORS SHOULD CONSIDER THAT THESE SECURITIES CARRY GREATER
RISKS, SUCH AS THE RISK OF DEFAULT, THAN OTHER DEBT SECURITIES. REFER TO
"INVESTMENT PRINCIPLES AND RISKS" ON PAGE 23 FOR FURTHER INFORMATION.
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.
ACOM-pro-0297
FIDELITY ADVISOR FUNDS
CLASS A, CLASS T, AND CLASS B
GROWTH FUNDS: Classes
Fidelity Advisor TechnoQuant(trademark) Growth Fund A,T,B
Fidelity Advisor Mid Cap Fund A,T,B
Fidelity Advisor Equity Growth Fund A,T,B
Fidelity Advisor Growth Opportunities Fund A,T,B Fidelity Advisor
Strategic Opportunities Fund A,T,B Fidelity Advisor Large Cap Fund A,T,B
GROWTH AND INCOME FUNDS:
Fidelity Advisor Growth & Income Fund A,T,B
Fidelity Advisor Equity Income Fund A,T,B Fidelity Advisor Balanced
Fund A,T,B
(formerly Advisor Income & Growth Fund)
TAXABLE INCOME FUNDS:
Fidelity Advisor High Yield Fund A,T,B
Fidelity Advisor Strategic Income Fund A,T,B
Fidelity Advisor Mortgage Securities Fund A,T,B
Fidelity Advisor Government Investment Fund A,T,B
Fidelity Advisor Intermediate Bond Fund A,T,B
Fidelity Advisor Short Fixed-Income Fund A,T
MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal fund A,T,B
Fidelity Advisor Municipal Bond Fund A,T,B
Fidelity Advisor Intermediate Municipal Income A,T,B
Fund
Fidelity Advisor Short-Intermediate Municipal A,T
Income Fund
STATE MUNICIPAL FUNDS:
Fidelity Advisor California Municipal Income A,T,B
Fund
Fidelity Advisor New York Municipal Income Fund A,T,B
PROSPECTUS
FEBRUARY 28, 1997(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS 3 WHO MAY WANT TO INVEST
3 EXPENSES Each class's sales charge (load) and its yearly
operating expenses.
12 FINANCIAL HIGHLIGHTS A summary of each fund's financial
data.
13 PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL 21 CHARTER How each fund is organized.
23 INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
33 BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT 37 TYPES OF ACCOUNTS Different ways to set up your
account, including tax-sheltered retirement plans.
38 HOW TO BUY SHARES Opening an account and making
additional investments.
39 HOW TO SELL SHARES Taking money out and closing your
account.
41 INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND 43 DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
44 TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
48 EXCHANGE RESTRICTIONS
48 SALES CHARGE REDUCTIONS AND WAIVERS
50 APPENDIX A
52 APPENDIX B
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Class A, Class T, and Class B shares are offered to investors who
engage an investment professional for investment advice.
TechnoQuant(trademark) Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income, Equity
Income, Balanced, High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Municipal Bond, and Intermediate Municipal Income are
diversified funds.
Strategic Income, Short-Intermediate Munic ipal Income, California
Municipal Income, and New York Municipal Income are non-diversified funds.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified fund.
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, Large Cap, Growth & Income, Equity Income, and
Balanced are designed for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term
returns. TechnoQuant Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, and Large Cap are designed for
investors who want to be invested in the stock market for its long-term
growth potential. These funds invest for growth and do not pursue income.
Growth & Income, Equity Income, and Balanced are designed for those
investors who seek a combination of growth and income from equity and some
bond investment s.
TechnoQuant Growth is designed to provide an alternative to more
traditional styles of investing for growth-oriented investors. The fund
utilizes computer-aided quantitative analysis emphasizing technical
factors, such as historical price and volume relationships.
High Yield and Strategic Income a re designed for investors who want
high current income with some potential for capital growth from a portfolio
of debt instruments with a focus on lower-quality debt securities and
income-producing equity securities . These funds may be appropriate for
long-term, aggressive investors who understand the potential risks and
rewards of investing in lower-quality debt securities, including defaulted
securities.
Mortgage Securities is designed for investors who seek high current
income from a portfolio of mortgage-related securities of all types.
Government Investment is designed for investors who seek high current
income from a portfolio of U.S. Government securities in a manner
consistent with preserving principal.
Intermediate Bond and Short Fixed-Income are designed for investors who
seek high current income from a portfolio of investment-grade debt
securities consistent with capital preservation.
High Income Municipal, Municipal Bond, Intermediate Municipal
Income, and Short-Intermediate Municipal Income are designed for investors
in higher tax brackets who seek high current income that is free from
federal income tax. Municipal Bond, Intermediate Municipal Income
and Short-Intermediate Municipal Income also invest consistent with
consideration of capital preservation. High Income Municipal focuses on
lower-quality debt securities and may be appropriate for long-term,
aggressive investors who understand the potential risks and rewards of
investing in lower-quality debt securities, including defaulted securities.
California Municipal Income is designed for investors in higher tax
brackets who seek high current income that is free from federal and
California personal income taxes. New York Municipal Income is designed for
investors in higher tax brackets who seek high current income that is free
from federal and New York State and City personal income taxes.
The value of each fund's investments and, as applicable, the income they
generate, will vary from day to day, and generally reflect changes in
market conditions, interest rates and other company, political, and
economic news. In the short term, stock prices can fluctuate dramatically
in response to these factors. The securities of small, less well-known
companies may be more volatile than those of larger companies. Bond
values fluctuate based on changes in interest rates and the credit quality
of the issuer, and may be subject to prepayment risk, which can limit their
price appreciation potential in periods of declining interest rates.
Over time, however, stocks, although more volatile, have shown greater
growth potential than other types of securities. Investments in foreign
securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to
currency fluctuations.
In addition, Strategic Income may also be appropriate for investors who
want to pursue their investment goals in markets outside of the United
States. By including international investments in your portfolio, you can
achieve additional diversification and participate in growth opportunities
around the world.
Each fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
Each fund is composed of multiple classes of shares. All classes of a fund
have a common investment objective and investment portfolio. Class A and
Class T shares have a front-end sales charge and pay a distribution fee.
Class T shares may be subject to a contin gent deferred sales charge
(CDSC) . Class B shares do not have a front-end sales charge, but do
have a CDSC, and pay a distribution fee and a shareholder service fee.
Institutional Class shares have no sales charge and do not pay a
distribution fee or a shareholder service fee, but ar e only
available to certain types of investors. See "Sales Charge Reductions
and Waivers," page , for Institutional Class eligibility information.
You may obtain more information about Institutional Class shares, which are
not offered through this prospectus, by calling 1-800-843-3001 or from your
investment professional. Contact your investment professional to discuss
which class is appropriate for you.
In determining which class of shares is the most appropriate for you, you
should consider, among other factors, the length of time you intend to hold
your shares. In general, because of its higher front-end load, Class A
shares have higher costs than Class T for a short holding period and,
because of their lower 12b-1 fees, lower costs than Class T for a longer
holding period. If you are planning to invest a significant amount either
at one time or through a regular investment program, you should consider
the reduced sales charges available on Class A and Class T shares. If you
prefer not to pay a front-end sales charge and plan to hold your shares for
more than three or six years, as applicable, you should consider
Class B shares. While Class B shares are subject to higher ongoing
expenses, they are sold without a front-end sales charge so your entire
purchase amount is immediately invested. However, if you sell your Class B
shares within three or six years, as applicable, you will normally pay a
CDSC that varies depending on how long you have held your shares.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy or
sell shares of a fund. In addition, you may be charged an annual account
maintenance fee if your account balance falls below $2,500. Lower front-end
sales cha rges may be available with purchases of $50,000 or more. See
"Transaction Details," page , for an explanation of how and when these
charges apply.
A CDSC is imposed on Class B shares only if you redeem Class B shares
within three years of purchase for Intermediate Bond and Intermediate
Municipal Income, or within six years of purchase for all other funds.
See "Transaction Details," page , for information about the CDSC.
Clas Clas Clas
s A s T s B
Maximum sales charge (as a % of 5.25 3.50 None
offering price) on purchases of: % %
TechnoQuant Growth, Mid Cap,
Equity Growth, Growth
Opportunities, Strategic
Opportunities, Large Cap, Growth &
Income, Equity Income, and
Balanced (the Equity Funds)
Maximum sales charge (as a % of 4.25 3.50 None
offering price) on purchases of: % %
High Yield, Strategic Income,
Mortgage Securities, Government
Investment, High Income Municipal,
Municipal Bond, California
Municipal Income, and New York
Municipal Income (the Bond Funds)
Maximum sales charge (as a % of 3.25 2.75 None
offering price) on purchases of % %
Intermediate Bond and
Intermediate Municipal Income (the
Intermediate-Term Bond Funds)
Clas Clas Clas
s A s T s B
Maximum sales charge (as a % of 1.50 1.50 None
offering price) on purchases % %
of:Short-Fixed Income and
Short-Intermediate Municipal
Income (the Short-Term Bond
Funds)
Maximum CDSC for all funds that None None 5.00%
offer Class B shares (except [A] [B]
Intermediate-Term Bond Funds)
(as a % of the lesser of original
purchase price or redemption
proceeds)
Maximum CDSC for the None None 3.00%
Intermediate-Term Bond
[A] [C]
Funds (as a % of the lesser of the
original purchase price or
redemption proceeds)
Maximum sales charge on None None None
reinvested distributions
Redemption fee None None None
Exchange fee None None None
Annual account maintenance fee $12.0 $12.0 $12.00
(for accounts under $2,500) 0 0
[A] A CONTINGENT DEFERRED SALES CHARGE CHARGE OF 0.25% IS ASSESSED ON
CERTAIN REDEMPTIONS OF CLASS T SHARES THAT WERE PURCHASED WITHOUT AN
INITIAL SALES CHARGE. SEE "TRANSACTION DETAILS", PAGE__.
[B] DECLINES OVER 6 YEARS FROM 5.00% TO 0%.
[C] DECLINES OVER 3 YEARS FROM 3.00% TO 0%.
ANNUAL OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays a management fee to Fidelity Management & Research Company
(FMR) that, for Growth Opportunities and Strategic Opportunities, varies
based on performance. Each fund also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and financial reports.
12b-1 f ees for Class A, Class T, and Class B include a distribution
fee and, for Class B, a shareholder service fee. Distribution fees are paid
by each class of each fund to FDC for services and expenses in
connection with the distribution of the applicable class's shares.
Shareholder service fees are paid by Class B to investment professionals
for services and expenses incurred in connection with providing personal
service and/or maintenance of Class B shareholder accounts. Long-term
shareholders may pay more than the economic equivalent of the maximum sales
charges permitted by the National Association of Securities Dealers,
Inc., due to 12b-1 fees.
Each class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The tables beginning below are figures based on estimated or historical
expenses of each class of each fund, adjusted to reflect current fees, and
are calculated as a percentage of average net assets of the applicable
class of each fund. A portion of the brokerage commissions that
certain of the funds pay is used to reduce fund expenses. In addition, each
fund has entered into arrangements with its custodian and transfer agent
whereby interest earned on uninvested cash balances is used to reduce
custodian and transfer agent expenses. Including these reductions,
the total operating expenses presented in the tables beginning below
for the applicable class would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Class T Class B
Mid Cap
Equity Growth
Growth Opportunities
Strategic Opportunities
Large Cap
Equity Income
Balanced
EQUITY FUNDS
Operating Expenses Class Class T Class B
A
TECHNOQUANT GROWTH Management fee [A] [A] [A]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
MID CAP Management fee [A] [A] [A]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
EQUITY GROWTH Management fee (after fee reduction)[B]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A]
Total operating expenses
GROWTH OPPORTUNITIES Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A]
Total operating expenses
</TABLE>
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
[B] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.33% TO 0.30%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE ___% AND TOTAL OPERATING EXPENSES WOULD BE __ % ____% , AND___%
FOR CLASS A,CLASS T, AND CLASS B RESPECTIVELY.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
STRATEGIC OPPORTUNITIES Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
LARGE CAP Management fee [A] [A] [A]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
GROWTH & INCOME Management fee [A] [A] [A]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
EQUITY INCOME Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
BALANCED Management fee (after fee reduction)[C]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A]
Total operating expenses
</TABLE>
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
[C] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.20% TO 0.15%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE ___% AND TOTAL OPERATING EXPENSES WOULD BE ___% ___% , AND ___%
FOR CLASS A, CLASS T, AND CLASS B RESPECTIVELY.
TAXABLE INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
HIGH YIELD Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
STRATEGIC INCOME Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
MORTGAGE SECURITIES Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
GOVERNMENT INVESTMENT Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
INTERMEDIATE BOND Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
SHORT FIXED-INCOME Management fee *
12b-1 fee (Distribution fee) *
Other expenses [A] *
Total operating expenses *
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating Expenses Class Class T Class B
A
HIGH INCOME MUNICIPAL Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
MUNICIPAL BOND Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
INTERMEDIATE MUNICIPAL INCOME Management fee
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A]
Total operating expenses
SHORT-INTERMEDIATE MUNICIPAL INCOME Management fee *
12b-1 fee *
Other expenses [A] *
Total operating expenses *
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
STATE MUNICIPAL FUNDS
Operating Expenses Class Class T Class B
A
CALIFORNIA MUNICIPAL INCOME Management fee [A] [A] [A]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
NEW YORK MUNICIPAL INCOME Management fee [A] [A] [A]
12b-1 fee (including 0.25% Shareholder
Service Fee for Class B shares)
Other expenses [A] [A] [A]
Total operating expenses
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge or CDSC, as applicable, on a $1,000
investment, assuming a 5% annual return and either (1) full redemption or
(2) no redemption, at the end of each time period:
EQUITY FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Clas Class T Class B Class B
s A
TECHNOQUANT GROWTH After 1 year [A]
After 3 [A]
years
MID CAP After 1 year [A]
After 3 [A]
years
EQUITY GROWTH After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
GROWTH OPPORTUNITIES After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
STRATEGIC OPPORTUNITIES After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
LARGE CAP After 1 year [A]
After 3 [A]
years
GROWTH & INCOME After 1 year [A]
After 3 [A]
years
EQUITY INCOME After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years [B]
BALANCED After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
</TABLE>
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SEVEN
YEARS.
TAXABLE INCOME FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Class Class T Class B Class B
A
HIGH YIELD After 1 year [A]
After 3 years [A]
After 5 years [A]
After 10
years[B]
STRATEGIC INCOME After 1 year [A]
After 3 years [A]
After 5 years [A]
After 10
years[B]
MORTGAGE SECURITIES After 1 year [A]
After 3 years [A]
After 5 years [A]
After 10
years[B]
GOVERNMENT INVESTMENT After 1 year [A]
After 3 years [A]
After 5 years [A]
After 10
years[B]
INTERMEDIATE BOND After 1 year [A]
After 3 years [A]
After 5
years[C]
After 10
years[C]
SHORT FIXED-INCOME After 1 year * *
After 3 years * *
After 5 years * *
After 10 * *
years
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[ B] REFL ECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER
SEVEN YEARS.
[C] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER FOUR
YEARS.
MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Class Class T Class B Class B
A
HIGH INCOME MUNICIPAL After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
MUNICIPAL BOND After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
INTERMEDIATE MUNICIPAL INCOME After 1 year [A]
After 3 [A]
years
After 5
years[C]
After 10
years[C]
</TABLE>
SHORT-INTERMEDIATE MUNICIPAL INCOME After 1 year * *
After 3 * *
years
After 10 *
years *
STATE MUNICIPAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Examples
Full Redemption No
Redempt
ion
Class Class T Class B Class B
A
CALIFORNIA MUNICIPAL INCOME After 1 year [A]
After 3 [A]
years
NEW YORK MUNICIPAL INCOME After 1 year [A]
After 3 [A]
years
After 5 [A]
years
After 10
years[B]
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER SEVEN
YEARS.
[C] REFLECTS CONVERSION OF CLASS B SHARES TO CLASS A SHARES AFTER FOUR
YEARS.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse Class A, Class T, and Class B of
certain funds to the extent that total operating expenses as a percentage
of their respective average net assets exceed the following rates:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class Effectiv Class Effecti Class Effecti
A e T ve B ve
Date Date Date
TechnoQuant Growth 1.75 12/31/9 2.00 12/31/9 2.50 12/31/9
% 6 % 6 % 6
Mid Cap 1.75 8/30/96 2.00 2/26/96 2.50 2/26/96
% % %
Equity Growth ** ** ** ** 2.25 12/31/9
% 6
Growth Opportunities ** ** ** **
Large Cap 1.75 8/30/96 2.00 2/26/96 2.50 2/26/96
% % %
Growth & Income 1.50 12/31/9 1.75 12/31/9 2.25 12/31/9
% 6 % 6 % 6
Balanced 1.50 8/30/96 1.75 1/1/96 2.25 12/31/9
% % % 6
High Yield 1.25 8/30/96 1.35 7/1/95 2.00 1/1/96
% % %
Strategic Income 8/30/96 1.35 10/31/9 1/1/96
1.25% % 4 2.00%
Mortgage Securities
Government 0.90 8/30/96 1.00 7/1/95 1.65 1/1/96
Investment % % %
Intermediate Bond 0.90 8/30/96 1.00 7/1/95 1.65 1/1/96
% % %
Short Fixed--Income 0.90 8/30/96 0.90 8/30/96 *
% % *
High Income Municipal 0.90 8/30/96 1.00 7/1/95 1.65% 1/1/96
% %
Municipal Bond 1.00 7/1/96 1.65%
% 7/1/96
Intermediate Municipal Income 0.90 8/30/96 1.00 7/1/95 1.65
% % % 1/1/96
Short-Intermediate 0.90 8/30/96 0.90 7/1/95 * *
Municipal Income % %
California Municipal Income 0.90 8/30/96 1.00 8/1/95 1.65 1/1/96
% % %
New York Municipal 0.90 8/30/96 1.00 8/1/95 1.65 1/1/96
Income % % %
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
**NO REIMBURSEMENT ARRANGEMENT
If these agreements were not in effect, other expenses and total operating
expenses, as a percentage of average net assets, would have been the
following amounts:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Other Expenses Total Operating Expenses
Class Class Class Class Class Class B
A[A] T B A[A] T
TechnoQuant Growth[A]
Mid Cap[A]
Equity Growth ** ** [A] ** ** [A]
Growth Opportunities ** ** [A] ** ** [A]
Large Cap[A]
Growth & Income[A]
Balanced [A] [A]
High Yield
Strategic Income
Mortgage Securities[A]
Government Investment
Intermediate Bond
Short Fixed-Income * *
High Income
Municipal
Municipal Bond[A]
Intermediate
Municipal Income
Short-Intermediate * *
Municipal Income
California Municipal Income[A]
New York Municipal Income
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
**NO REIMBURSEMENT ARRANGEMENT
[A] BASED ON ESTIMATED EXPENSES FOR THE FIRST YEAR.
Expenses eligible for reimbursement do not include interest, taxes,
brokerage commissions, and extraordinary expenses.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for certain funds and these
funds' financial statements are included in each fund's Annual
Report and have been audited by independent accountants________ and
___________. (TechnoQuant and Growth & Income only) Their reports on
the financial statements and financial highlights are included in each
Annual Report. TechnoQuant Growth and Growth and Income are expected to
commence operations on January 2, 1997. The financial statements, the
financial highlights, and the reports are incorporated by reference into
the funds' SAI, which may be obtained free of charge from FDC or your
investment professional.
[TABLES TO BE INSERTED LATER]
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
For Growth Opportunities, Balanced, High Yield, Government Investment,
Short Fixed-Income, High Income Municipal, California Municipal Income, and
New York Municipal Income the fiscal year runs from November 1 to October
31. For TechnoQuant Growth, Mid Cap, Equity Growth, Large Cap, Growth &
Income, Equity Income, Intermediate Bond, Intermediate Municipal Income,
and Short-Intermediate Municipal Income the fiscal year runs from December
1 to November 30. For Strategic Opportunities, Strategic Income, and
Municipal Bond, the fiscal year runs from January 1 to December 31. For
Mortgage Securities the fiscal year runs from August 1 to July 31. The
tables below show each class's performance over past fiscal years.
Performance history will be available for TechnoQuant Growth and Growth &
Income after the funds have been in operations for six months. For
additional charts presenting each class's calendar year performance, see
Appendix B, beginning on page __.
EQUITY FUNDS - CLASS A
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Years/ Past 6 Past 1 Past 5 10 Years/
year years Life of fund+ months year years Life of fund+
MID CAP - CLASS A [C] n/a n/a n/a n/a n/a n/a %
MID CAP - CLASS A (LOAD ADJ.) [A][C] n/a n/a n/a n/a n/a n/a %
EQUITY GROWTH - CLASS A[C] % % % % % % %
EQUITY GROWTH - CLASS A (LOAD ADJ.) [A][C] % % % % % % %
GROWTH OPPORTUNITIES - CLASS A[B] % % % % % % %
GROWTH OPPORTUNITIES - CLASS A (LOAD % % % % % % %
ADJ.)[A][B]
STRATEGIC OPPORTUNITIES - CLASS A [D] % % % % % % %
STRATEGIC OPPORTUNITIES - CLASS A (LOAD % % % % % % %
ADJ.) [A][D]
LARGE CAP - CLASS A [C] n/a n/a n/a n/a n/a n/a %
LARGE CAP - CLASS A (LOAD ADJ.) [A][C] n/a n/a n/a n/a n/a n/a %
EQUITY INCOME - CLASS A [C] % % % % % % %
EQUITY INCOME - CLASS A (LOAD ADJ.) % % % % % % %
[A][C]
BALANCED - CLASS A[B] % % % % % % %
BALANCED - CLASS A (LOAD ADJ.)[A][B] % % % % % % %
</TABLE>
TAXABLE BOND FUNDS - CLASS A
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Years/ Past 6 Past 1 Past 5 10 Years/
year years Life of fund+ months year years Life of fund+
HIGH YIELD - CLASS A[B] % % % % % % %
HIGH YIELD - CLASS A (LOAD ADJ.)[A][B] % % % % % % %
STRATEGIC INCOME - CLASS A [D] % n/a % % % n/a %
STRATEGIC INCOME - CLASS A (LOAD % n/a % % % n/a %
ADJ.)[A][D]
MORTGAGE SECURITIES - CLASS A[E] % % % % % % %
MORTGAGE SECURITIES - CLASS A % % % % % % %
(LOAD ADJ.) [A][E]
GOVERNMENT INVESTMENT - CLASS A [B] % % % % % % %
GOVERNMENT INVESTMENT - CLASS A % % % % % % %
(LOAD ADJ.) [A][B]
INTERMEDIATE BOND - CLASS A [C] % % % % % % %
INTERMEDIATE BOND - CLASS A % % % % % % %
(LOAD ADJ.) [A][C]
SHORT FIXED-INCOME - CLASS A [B] % % % % % % %
SHORT FIXED-INCOME - CLASS A % % % % % % %
(LOAD ADJ.)[A][B]
</TABLE>
MUNICIPAL FUNDS - CLASS A
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
HIGH INCOME MUNICIPAL - CLASS A [B] % % % % % % %
HIGH INCOME MUNICIPAL - CLASS A % % % % % % %
(LOAD ADJ.)[A][B]
MUNICIPAL BOND - CLASS A [D] % % % % % % %
MUNICIPAL BOND - CLASS A % % % % % % %
(LOAD ADJ.)[A] [D]
INTERMEDIATE MUNICIPAL INCOME - CLASS % % % % % % %
A [C]
INTERMEDIATE MUNICIPAL INCOME - CLASS % % % % % % %
A
(LOAD ADJ.)[A][C]
SHORT-INTERMEDIATE MUNICIPAL INCOME - % n/a % % % n/a %
CLASS A [C]
SHORT-INTERMEDIATE MUNICIPAL INCOME - % n/a % % % n/a %
CLASS A (LOAD ADJ.)[A][C]
</TABLE>
STATE MUNICIPAL FUNDS - CLASS A
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
CALIFORNIA MUNICIPAL INCOME - CLASS A n/a n/a n/a % n/a n/a %
[B]
CALIFORNIA MUNICIPAL INCOME - CLASS A n/a n/a n/a % n/a n/a %
(LOAD ADJ.)[A][B]
NEW YORK MUNICIPAL INCOME - CLASS A % n/a n/a % % n/a %
[B]
NEW YORK MUNICIPAL INCOME - CLASS A % n/a n/a % % n/a %
(LOAD ADJ.)[A][B]
</TABLE>
EQUITY FUNDS - CLASS T
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Years/ Past 6 Past 1 Past 5 10 Years/
year years Life of fund+ months year years Life of fund+
MID CAP - CLASS T[B] n/a n/a n/a n/a n/a n/a %
MID CAP - CLASS T (LOAD ADJ.) [A][B] n/a n/a n/a n/a n/a n/a %
EQUITY GROWTH - CLASS T [C] % % % % % % %
EQUITY GROWTH - CLASS T (LOAD ADJ.) [A][C] % % % % % % %
GROWTH OPPORTUNITIES - CLASS T [B] % % % % % % %
GROWTH OPPORTUNITIES - CLASS T (LOAD % % % % % % %
ADJ.)[A][B]
STRATEGIC OPPORTUNITIES - CLASS T % % % % % % %
STRATEGIC OPPORTUNITIES - CLASS T (LOAD % % % % % % %
ADJ.) [A]
LARGE CAP - CLASS T [B] n/a n/a n/a n/a n/a n/a %
LARGE CAP - CLASS T (LOAD ADJ.) [A][B] n/a n/a n/a n/a n/a n/a %
EQUITY INCOME - CLASS T [C] % % % % % % %
EQUITY INCOME - CLASS T (LOAD ADJ.) [A][C] % % % % % % %
BALANCED - CLASS T [B] % % % % % % %
BALANCED - CLASS T (LOAD ADJ.)[A][B] % % % % % % %
</TABLE>
TAXABLE BOND FUNDS - CLASS T
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 Years/ Past 6 Past 1 Past 5 10 Years/
year years Life of fund+ months year years Life of fund+
HIGH YIELD - CLASS T [B] % % % % % % %
HIGH YIELD - CLASS T (LOAD ADJ.)[A]][B] % % % % % % %
STRATEGIC INCOME - CLASS T [D] % n/a % % % n/a %
STRATEGIC INCOME - CLASS T (LOAD % n/a % % % n/a %
ADJ.)[A][D]
MORTGAGE SECURITIES - CLASS T [E] % % % % % % %
MORTGAGE SECURITIES - CLASS T % % % % % % %
(LOAD ADJ.) [A][E]
GOVERNMENT INVESTMENT - CLASS T [B] % % % % % % %
GOVERNMENT INVESTMENT - CLASS T [B] % % % % % % %
(LOAD ADJ.) [A][B]
INTERMEDIATE BOND - CLASS T [C] % % % % % % %
INTERMEDIATE BOND - CLASS T % % % % % % %
(LOAD ADJ.) [A] [C]
SHORT FIXED-INCOME - CLASS T [B] % % % % % % %
SHORT FIXED-INCOME - CLASS T % % % % % % %
(LOAD ADJ.)[A][B]
</TABLE>
MUNICIPAL FUNDS - CLASS T
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
HIGH INCOME MUNICIPAL - CLASS T [B] % % % % % % %
HIGH INCOME MUNICIPAL - CLASS T % % % % % % %
(LOAD ADJ.)[A][B]
MUNICIPAL BOND - CLASS T [D] % % % % % % %
MUNICIPAL BOND - CLASS T % % % % % % %
(LOAD ADJ.)[A][D]
INTERMEDIATE MUNICIPAL INCOME - CLASS % % % % % % %
T [C]
INTERMEDIATE MUNICIPAL INCOME - CLASS % % % % % % %
T
(LOAD ADJ.)[A][C]
SHORT-INTERMEDIATE MUNICIPAL INCOME - % n/a % % % n/a %
CLASS T [C]
SHORT-INTERMEDIATE MUNICIPAL INCOME - % n/a % % % n/a %
CLASS T (LOAD ADJ.)[A][C]
</TABLE>
STATE MUNICIPAL FUNDS - CLASS T
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
CALIFORNIA MUNICIPAL INCOME - CLASS T[B] n/a n/a n/a % n/a n/a %
CALIFORNIA MUNICIPAL INCOME - CLASS T n/a n/a n/a % n/a n/a %
(LOAD ADJ.)[A][B]
NEW YORK MUNICIPAL INCOME - CLASS T % n/a n/a % n/a n/a %
[B]
NEW YORK MUNICIPAL INCOME - CLASS T % n/a n/a % n/a n/a %
(LOAD ADJ.)[A][B]
</TABLE>
EQUITY FUNDS - CLASS B
Average Annual Total Return F Cumulative Total Return F
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
MID CAP - CLASS B [C] n/a n/a n/a % n/a n/a %
MID CAP - CLASS B (LOAD ADJ.)[A][C] n/a n/a n/a % n/a n/a %
EQUITY GROWTH - CLASS B [C] % % % % % % %
EQUITY GROWTH - CLASS B (LOAD ADJ.) [A][C] % % % % % % %
GROWTH OPPORTUNITIES - CLASS B [B] % % % % % % %
GROWTH OPPORTUNITIES - CLASS B (LOAD % % % % % % %
ADJ.)[A][B]
STRATEGIC OPPORTUNITIES - CLASS B [D] % % % % % % %
STRATEGIC OPPORTUNITIES - CLASS B % % % % % % %
(LOAD ADJ.) [A][D]
LARGE CAP - CLASS B [C] n/a n/a n/a % n/a n/a %
LARGE CAP - CLASS B (LOAD ADJ.)[A][C] n/a n/a n/a % n/a n/a %
EQUITY INCOME - CLASS B [C] % % % % % % %
EQUITY INCOME - CLASS B (LOAD ADJ.)[A][C] % % % % % % %
BALANCED - CLASS B [B] % % % % % % %
BALANCED - CLASS B (LOAD ADJ.)[A][B] % % % % % % %
</TABLE>
TAXABLE BOND FUNDS - CLASS B
Average Annual Total ReturnF Cumulative Total ReturnF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
HIGH YIELD - CLASS B [B] % % % % % % %
HIGH YIELD - CLASS B (LOAD ADJ.)[A][B] % % % % % % %
STRATEGIC INCOME - CLASS B [D] % n/a % % % n/a %
STRATEGIC INCOME - CLASS B (LOAD % n/a % % % n/a %
ADJ.)[A][D]
MORTGAGE SECURITIES - CLASS B [E] % % % % % % %
MORTGAGE SECURITIES - CLASS B % % % % % % %
(LOAD ADJ.) [A][E]
GOVERNMENT INVESTMENT - CLASS B [B] % % % % % % %
GOVERNMENT INVESTMENT - CLASS B % % % % % % %
(LOAD ADJ.)[A][B]
INTERMEDIATE BOND - CLASS B [C] % % % % % % %
INTERMEDIATE BOND - CLASS B (LOAD % % % % % % %
ADJ.)[A][C]
</TABLE>
MUNICIPAL FUNDS - CLASS B
Average Annual Total ReturnF Cumulative Total ReturnF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
HIGH INCOME MUNICIPAL - CLASS B [B] % % % % % % %
HIGH INCOME MUNICIPAL - CLASS B % % % % % % %
(LOAD ADJ.)[A][B]
MUNICIPAL BOND - CLASS B [D] % % % % % % %
MUNICIPAL BOND - CLASS B (LOAD % % % % % % %
ADJ.)[A][D]
INTERMEDIATE MUNICIPAL INCOME - CLASS % % % % % % %
B [C]
INTERMEDIATE MUNICIPAL INCOME - CLASS % % % % % % %
B
(LOAD ADJ.)[A][C]
</TABLE>
STATE MUNICIPAL FUNDS - CLASS B
Average Annual Total ReturnF Cumulative Total ReturnF
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Past 1 Past 5 10 years/ Past 6 Past 1 Past 5 10 years/
year years Life of fund+ months year years Life of fund+
CALIFORNIA MUNICIPAL INCOME - CLASS B n/a n/a n/a % n/a n/a %
[B]
CALIFORNIA MUNICIPAL INCOME - CLASS B n/a n/a n/a % n/a n/a %
(LOAD ADJ.)[A][B]
NEW YORK MUNICIPAL INCOME - CLASS B % n/a n/a % % n/a %
[B]
NEW YORK MUNICIPAL INCOME - CLASS B % n/a n/a % % n/a %
(LOAD ADJ.)[A][B]
</TABLE>
+ LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 18,
1987 FOR GROWTH OPPORTUNITIES; JANUARY 6, 1987 FOR BALANCED; JANUARY 5,
1987 FOR HIGH YIELD; OCTOBER 31, 1994 FOR STRATEGIC INCOME; JANUARY 7, 1987
FOR GOVERNMENT INVESTMENT; SEPTEMBER 16, 1987 FOR SHORT FIXED-INCOME AND
HIGH INCOME MUNICIPAL; MARCH 16, 1994 FOR SHORT-INTERMEDIATE MUNICIPAL
INCOME; AUGUST 21, 1995 FOR NEW YORK MUNICIPAL INCOME; AND FEBRUARY 20,
1996 FOR MID CAP, LARGE CAP, AND CALIFORNIA MUNICIPAL INCOME) THROUGH THE
ANNUAL PERIODS ENDED 1996.
[A] LOAD ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING CLASS A'S MAXIMUM
FRONT-END SALES CHARGE OF 5.25% FOR THE EQUITY FUNDS; 4.25% FOR THE BOND
FUNDS; 3.25% FOR THE INTERMEDIATE-TERM BOND FUNDS; AND 1.50% FOR THE
SHORT-TERM BOND FUNDS.
LOAD ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING CLASS T'S MAXIMUM 3.50%
FRONT-END SALES CHARGE FOR THE EQUITY FUNDS AND BOND FUNDS; 2.75% FOR THE
INTERMEDIATE-TERM BOND FUNDS; AND 1.50% FOR THE SHORT-TERM BOND FUNDS.
LOAD ADJUSTED RETURNS FOR CLASS B SHARES OF THE EQUITY FUNDS AND BOND
FUNDS REFLECT CDSCS FOR THE PERIODS OF; ONE YEAR OR LESS, 5%; GREATER THAN
ONE YEAR TO TWO YEARS, 4%; GREATER THAN TWO TO FOUR YEARS, 3%; GREATER THAN
FOUR TO FIVE YEARS, 2%; GREATER THAN FIVE YEARS TO SIX YEARS, 1%.; GREATER
THAN SIX YEARS, 0%. LOAD ADJUSTED RETURNS FOR CLASS B SHARES OF THE
INTERMEDIATE-TERM BOND FUNDS REFLECT CDSCS FOR THE PERIODS OF: ONE YEAR OR
LESS, 3%; GREATER THAN ONE YEAR TO TWO YEARS, 2%; GREATER THAN TWO TO THREE
YEARS, 1%; GREATER THAN THREE YEARS, 0%.
[B] PERIOD ENDED OCTOBER 31, 1996.
[C] PERIOD ENDED NOVEMBER 30, 1996.
[D] PERIOD ENDED DECEMBER 31, 1996.
[E] PERIOD ENDED JULY 31, 1996.
[F] I NITIAL OFFERING OF CLASS A SHARES FOR EACH FUND (EXCEPT MORTGAGE
SECURITIES AND MUNICIPAL BOND) TOOK PLACE ON SEPTEMBER 3, 1996. RETURNS
PRIOR TO SEPTEMBER 3, 1996 (EXCEPT FOR EQUITY GROWTH, EQUITY INCOME,
INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME) ARE THOSE OF CLASS T,
THE ORIGINAL CLASS OF EACH FUND AND REFLECT CLASS T'S THEN APPLICABLE 12B-1
FEE ( 0.65% FOR EQUITY FUNDS PRIOR TO JANUARY 1, 1996). FOR EQUITY GROWTH,
EQUITY INCOME, INTERMEDIATE BOND,AND INTERMEDIATE MUNICIPAL INCOME RETURNS
BETWEEN SEPTEMBER 10, 1992 AND SEPTEMBER 3, 1996 ARE THOSE OF CLASS T AND
REFLECT CLASS T'S THEN APPLICABLE 12B-1 FEE ( 0.65% FOR EQUITY FUNDS PRIOR
TO JANUARY 1, 1996). RETURNS BETWEEN COMMENCEMENT OF OPERATIONS AND
SEPTEMBER 10, 1992 REFLECT THE RETURNS OF INSTITUTIONAL CLASS, THE ORIGINAL
CLASS OF EACH FUND WHICH DOES NOT HAVE A 12B-1 FEE. CLASS A'S RETURNS WOULD
HAVE BEEN LOWER IF 12B-1 FEES WERE REFLECTED PRIOR TO SEPTEMBER 10, 1992.
CLASS A, CLASS T, AND CLASS B SHARES OF MORTGAGE SECURITIES ARE EXPECTED
TO COMMENCE OPERATIONS ON FEBRUARY 28, 1997. RETURNS PRIOR TO THAT DATE ARE
THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR
A 12B-1 FEE. CLASS T AND CLASS A RETURNS WOULD HAVE BEEN LOWER IF THEIR
RESPECTIVE 12B-1 FEES WERE REFLECTED IN RETURNS PRIOR TO THAT DATE. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE (INCLUDING A SHAREHOLDER
SERVICING FEE) BEEN REFLECTED IN RETURNS PRIOR TO THAT DATE.
CLASS A OF MUNICIPAL BOND IS EXPECTED TO COMMENCE OPERATIONS ON FEBRUARY
28, 1997. RETURNS BETWEEN JULY 1, 1996 AND FEBRUARY 28, 1997 ARE THOSE OF
CLASS T AND REFLECT CLASS T'S 0.25% 12B-1 FEE. RETURNS PRIOR THAT DATE ARE
THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR
A 12B-1 FEE. CLASS A'S RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE WAS
REFLECTED IN RETURNS PRIOR TO JULY 1, 1996.
I NITIAL OFFERING OF CLASS T AND CLASS B SHARES FOR MUNICIPAL BOND TOOK
PLACE ON JULY 1, 1996. RETURNS PRIOR TO THAT DATE ARE THOSE OF INITIAL
CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT HAVE A 12B-1 FEE.
CLASS T RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE BEEN REFLECTED IN
RETURNS PRIOR TO THAT DATE. CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS
12-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) HAD BEEN REFLECTED IN
PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS T SHARES FOR EQUITY GROWTH, EQUITY INCOME,
INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON
SEPTEMBER 10, 1992, AND BEAR A 12B-1 FEE (AT THEN CURRENTLY APPLICABLE
RATES FOR EQUITY GROWTH AND EQUITY INCOME OF 0.65%, AND FOR INTERMEDIATE
BOND AND INTERMEDIATE MUNICIPAL INCOME OF 0.25%) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND WHICH DOES NOT BEAR A
12B-1 FEE. CLASS T SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE
BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES OF EQUITY GROWTH WILL TAKE PLACE ON
OR ABOUT JANUARY 2, 1997. CLASS B SHARES BEAR A 12B-1 FEE (INCLUDING A
SHAREHOLDER SERVICING FEE), WHICH IS NOT REFLECTED IN PRIOR RETURN
DATES. RETURNS BETWEEN SEPTEMBER 10, 1992 AND DECEMBER 31, 1995 ARE THOSE
OF CLASS T AND REFLECT CLASS T'S THEN APPLICABLE 0.65% 12B-1 FEE. RETURNS
PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF INSTITUTIONAL CLASS, THE
ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A 12B-1 FEE. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12-1 FEE (INCLUDING A SHAREHOLDER
SERVICING FEE) HAD BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES OF BALANCED WILL TAKE PLACE ON OR ABOUT
JANUARY 2, 1997. CLASS B SHARES BEAR A 12B-1 FEE (INCLUDINGA SHAREHOLDER
SERVICING FEE), WHICH IS NOT REFLECTED IN PRIOR RETURN DATES. RETURNS
BETWEEN JANUARY 6, 1987 AND DECEMBER 31, 1995 ARE THOSE OF CLASS T AND
REFLECT CLASS T'S THEN APPLICABLE 0.65% 12B-1 FEE.. CLASS B RE TURNS
WOULD HAVE BEEN LOWER IF ITS 12-1 FEE (INCLUDING A SHAREHOLDER SERVICING
FEE) HAD BEEN REFLECTED IN PRIOR DATE RETURNS.
CLASS B OF GROWTH OPPORTUNITIES IS EXPECTED TO COMMENCE OPERATIONS ON
FEBRUARY 28, 1997. RETURNS PRIOR TO THAT DATE ARE THOSE OF CLASS T, THE
ORIGINAL CLASS OF THE FUND AND REFLECT CLASS T'S THEN APPLICABLE 12B-1 FEE
( 0.65% PRIOR TO JANUARY 1, 1996). CLASS B SHARE RETURNS WOULD HAVE BEEN
LOWER HAD ITS 12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) BEEN
REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR EQUITY INCOME, INTERMEDIATE BOND,
AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JUNE 30, 1994, AND BEAR A
12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) (AT A THEN CURRENTLY
APPLICABLE COMBINED RATE OF 1.00% FOR BOND FUNDS) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE 30, 1994, AND SEPTEMBER 10,
1992, ARE THOSE OF CLASS T AND INSTITUTIONAL CLASS SHARES, RESPECTIVELY.
CLASS T RETURNS INCLUDE A THEN CURRENTLY APPLICABLE 12B-1 FEE OF 0.65% FOR
EQUITY INCOME, AND 0.25% FOR INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL
INCOME. INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, DOES NOT
BEAR A 12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS
12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN PRIOR
DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR STRATEGIC OPPORTUNITIES TOOK PLACE
ON JUNE 30, 1994, AND BEAR A 12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING
FEE) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE
30, 1994, AND AUGUST 20, 1986, ARE THOSE OF CLASS T AND INITIAL CLASS
SHARES, RESPECTIVELY. CLASS T RETURNS INCLUDE A THEN APPLICABLE 12B-1 FEE
OF 0.65%. INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, DOES NOT BEAR A
12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE
(INCLUDING A SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN PRIOR DATE
RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR HIGH YIELD, GOVERNMENT INVESTMENT,
AND HIGH INCOME MUNICIPAL TOOK PLACE ON JUNE 30, 1994, AND BEAR A 12B-1 FEE
(INCLUDING A SHAREHOLDER SERVICING FEE) (AT A THEN CURRENTLY APPLICABLE
COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JUNE 30, 1994, ARE THOSE OF CLASS T SHARES, THE ORIGINAL
CLASS OF THESE FUNDS AND INCLUDE THEN APPLICABLE CLASS T 12B-1 FEES OF
0.25%. CLASS B RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE (INCLUDING
A SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN PRIOR DATE RETURNS.
The exclusion of any applicable sales charge from a performance
calculation produces a higher return.
If FMR had not reimbursed certain class expenses during these periods,
total returns would have been lower.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as
actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
Average annual and cumulative total returns will include the effect of
paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
This difference may be significant for funds whose investments are
denominated in foreign securities.
In calculating yield, a fund may from time to time use a security's coupon
rate instead of its yield to maturity in order to reflect the risk premium
on that security. This practice will have the effect of reducing a fund's
yield.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE COMPETITIVE FUNDS AVERAGE is each fund's applicable Lipper Funds
Average, which reflects the performance of mutual funds with similar
objectives. These averages, published by Lipper Analytical Services, Inc.,
exclude the effect of sales charges.
STANDARD & POOR'S 500 INDEX (S&P 500) is a widely recognized,
unmanaged index of common stocks.
STANDARD & POOR'S MIDCAP 400 INDEX is a widely recognized, unmanaged index
of 400 medium-capitalization stocks.
MERRILL LYNCH HIGH YIELD MASTER INDEX is a market capitalization weighted
index of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of at least one year and have a credit rating lower
than BBB-/Baa3, but are not in default.
LEHMAN BROTHERS 70% MUNICIPAL/30% NON-INVESTMENT GRADE COMPOSITE INDEX,
with a Municipal Bond Index weight of 70% and a Non-Investment Grade Bond
Index weight of 30%, is a total return performance benchmark for both
investment-grade and non-investment grade municipal bonds.
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX is a market value
weighted performance benchmark for government and corporate fixed-rate debt
issues with maturities between one and three years.
SALOMON BROTHERS MORTGAGE INDEX is a market capitalization weighted index
of 15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC), and
FNMA and FHLMC balloon mortgages with fixed-rate coupons.
SALOMON BROTHERS TREASURY/AGENCY INDEX is a market capitalization
weighted index of U.S. Treasury and U.S. government agency securities with
fixed-rate coupons and weighted average lives of at least one year.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is a
market value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 10 years.
Unlike each Class's returns, the total returns of each comparative index do
not include the effect of any brokerage commissions, transaction fees, or
other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
Each class of each growth or growth and income fund may quote its adjusted
net asset value including all distributions paid. This value may be
averaged over specified periods and may be used to calculate a class's
moving average.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report ,please contact your investment
professional.
TOTAL RETURNS AND YIELDS 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. TechnoQuant Growth, Equity
Growth, Mid Cap, Large Cap, and Growth & Income are diversified funds of
Fidelity Advisor Series I, a Massachusetts business trust organized on
June 24, 1983. Growth Opportunities, Balanced , High Yield,
Government Investment and Short Fixed-Income are diversified funds of
Fidelity Advisor Series II, a Massachusetts business trust organized on
April 24, 1986. Equity Income is a diversified fund of Fidelity Advisor
Series III, a Massachusetts business trust organized on May 17, 1982.
Intermediate Bond is a diversified fund of Fidelity Advisor Series IV, a
Massachusetts busine ss trust organized on May 6, 1983. High Income
Municipal is a diversified fund and California Municipal Income and New
York M unicipal Income are non-diversified funds of Fidelity Advisor
Series V, a Massachusetts business trust organized on April 24, 1986.
Intermediate Municipal Income is a diversified fund and Short-Intermediate
Municipal Income is a non-diversified fund of Fidelity Advisor Series VI, a
Massachusetts business trust organized on June 1, 1983. Strategic
Income is a non-diversified fund and Strategic Opportunities is a
diversified fund of Fidelity Advisor Series VIII, a Massachusetts
business trust org anized on September 23, 1983. Mortgage Securities
is a diversified fund of Fidelity Income Fund, a Massachusetts business
trust organized on August 7, 1984. Municipal Bond is a diversified fund of
Fidelity Municipal Trust, a Massachusetts business trust organized on June
22, 1984. Each trust is an open-end management investment company.
There is a remote possibility that one fund might become liable for a
misstatement in the prospectus about another fund.
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 the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS 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.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. For
shareholders of TechnoQuant Growth, Mid Cap, Equity Growth, Strategic
Opportunities, Large Cap, Growth & Income, and Strategic Income, you are
entitled to one vote for each share you own. For shareholders of Growth
Opportunities, Equity Income, Balanced, High Yield, Mortgage Securities,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Municipal Bond, Intermediate Municipal Income, Short-
Intermediate Municipal Income, California Municipal Income, and New York
Municipal Income the number of votes you are entitled to is based upon the
dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which chooses each fund's investments and
handles its business affairs. FMR chooses investments with the assistance
of foreign affiliates for each fund except Government Investment, High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income.
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for TehnoQuant Growth,
Mid Cap. Equity Growth, Growth Opportunities, Strategic Opportunities,
Large Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Mortgage Securities, Intermediate Bond, and Short-Fixed Income.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR Far
East), in Tokyo, Japan, serves as a sub-adviser for TehnoQuant Growth, Mid
Cap. Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Mortgage Securities, Intermediate Bond, and Short-Fixed Income.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.), in Pembroke, Bermuda, serves as a sub-adviser for
Strategic Income.
(small solid bullet) Fidelity International Investment Advisors (FIIA), in
Pembroke, Bermuda, serves as a sub-adviser for Strategic Income.
(small solid bullet) Fidelity Investment Japan Ltd. (FIJ), in Tokyo, Japan
serves as a sub-adviser for Strategic Income.
As of __, 19_, FMR advised funds having approximately __million shareholder
accounts with a total value of more than $__ billion.
John H. Carlson is lead manager of Advisor Strategic Income, which he has
managed since August 1995, and is manager of the fund's emerging market
investments. Mr. Carlson also manages Advisor Emerging Markets Income
and New Markets Income. Previously, he was executive director of emerging
markets at Lehman Brothers International, London. From 1990 to 1992, Mr.
Carlson was executive vice president of capital markets for Daiwa
Securities America.
C. Robert Chow is manager of Advisor Equity Income, which he has managed
since March 1996. Previously, he managed Select Paper and Forest Products,
Select Computers, and Select Insurance. In addition, he was an equity
analyst covering consumer finance and household products. Mr. Chow joined
Fidelity in 1989.
Bettina E. Doulton is lead manager and vice president of Advisor
Balanced, which she has managed since March 1996. Ms. Doulton also
manages Advisor Annuity Income & Growth, and Puritan(registered trademark).
Previously, she managed Advisor Equity Income, VIP Equity-Income, Value,
Select Automotive, and was assistant to Peter Lynch on Magellan(registered
trademark). Ms. Doulton also served as an analyst following the automotive
and tire industry as well as the gaming and lodging industry. Ms. Doulton
joined Fidelity in 1986.
Margaret L. Eagle is vice president and manager of Advisor High Yield,
which she has managed since it began in January 1987, and has been manager
of Advisor Strategic Income's high yield investments since January 1996.
Previously, she managed Spartan High Income, High Income (now Capital &
Income), and several pension fund accounts. She also managed the bond
portion of Puritan(registered trademark). Ms. Eagle joined Fidelity in
1980.
George Fischer is manager of Advisor Municipal Bond, which he has
managed since October 1995. He also manages Spartan Bond Strategist,
Insured Municipal Income, and various trust accounts. Mr. Fischer joined
Fidelity in 1989.
Kevin E. Grant is vice president of Advisor Balanced a nd has been
manager of its fixed-income investments since March 1996. Mr. Grant is also
vice president and manager of Advisor Intermediate Bond, and manager of
Advisor Strategic Income's U.S. government and domestic investment grade
investments. Mr. Grant is also the manager of Advisor Mortgage
Securities which he has managed since 1993. I n addition, he manages the
fixed-income investments of Puritan. Mr. Grant also manages Advisor World
Limited Term Bond, Spartan Ginnie Mae and Ginnie Mae,. Previously, he was
vice president and chief strategist for mortgage-backed securities at
Morgan Stanley and an investment director at Aetna. Mr. Grant joined
Fidelity in 1993.
Lawrence Greenberg is vice president and manager of Advisor Equity Growth,
which he has managed since June 1996. Mr. Greenberg also manages
VIP:Growth, Growth Company, and Emerging Growth. Mr. Greenberg joined
Fidelity in 1986.
Robert C. Ives is manager of Advisor Government Investment, which he has
managed since February 1995. Mr. Ives also manages Spartan Government
Income and Government Securities. Previously, he managed Ginnie Mae,
Spartan Ginnie Mae and Mortgage Securities. Mr. Ives joined Fidelity in
1991, and received an M.B.A. from the University of Chicago.
Jonathan M. Kelly has been manager of Advisor Strategic Income's foreign
bond investments in developed markets since January 1996. Previously, he
managed Advisor Emerging Markets Income, and New Markets Income. Mr. Kelly
joined Fidelity in 1991, after receiving his M.B.A. from the Wharton School
at the University of Pennsylvania. Mr. Kelly worked in the money management
field prior to business school.
Timothy A. Krochuk is manager of Advisor TechnoQuant Growth, which he
has managed since inception. Previously, he was a quantitative analyst. Mr.
Krochuk joined Fidelity in 1992.
Harris B. Leviton is vice president and manager of Advisor Strategic
Opportunities, which he has managed since March 1996. Previously, he
managed Retirement Growth, Select Electronics, and Convertible Securities.
Mr. Leviton joined Fidelity in 1986.
Norman U. Lind is vice president and manager of Advisor Short-Intermediate
Municipal Income, which he has managed since October 1995 and is also
manager of Advisor New York Municipal Income which he has managed since
August 1995, New York Tax-Free Insured, New York Tax-Free High Yield,
Spartan New York Municipal High Yield, Spartan Intermediate Municipal,
Spartan Short-Intermediate Municipal, and Spartan New York Intermediate
Municipal. Previously, he served as the leader of the municipal bond
research group. Mr. Lind joined Fidelity in 1986.
Charles S. Morrison is manager of Advisor Short Fixed-Income, which he has
managed since February 1995. Mr. Morrison also manages Spartan Short-Term
Income, Short-Term Bond, and Short-term World Income. Mr. Morrison is vice
president of Fidelity Management Trust Company. Mr. Morrison joined
Fidelity in 1987.
David L. Murphy is manager of Advisor Intermediate Municipal Income, which
he has managed since March 1995. Mr. Murphy also manages High Yield
Tax-Free, Spartan Municipal Income, and Limited Term Municipals.
Previously, he managed Advisor Short-Intermediate Municipal Income, Spartan
Short-Intermediate Municipal, Spartan Intermediate Municipal, Spartan New
Jersey Municipal High-Yield, and Spartan New York Intermediate Municipal.
Mr. Murphy joined Fidelity in 1989.
Tanya M. Roy is manager of Advisor High Income Municipal, which she has
managed since August 1995. Ms. Roy also manages Aggressive Tax-Free and
Spartan Aggressive Municipal. Previously, she managed Municipal Bond and
was a municipal bond analyst. Ms. Roy joined Fidelity in 1989.
Jonathan D. Short is manager of Advisor California Municipal Income, which
he has managed since February 1996. Mr. Short also manages Minnesota
Municipal Income, Spartan Arizona Municipal Income, California Municipal
Income, California Insured Municipal Income, Spartan California Municipal
High Yield, and Spartan California Intermediate Municipal. Previously, he
was a municipal bond analyst. Mr. Short joined Fidelity in 1990, after
receiving his M.B.A. from the Massachusetts Institute of Technology.
Thomas Sprague is manager of Advisor Large Cap, which he has managed since
March 1996. Mr. Sprague also manages Large Cap Stock, Trust Earnings
Growth, and Advisor World U.S. Large Cap. Previously, he managed Select
Environmental Services, Select Electronics, Select Software, and Select
Computer Services. Mr. Sprague joined Fidelity in 1989.
Beth Terrana is manager of Advisor Growth & Income, which she has
managed since inception. She also manages another Fidelity fund. Since
joining Fidelity in 1983, Ms. Terrana has worked as a portfolio manager.
Jennifer S. Uhrig is manager of Advisor Mid Cap, which she has managed
since February 1996. Ms. Uhrig also manages Mid Cap Stock. Previously,
she managed Select Retailing, Select Developing Communications, and Select
Telecommunications. Ms. Uhrig joined Fidelity in 1987.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities, which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp. and leader of the growth group. Mr. Vanderheiden joined Fidelity in
1971.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs certain
transfer agent servicing functions for each class of each fun d.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant owners
of a class of shares of common stock representing approximately 49% of the
voting power of FMR Corp. Under the Investment Company Act of 1940 (the
1940 Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
Fidelity International Limited (FIL), is the parent company of FIIA , FIJ,
and FIIAL U.K The Johnson family group also owns, directly or indirectly,
more than 25% of the voting common stock of FIL.
UMB Bank, n.a. (UMB) is the transfer agent for High Income Municipal,
Municipal Bond, I ntermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income and New York Municipal
Income, although it employs FIIOC to perform these functions for each class
of each fund. UMB is located at 1010 Grand Avenue, Kansas City, Missouri
64106.
A broker-dealer may use a portion of the commissions paid by a fund to
reduce custodian or transfer agent fees for that fund . 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 value of each fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions. Bond values fluctuate based on changes in interest rates,
market conditions, other economic and political news, and on their quality
and maturity. In general, bond prices rise when interest rates fall, and
fall when interest rates rise. This effect is more pronounced for
longer-term securities. Lower quality securities offer higher yields, but
also carry more risk.
Funds which invest in foreign securities have increased economic and
political risks as they are exposed to events and factors in the various
world markets. This is especially true for funds that invest in emerging
markets. Also, because many 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
investment techniques to either increase or decrease a fund's investment
exposure to any currency.
The total return from a bond includes both income and price gains or
losses. In selecting investments for a bond fund, FMR considers a bond's
expected income together with its potential for price gains or losses.
While income is generally the most important component of bond returns over
time, a bond fund's emphasis on income does not mean the fund invests only
in the highest-yielding bonds available, or that it can avoid losses of
principal.
FMR generally focuses on assembling a portfolio of bonds that it believes
will provide the best balance between risk and return within the range of
eligible investments for the fund. FMR's evaluation of a potential
investment includes an analysis of the credit quality of the issuer, its
structural features, its current price compared to FMR's estimate of its
long-term value, and any short-term trading opportunities resulting from
market inefficiencies.
FMR may use various investment techniques to hedge a portion of the funds'
risks, but there is no guarantee that these strategies will work as FMR
intends. It is important to note that neither the funds nor their yields
are guaranteed by the U.S. Government. When you sell your shares, they may
be worth more or less than what you paid for them.
TECHNOQUANT GROWTH FUND seeks growth of capital by investing mainly
in common stocks. However, the fund has the flexibility to invest in other
types of equity securities and debt securities as well. The fund's security
selection process utilizes computer-aided, quantitative analysis. FMR's
computer models use many types of data, but emphasize technical factors
such as historical price and volume relationships. Fundamental criteria,
such as earnings estimates, and dividend yield may also be considered.
FMR's emphasis on technical analysis can result in the fund holding
different types of stocks at different times. For example, the fund may
hold stocks of companies with large or small market capitalization or high
or low price/earnings ratios. The fund's focus may change rapidly based on
FMR's analysis of the most current information. At times, the fund may be
concentrated in a small number of market sectors or securities.
MID CAP FUND seeks long-term growth of capital by investing primarily in
equity securities of companies with medium market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance in
other market capitalizations and security types.
Medium market capitalization companies are those whose market
capitalization falls within the capitalization range of the S&P MidCap 400
at the time of the fund's investment. The S&P MidCap 400 Index is an
unmanaged index of medium-capitalization stocks. Companies whose
capitalization falls outside this range after purchase continue to be
considered medium-capitalized for purposes of the 65% policy. As of
________, the S&P MidCap 400 included companies with capitalizations of
between $72 million and $6.5 billion.
Investing in medium capitalization stocks may involve greater risk than
investing in large capitalization stocks, since they can be subject to more
abrupt or erratic movements. However, they tend to involve less risk than
stocks of small capitalization companies.
EQUITY GROWTH FUND seeks capital appreciation by investing primarily in
common and preferred stock and securities convertible into the common stock
of companies with above-average growth characteristics. FMR normally
invests at least 65% of the fund's total assets in common and preferred
stock. The fund looks for domestic and foreign companies with above-average
growth characteristics compared to the average of the companies included
in the Standard & Poor's 500 Index (S&P 500). The S&P 500 is a
registered trademark of Standard & Poor's.
Growth may be measured by factors such as earnings or gross sales.
Companies with strong growth potential often have new products,
technologies, distribution channels, or other opportunities. As a general
rule, these companies may include smaller, less well-known companies, and
companies whose stocks have higher than average price/earnings (P/E)
ratios. The market prices of these stocks may be particularly sensitive to
economic, market, or company news. FMR may also pursue growth in larger or
revitalized companies or companies that hold a strong position in the
market. These growth characteristics may be found in mature or declining
industries.
GROWTH OPPORTUNITIES FUND seeks capital growth by investing primarily in
common stocks and securities convertible into common stocks. FMR normally
invests at least 65% of the fund's total assets in securities of companies
that FMR believes have long-term growth potential. Although the fund
invests primarily in common stock and securities convertible into common
stock, it has the ability to purchase other securities, such as preferred
stock and bonds, that may produce capital growth. The fund may invest in
foreign securities without limitation.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation." FMR normally invests at least 65% of the fund's total assets in
these securities. The term "special situation" refers to FMR's
identification of an unusual, and possibly non-repetitive, development
taking place in a company or a group of companies in an industry.
A special situation may involve one or more of the following
characteristics:
(small solid bullet) A technological advance or discovery, the offering of
a new or unique product or service, or changes in consumer demand or
consumption forecasts.
(small solid bullet) Changes in the competitive outlook or growth potential
of an industry or a company within an industry, including changes in the
scope or nature of foreign competition or the development of an emerging
industry.
(small solid bullet) New or changed management, or material changes in
management policies or corporate structure.
(small solid bullet) Significant economic or political occurrences abroad,
including changes in foreign or domestic import and tax laws or other
regulations.
(small solid bullet) Other events, including natural disasters, favorable
litigation settlements, or a major change in demographic patterns.
"Special situations" often involve breaks with past experience. They can be
relatively aggressive investments. In seeking capital appreciation, the
fund also may invest in securities of companies not involving a special
situation, but which are companies with valuable fixed assets and whose
securities are believed by FMR to be undervalued in relation to the
companies' assets, earnings, or growth potential. FMR intends to invest
primarily in common stocks and securities that are convertible into common
stocks; however, it also may invest in debt securities of all types and
quality if FMR believes that investing in these securities will result in
capital appreciation. The fund may invest up to 30% of its assets in
foreign investments.
LARGE CAP FUND seeks long term growth of capital by investing primarily in
equity securities of companies with large market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance
in other market capitalizations and security types.
FMR defines large market capitalization companies as those with market
capitalizations of $1 billion or more at the time of the fund's investment.
Companies whose capitalization falls below this level after purchase
continue to be considered large-capitalized for purposes of the 65% policy.
Companies with large market capitalizations typically have a large number
of publicly held shares and a high trading volume, resulting in a high
degree of liquidity. These tend to be quality companies with strong
management organizations. However, large capitalization companies may have
less growth potential than smaller companies and may be able to react less
quickly to changes in the marketplace.
GROWTH & INCOME FUND seeks high total return through a
combination of current income and capital appreciation. The fund invests
mainly in equity securities. The fund expects to invest the majority of its
assets in domestic and foreign equity securities, with a focus on those
that pay current dividends and show potential earnings growth. However, the
fund may buy debt securities as well as equity securities that are not
currently paying dividends, but offer prospects for capital appreciation or
future income.
EQUITY INCOME FUND seeks a yield which exceeds the composite
dividend yield on securities comprising the S&P 500. In addition,
consistent with the primary objective of obtaining income, the fund will
consider the potential for achieving capital appreciation. Under normal
conditions, FMR normally invests at least 65% of the fund's total assets in
income-producing equity securities. For purposes of this policy, equity
securities are defined as common and preferred stocks. The balance of the
fund's assets will tend to be invested in debt securities, a high
percentage of which are expected to be convertible into common stocks.
The fund seeks to achieve a yield that beats that of the S&P 500. The fund
does not intend to invest in securities of issuers without proven earnings
and/or credit histories. Because the fund invests for income, as well as
capital appreciation, investors should not expect capital appreciation
comparable with funds which seek only capital appreciation. The yield on
the fund's assets generally will increase or decrease from year to year in
accordance with market conditions and in relation to the changes in yields
of the stocks included in the S&P 500.
BALANCED FUND seeks both income and growth of capital by investing in a
diversified portfolio of equity and fixed-income securities with income,
growth of income, and capital appreciation potential. FMR manages the fund
to maintain a balance between stocks and bonds. When FMR's outlook is
neutral, it will invest approximately 60% of the fund's assets in stocks
and other equity securities and the remainder in bonds and other
fixed-income securities. FMR may vary from this target if it believes
stocks or bonds offer more favorable opportunities, but will always invest
at least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
The fund may buy securities that are not currently paying income but offer
prospects for future income. The fund may invest in securities of foreign
issuers. In selecting investments for the fund, FMR will consider such
factors as the issuer's financial strength, its outlook for increased
dividend or interest payments, and the potential for capital gains.
HIGH YIELD FUND seeks a combination of a high level of income and the
potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks. FMR normally invests at least 65% of the fund's total
assets in these securities.
The fund may also invest in securities issued or guaranteed by the U.S.
Government, any state or any of their respective subdivisions, agencies or
instrumentalities, and securities of foreign issuers, including securities
of foreign governments. The fund may invest up to 35% of its total assets
in equity securities, including common stocks, warrants and rights.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
The fund invests primarily in fixed-income securities, allocated among four
general investment categories: high yield securities, U.S. Government and
investment grade securities, emerging market securities, and foreign
developed market securities. The fund's neutral mix, or the benchmark for
its combination of investments in each category over time, is approximately
40% high yield, 30% U.S. Government and investment-grade, 15% emerging
markets and 15% foreign developed markets.
FMR regularly reviews the fund's allocation and makes changes gradually
over time to favor investments that it believes provide the most favorable
outlook for achieving the fund's objective. In normal market environments,
FMR expects the fund's asset allocation to approximate the neutral mix
within a range of plus or minus 10% of assets per category. There are no
absolute limits on the percent of assets invested in each category,
however, and FMR reserves the right to change the neutral mix from time to
time.
The HIGH YIELD category includes high-yielding, lower-quality debt
securities consisting mainly of U.S. securities of a quality grade lower
than BBB. The U.S. GOVERNMENT AND INVESTMENT-GRADE category includes
mortgage securities, U.S. Government securities, government agency
securities and other U.S. dollar-denominated securities of investment-grade
quality. The EMERGING MARKET category includes corporate and governmental
debt securities of issuers located in emerging markets. The FOREIGN
DEVELOPED MARKET category includes corporate and governmental debt
securities of issuers located in developed foreign markets. These
investment categories are only general guidelines, and FMR may use its
judgment as to which category an investment falls within. The fund may also
make investments that do not fall within these categories.
By allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant risks of each
investment category through diversification. Diversification, when
successful, can mean higher returns with decreased volatility. However,
each of the fund's four investment categories may experience periods of
volatile returns, and it is possible for all investment categories to
decline at the same time.
MORTGAGE SECURITIES FUND seeks high current income, consistent with
prudent investment risk, by investing primarily in mortgage-related
securities. When consistent with its goal, the fund may also consider the
potential for capital gain. FMR normally invests at least 65% of the fund's
total assets in mortgage-related securities. The fund may also invest in
U.S. government securities and instruments related to U.S. government
securities.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between two and 10 years.
However, the reaction of mortgage securities to changes in interest rates
can be difficult to predict since mortgage securities are subject to
prepayment of principal and can be structured in a complex manner. As of
November 30, 1996, the fund's dollar-weighted average maturity was
approximately _ years.
GOVERNMENT INVESTMENT FUND seeks high current income by investing in
U.S. government securities and instruments related to U.S. government
securities under normal conditions. FMR normally invests the fund's assets
only in U.S. government securities, repurchase agreements, and other
instruments related to U.S. government securities. Under normal conditions,
FMR invests at least 65% of the fund's total assets in U.S. government
securities and repurchase agreements for U.S. government securities. Other
instruments may include futures or options on U.S. government securities or
interests in U.S. government securities that have been repackaged by
dealers or other third parties.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between five and 12 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately ___ years.
INTERMEDIATE BOND FUND seeks high current income by investing in
U.S. dollar-denominated investment-grade debt securities under normal
conditions. When consistent with its primary objective, the fund may also
seek capital appreciation. The fund normally maintains a dollar-weighted
average maturity between three and 10 years.
As of November 30, 1996, the fund's dollar-weighted average maturity was
approximately ___ years. In determining a security's maturity for purposes
of calculating the fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
SHORT FIXED-INCOME FUND seeks high current income, consistent with
the preservation of capital, by investing in U.S. dollar-denominated
investment-grade debt securities under normal conditions. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation. FMR normally invests at least 65% of the fund's total assets
in fixed-income securities of all types which may include convertible and
zero coupon securities.
As of October 31, 1996, the fund's dollar-weighted average maturity was
approximately ___ years. Although the fund can invest in securities of any
maturity, the fund maintains a dollar-weighted average maturity of three
years or less under normal conditions. In determining a security's
maturity for purposes of calculating the fund's average maturity, an
estimate of the average time for its principal to be paid may be used. This
can be substantially shorter than its stated final maturity.
HIGH INCOME MUNICIPAL FUND seeks high current income that is free
from federal income tax by investing in municipal securities of any quality
under normal conditions. Since the fund can emphasize lower-quality
securities, FMR's research and analysis is an integral part of choosing the
fund's investments. FMR normally invests so that at least 80% of the fund's
assets are invested in municipal securities whose interest is free from
federal income tax. In addition, FMR may invest all of its assets in
municipal securities issued to finance private activities. The interest
from these securities is a tax preference item for the purposes of the
federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds of comparable quality with maturities between
12 and 20 years. As of October 31, 1996, the fund's dollar-weighted average
maturity was approximately ___ years.
MUNICIPAL BOND FUND seeks a high level of current income that is
free from federal income tax, consistent with preservation of capital, by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets are invested
in municipal securities whose interest is free from federal income tax. In
addition, FMR may invest all of the fund's assets in municipal securities
issued to finance private activities. The interest from these securities
is a tax-preference item for purposes of the federal alternative minimum
tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of December 31, 1996, the fund's dollar-weighted average maturity was
approximately __ years.
INTERMEDIATE MUNICIPAL INCOME FUND seeks high current income that is
free from federal income tax, consistent with the preservation of capital,
by investing in investment-grade municipal securities under normal
conditions. FMR fund normally invests at least 80% of the fund's assets in
federally tax-free municipal securities. FMR may invest all of the fund's
assets in municipal securities issued to finance private activities. The
interest from these securities is a tax preference item for the purposes of
the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between three and 10 years
under normal conditions. FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between seven and 10 years. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately ___ years.
SHORT INTERMEDIATE MUNICIPAL INCOME FUND seeks high current
income that is free from federal income tax, consistent with preservation
of capital, by investing in investment-grade municipal securities under
normal conditions. FMR normally invests at least 80% of the fund's assets
in federally tax-free municipal securities. FMR may invest all of the
fund's assets in municipal securities issued to finance private activities.
The interest from these securities is a tax preference item for the
purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between two and five
years under normal conditions. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately ___ years.
CALIFORNIA MUNICIPAL INCOME FUND seeks high current income that is
free from federal income tax and California state personal income tax by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests at least 80% of the fund's assets in securities whose
interest is free from federal and California income taxes. FMR may invest
all of the fund's assets in municipal securities issued to finance private
activities. The interest from these securities is a tax preference item for
the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years.
As of October 31, 1996, the fund's dollar-weighted average maturity was
approximately ___ years.
The performance of California Municipal Income is affected by the economic
and political conditions within the state of California. California
suffered a severe economic recession between 1990- 1993, which resulted in
broad-based revenue shortfalls for the State and many local governments.
California's fiscal condition has improved as its economy has been in a
sustained recovery since 1994. During the recession, the State
substantially reduced local assistance, and further reductions could
adversely affect the financial condition of cities, counties and other
government agencies facing constraints in their own revenue collections.
California's long-term credit rating has been reduced in the past several
years. California voters in the past have passed amendments to the
California Constitution and other measures that limit the taxing and
spending authority of California governmental entities, and future voter
initiatives could result in adverse consequences affecting California
municipal bonds.
NEW YORK MUNICIPAL INCOME FUND seeks high current income that is
free from federal income tax and New York State and City personal income
taxes by investing in investment-grade municipal securities under normal
conditions.. FMR normally invests at least 80% of the fund's assets in
securities whose interest is free from federal and New York State and City
personal income taxes. FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from these
securities is a tax preference item for the purposes of the federal
alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately __ years.
The performance of New York Municipal Income Fund is affected by the
economic and political conditions within the state of New York. Both New
York City and State have recently experienced significant financial
difficulty, and both the City's and the State's credit ratings are among
the lowest in the country.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to its investment strategy.
Each of the Equity Funds, High Yield, and Strategic Income r eserves
the right to invest without limitation in preferred stocks and
investment-grade debt instruments for temporary, defensive purposes.
Each of Mortgage Securities, Government Investment, Intermed iate
Bond, and Short Fixed-Income reserves the right to invest without
limitation in investment-grade money market or short-term debt instruments
for temporary, defensive purposes.
Each of High Income Municipal, Municipal Bond, Intermediate
Municipal Income, and Short-Intermediate Municipal Income do not expect to
invest in federally taxable obligations. California Municipal Income and
New York Municipal Income do not expect to invest in federally or state
taxable obligations. Each of High Income Municipal, Municipal Bond,
Intermediate Municipal I ncome, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, reserves the
right to invest without limitation in short-term instruments, to hold a
substantial amount of uninvested cash, or to invest more than normally
permitted in taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in the funds' SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its
goal. Fund holdings and recent investment strategies are detailed in
each fund's financial reports, which are sent to shareholders twice a
year . For a free SAI or financial report, call your investment
professional.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each of
TechnoQuant Growth, Mid Cap, Growth Opportunities, Large Cap, Growth &
Income, Equity Income, Balanced, High Yield, Mortgage Securities,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Municipal Bond and Intermediate Municipal Income may not
purchase more than 10% of the outstanding voting securities of a single
issuer. For TechnoQuant Growth and Growth & Income, this limitation does
not apply to investment company securities.
With respect to 100% of its total assets, each of Equity Growth and
Strategic Opportunities may not purchase more than 10% of the outstanding
voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by
issuers to borrow money from investors. The issuer generally pays the
investor a fixed, variable, or floating rate of interest, and must repay
the amount borrowed at maturity. Other debt securities, such as zero coupon
bonds, do not pay interest, but are sold at a discount from their face
values.
Debt securities, loans, and other direct debt have varying levels of
sensitivity to changes in interest rates and varying degrees of quality.
Longer-term bonds and zero coupon bonds are generally more sensitive to
interest rate changes than short-term bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds"), and
tax-exempt lower-quality debt securities (sometimes called "municipal
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.
The table on the following page provides a summary of ratings assigned to
debt holdings (not including money market instruments) in the funds'
portfolios. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended 1996, and are
presented as a percentage of total security investments. These percentages
are historical and do not necessarily indicate a fund's current or future
debt holdings.
RESTRICTIONS: For all of the Equity Funds , purchase of a debt
security is consistent with a fund's debt quality policy if it is rated at
or above the stated level by Moody's Investors Service (Moody's) or rated
in the equivalent categories by Standard and Poor's (S&P), or is unrated
but judged to be of equivalent quality by FMR.
Mid Cap, Equity Growth, Growth Opportunities, Strategic Opportunities,
Large Cap, Growth & Income, Equity Income, and Balanced currently intends
to limit its investments in lower than Baa-quality debt securities to less
than 35% of its assets.
TechnoQuant Growth currently intends to limit its investments in lower than
Baa- quality debt securities to 5% of its assets.
Municipal Bond invests only in investment-grade securities. A security is
considered to be investment-grade if it is judged by FMR to be of
equivalent quality to securities rated Baa or BBB or higher by Moody's or
S&P, respectively. However, the fund will limit its investments in medium
quality securities, as judged by FMR, to one-third of its total assets;
will not purchase securities rated below Baa or BBB by Moody's or S&P,
respectively; and will not invest more than 20% of its total assets in
securities not rated by Moody's and S&P.
Each of Mortgage Securities, Short Fixed-Income, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income normally invests in investment-grade
securities, but reserves the right to invest up to 5% of its assets in
below investment-grade securities. A security is considered to be
investment-grade if it is rated investment-grade by Moody's, S&P, Duff &
Phelps Credit Rating Co. (Duff & Phelps), or Fitch Investors Service, L.P.
(Fitch), or is unrated but judged by FMR to be of equivalent quality.
Intermediate Bond invests only in investment-grade securities, and will
limit its investments in medium quality securities to 5% of its assets. A
security is considered to be investment-grade or me dium quality if it is
rated investment-grade or medium quality respectively by Moody's, S & P,
Duff &Phelps, or Fitch, or is unrated but judged by FMR to be of equivalent
quality.
High Income Municipal does not currently intend to invest more than 10% of
its assets in bonds that are in default.
FISCAL YEAR ENDED 1996Emerging Markets Income
DEBT HOLDINGS, BY RATING
(AS A % OF INVESTMENTS IN EACH RATING CATEGORY) (AS A % OF INVESTMENTS IN
EACH RATING CATEGORY)
INVESTMENT GRADE* LOWER QUALITY*
STANDARD & POOR'S CORPORATION AAA, AA, A BBB BB B CCC CC,C D NR
EQUITY FUNDS:
TechnoQuant Growth
Equity Growth
Growth Opportunities
Strategic Opportunities
Growth & Income
Equity Income
Balanced
TAXABLE INCOME FUNDS:
High Yield
Strategic Income
Mortgage Securities
Government Investment
Intermediate Bond
Short Fixed-Income
MUNICIPAL FUNDS:
High Income Municipal
Municipal Bond
Intermediate Municipal Income
Short Intermediate Municipal Income
New York Municipal Income
MOODY'S INVESTORS SERVICE, INC. Aaa, Aa, A Baa Ba B Caa Ca C NR
EQUITY FUNDS:
TechnoQuant Growth .
Equity Growth
Growth Opportunities
Strategic Opportunities
Growth & Income
Equity Income
Balanced
TAXABLE INCOME FUNDS:
High Yield .
Strategic Income
Mortgage Securities
Government Investment
Intermediate Bond
Short Fixed-Income
MUNICIPAL FUNDS:
High Income Municipal
Municipal Bond
Intermediate Municipal Income
Short Intermediate Municipal Income
New York Municipal Income
__________________________________________________________________________
____________________________
(AS A % OF INVESTMENTS)
SECURITIES NOT
RATED BY
MOODY'S OR S&P (dagger)
Investment Grade (double dagger)
Lower Quality(double dagger)
Total
* FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
(dagger) THE DOLLAR-WEIGHTED AVERAGE PERCENTAGES REFLECTED IN THIS TABLE
MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
(double dagger) AS DETERMINED BY FMR
U.S. GOVERNMENT SECURITIES are high-quality debt instruments
issued or guaranteed by the U.S. Treasury or by an agency or
instrumentality of the U.S. Government. Not all U.S. Government securities
are backed by the full faith and credit of the United States. For example,
U.S. Government securities such as those issued by the Federal National
Mortgage Association are supported by the instrumentality's right to borrow
money from the U.S. Treasury under certain circumstances. Other U.S.
Government securities, such as those issued by the Federal Farm Credit
Banks Funding Corporation, are supported only by the credit of the entity
that issued them.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. The value of some or all municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders. A fund may own a municipal security directly
or through a participation interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of
credit and liquidity enhancement, including letters of credit, guarantees,
puts and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These arrangements
expose a fund to the credit risk of the entity providing the credit or
liquidity support. Changes in the credit quality of the provider could
affect the value of the security and the fund's share price.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of Ca lifornia or New York or their respective counties,
municipalities, authorities, or other subdivisions. The ability of issuers
to repay their debt can be affected by many factors that impact the
economic vitality of either the state or a region within the state.
Other state municipal securities include obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, Puerto Rico, and
their political subdivisions and public corporations. The economy of Puerto
Rico is closely linked to the U.S. economy and will be a ffected by the
stren gth of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives.
OTHER INSTRUMENTS may include securities of closed-end investment
companies.
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 the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to pay
interest and repay principal when due, and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in developing countries, more
volatile than U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. government or by private entities.
The price of a mortgage security may be significantly affected by changes
in interest rates. Some mortgage securities may have a structure that makes
their reaction to interest rates and other factors difficult to predict,
making their price highly volatile. Also, mortgage securities, especially
stripped mortgage-backed securities, are subject to prepayment risk.
During periods of declining interest rates, borrowers are more likely to
prepay their mortgages. Prepayments can limit price appreciation and
result in proceeds generally being reinvested in lower-yielding securities.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
STRIPPED SECURITIES are the separate income or principal
components of a debt security. The risks associated with stripped
securities are similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of stripped
securities may move in the same direction as interest rates. U.S. Treasury
securities that have been stripped by a Federal Reserve Bank are
obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
temporarily transfers possession of a portfolio instrument to another party
in return for cash. This could increase the risk of fluctuation in the
fund's yield or in the market value of its assets.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or another party. In exchange for this ben efit, a fund may
accept a lower interest rate. Demand features and standby commitments are
types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
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 changes in 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.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates , or other factors that affect
security values. These techniques may involve derivative transactions such
as buying and selling options and futures contracts, entering into currency
exchange contracts or swap agreements, purchasing indexed securities, and
selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to a fund.
RESTRICTIONS. Each fund (except High Yield and Strategic Income) may not
purchase a security if, as a result, more than 10% of its assets would be
invested in illiquid securities.
High Yield and Strategic Income may not purchase a security if, as a
result, more than 15% of its assets would be invested in illiquid
securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading practices
in which payment and delivery for the securities take place at a future
date. The market value of a security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities, in
a pooled account of repurchase agreements, and in a money market fund
available only to funds and accounts managed by FMR or its affiliates,
whose goal is to seek a high level of current income (exempt from federal
income tax in the case of a tax-free money market fund) while maintaining a
stable $1.00 share price. A major change in interest rates or a default on
the money market fund's investments could cause its share price to change.
RESTRICTIONS: California Municipal Income and New York Municipal Income do
not currently intend to invest in a money market fund. High Income
Municipal, Municipal Bond Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income Fund, and New York Municipal
Income Fund do not currently intend to invest in a pooled account of
repurchase agreements. Equity Growth and Strategic Opportunities will not
invest in a money market fund.
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 or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
changes in the market value of a single issuer or industry.
RESTRICTIONS: With respect to 100% of its total assets each of Equity
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in the securities of any one issuer.
This limitation does not apply to U.S. Government Securities.
With respect to 75% of its total assets each of TechnoQuant Growth, Mid
Cap, Growth Opportunities, Large Cap, Growth & Income, Equity Income,
Balanced, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, and Intermediate Municipal Income may not purchase a security if,
as a result, more than 5% would be invested in the securities of any one
issuer. This limitation does not apply to U.S. Government Securities or,
for TechnoQuant Growth and Growth & Income, investment company
securities.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income are considered non-diversified.
Generally, to meet federal tax requirements at the close of each quarter,
each 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. This limitation does not apply
to U.S. Government Securities.
A fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
Securities.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income may invest more than 25% of its total assets
in tax-free securities that finance similar types of projects.
BORROWING. Each 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 a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets; however, G overnment Investment, High Income Municipal,
Municipal Bond, Interme diate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income do not currently intend to make loans.
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.
TECHNOQUANT GROWTH FUND seeks capital growt h.
MID CAP FUND seeks long-term growth of capital.
EQUITY GROWTH FUND seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics.
Under normal conditions, the fund will invest at least 65% of its assets
in common and preferred stock.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation." Under normal conditions, the fund will invest at least 65% of
its total assets in companies involving a special situation. FMR intends to
invest primarily in common stocks and securities that are convertible into
common stocks; however, it also may invest in debt securities of all types
and quality if FMR believes that investing in these securities will result
in capital appreciation. The fund may invest up to 30% of its assets in
foreign investments.
LARGE CAP FUND seeks long-term growth of capital.
GROWTH & INCOME seeks high total return through a combination of current
income and capital appreciation.
EQUITY INCOME FUND seeks a yield from dividend and interest income which
exceeds the composite dividend yield on securities comprising the S&P 500.
In addition, consistent with the primary objective of obtaining dividend
and interest income, the fund will consider the potential for achieving
capital appreciation.
BALANCED FUND s eeks both income and gr owth of capital by
investing in a diversified portfolio of equity and fixed-income securities
with income, growth of income, and capital appreciation potential.
HIGH YIELD FUND seeks a combination of a high level of income and the
potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
MORTGAGE SECURITIES FUND seeks a high level of current income,
consistent with prudent investment risk, by investing primarily in
mortgage-related securities. In seeking current income, the fund may also
consider the potential for capital gain.
GOVERNMENT INVESTMENT FUND seeks a high level of current income by
investing primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
INTERMEDIATE BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed-income obligations.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax. The fund normally invests at least 80% of its net
assets in municipal obligations whose interest is free from federal income
tax.
MUNICIPAL BOND FUND seeks to provide as high a level of interest income
exempt from federal income tax as is consistent with preservation of
capital.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
INTERMEDIATE MUNICIPAL INCOME FUND seeks the highest level of income exempt
from federal income taxes that can be obtained consistent with the
preservation of capital. The fund normally invests at least 80% of its net
assets in securities whose interest is free from federal income tax.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks as high a level of current
income, exempt from federal income tax, as is consistent with preservation
of capital. The fund normally invests at least 80% of its net assets in
municipal obligations whose interest is free from federal income tax.
CALIFORNIA MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and California state personal income tax by
investing primarily in municipal securities. The fund normally invests at
least 80% of its net assets in securities whose interest is free from
federal and California income taxes.
NEW YORK MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and New York State and City personal income taxes
by investing primarily in municipal securities. The fund normally invests
at least 80% of its net assets in securities whose interest is free from
federal and New York State and City personal income taxes.
With respect to 75% of its total assets each of TechnoQuant Growth, Mid
Cap, Growth Opportunities, Large Cap, Growth & Income, Equity Income,
Balanced, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, and Intermediate Municipal Income may not purchase a security if, as
a result, more than 5% would be invested in the securities of any one
issuer. With respect to 100% of its total assets, each of Equity Growth and
Strategic Opportunities may not purchase a security if, as a result, more
than 5% would be invested in the securities of any one issue r. This
limitation does not apply to U.S. Government Securities or, for TechnoQuant
Growth and Growth & Income, investment company securities.
With respect to 75% of its total assets, each of TechnoQuant Growth, Mid
Cap, Growth Opportunities, Large Cap, Growth & Income, Equity Income,
Balanced, High Yield, Mortgage Securities ,Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, and Intermediate Municipal Income may not purchase more than 10% of
the outstanding voting securities of a single issuer. With respect to 100%
of its total assets, each of Equity Growth and Strategic Opportunities may
not purchase more than 10% of the outstanding voting securities of a single
issuer. This limitation does not apply to U.S. Government Securities or,
for TechnoQuant Growth and Growth & Income, investment company
securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
Securities
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in that
class's share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain of the funds. Each fund also
pays OTHER EXPENSES , which are explained on page 23.
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 a 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
The management fee is calculated and paid to FMR every month. Equity Income
pays FMR a monthly management fee at an annual rate of 0.50% of its average
net assets. The fee for TechnoQuant Growth, Mid Cap, Equity Growth,
Large Cap, Growth & Income, Balanced, High Yield, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermed iate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income is calculated by adding a group fee
rate to an individual fee rate, and multiplying the result by the fund's
average net assets . The fee for Growth Opportunities and Strategic
Opportunities is determined by taking a basic fee and then applying a
performance adjustment. The performance adjustment either increases or
decreases the management fee, depending on how well each fund has performed
relative to the S&P 500.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. For TechnoQuant Growth, Mid Cap, Equity Growth,
Growth Opportunities, Strategic Opportunities, Large Cap, Growth & Income,
and Balanced this rate cannot rise above 0.52%, and it drops as total
assets under management increase. For High Yield, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short -intermediate Municipal, California Municipal Income, and New
York Municipal Income this rate cannot rise above 0.37%, and it drops as
total assets under management increase. The basic fee rate is calculated
monthly by adding a group fee rate to an individual fund fee rate, and
multiplying the result by each fund's average net assets.
The performance adjustment rate is calculated monthly by comparing the
performance of Growth Opportunities and Strategic Opportunities to that of
the S&P 500 over the most recent 36-month period. The difference is
translated into a dollar amount that is added to or subtracted from the
basic fee. The maximum annualized performance adjustment rate is +_ 0.20%.
Investment performance will be measured separately for each class of shares
offered by Growth Opportunities and Strategic Opportunities and the least
of the results obtained will be used in calculating the performance
adjustment.
The following table states the management fee for each fund for its most
recent fiscal year end
Group Individual Total
Fee Rate Fund Fee Manageme
Rate nt Fee
TechnoQuant Growth [A] 0.30%
Mid Cap [A] 0.30%
Equity Growth 0.30%
[B]
Growth Opportunities [C] 0.30%
Strategic Opportunities [C] 0.30%
Large Cap [A] 0.30%
Growth & Income [A] 0.20%
Equity Income n/a n/a 0.50%
Balanced 0.15%[D
]
High Yield 0.45%
Strategic Income 0.45%
Mortgage Securities 0.30%
Government Investment 0.30%
Intermediate Bond 0.30%
Short Fixed-Income 0.30%
High Income Municipal Fund 0.20%
Municipal Bond Fund 0.25%
Intermediate Municipal Income 0.25%
Short-Intermediate Municipal Income 0.25%
California Municipal Income [A] 0.25%
New York Municipal Income 0.25%
[A] ESTIMATED
[B] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.33% TO 0.30%. IF THIS REDUCTION WAS NOT IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN ___%.
[C] THE BASIC FEE RATE FOR THE FISCAL YEAR ENDED 1996 WAS ___% FOR GROWTH
OPPORTUNITIES AND___% FOR STRATEGIC OPPORTUNITIES.
[D] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.20% TO 0.15%. IF THIS REDUCTION WERE IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN___%.
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR Far
East, FIJ, and FIIA. FIIA in turn has a sub-advisory agreement with FIIAL
U.K. These sub-advisers are compensated for providing FMR with investment
research and advice on issuers based outside the United States. FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the
costs of providing these services. FMR pays FIJ and FIIA a fee equal to 30%
of its management fee rate associated with investments for which the
sub-adviser provided investment advice.
T he 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 cost of providing these services.
For the fiscal year ended 1996, FMR, on behalf of ________ paid
_____________ fees equal to __%, __% and __%, respectively of ____________
average net assets.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and shareholder
services for each class of the Equity Funds, High Yield, Strategic
Income, Mortgage Securities, Government Investment, Intermediate Bond, and
Short-Fixed Income. Fidelity Service Company (FSC) calculates the NAV and
dividends for each class of the Equity Funds, High Yield, Strategic
Income, Mortgage Securities, Government Investment, Intermediate Bond, and
Short-Fixed Income. FSC also maintains the general accounting records and
administers the securities lending program for each fund.
For the fiscal year ended 1996, transfer agent and pricing and bookeeping
fees (as a percentage of average net assets) amounted to the following. The
amounts disclosed are before reimbursement, if any.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Class T Class B to Each Fund
to FIIOC to State FIIOC to FSC
Street[A]
TechnoQuant Growth
Mid Cap
Equity Growth
Growth Opportunities
Strategic Opportunities
Large Cap
Growth & Income
Equity Income
Balanced
High Yield
Strategic Income
Mortgage Securities
Government Investment
Intermediate Bond
Short-Fixed Income *
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
[A] THROUGH DECEMBER 31, 1996, STATE STREET BANK & TRUST COMPANY (STATE
STREET) PERFORMED CERTAIN TRANSFER AGENCY, DIVIDEND DISBURSING, AND
SHAREHOLDER SERVICES FOR CLASS T OF THE FUNDS. DURING THAT PERIOD, STATE
STREET ENTERED INTO SUB-ARRANGEMENTS PURSUANT TO WHICH FIIOC PERFORMED
CERTAIN TRANSFER AGENCY, DIVIDEND DISBURSING, AND SHAREHOLDER SERVICES FOR
CLASS T SHARES. STATE STREET PAID FIIOC A PORTION OF ITS FEE FOR CLASS T
ACCOUNTS FOR WHICH FIIOC PROVIDED LIMITED SERVICES, OR ITS FULL FEE FOR
CLASS T ACCOUNTS THAT FIIOC MAINTAINED ON ITS BEHALF.
UMB has entered into a sub-arrangement with FIIOC. FIIOC performs transfer
agency, dividend disbursing and shareholder services for each class of High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income. UMB has also entered into a sub-arrangement with
FSC. FSC calculates the NAV and dividends for each class of High Income
Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income and New
York Municipal Income, and maintains each fund's general accounting
records. All of the fees are paid to FIIOC and FSC by UMB, which is
reimbursed by the applicable class or the fund, as appropriate, for such
payments.
For the fiscal year ended 1996, transfer agent and pricing and bookkeeping
fees paid (as a percentage of average net assets) amounted to the
following. The amounts disclosed are before reimbursements, if any.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
UMB to UMB to UMB to UMB to
FIIOC on FIIOC on FIIOC on FSC on
behalf of behalf of behalf of behalf of
Class A Class T Class B each fund
High Income Municipal
Municipal Bond **
Intermediate Municipal Income
Short-Intermediate Municipal Income *
California Municipal Income
New York Municipal Income
</TABLE>
* FUND DOES NOT OFFER CLASS B SHARES.
**CLASS IS EXPECTED TO COMMENCE OPERATIONS IN FEBRUARY 1997.
Class A shares of each fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plans, Class A of each fund is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class A shares. Class A of the Equity
Funds may pay FDC a distribution fee at an annual rate of up to 0.75% of
its average net assets, or such lesser amount as the Trustees may determine
from time to time. Class A of the Bond Funds, the Intermediate-Term Bond
Funds, and the Short-Term Bond Funds may pay FDC a distribution fee at an
annual rate of up to 0.40% of its average net assets, or such lesser amount
as the Trustees may determine from time to time.
Class A of each of the Equity Funds currently pays FDC a monthly
distribution fee at an annual rate of 0.25% of its average net assets
throughout the month; Class A of each of the Bond Funds, the
Intermediate-Term Bond Funds, and the Short-Term Bond Funds currently pays
FDC a monthly distribution fee at an annual rate of 0.15% of its average
net assets throughout the month. Class A distribution fee rates may
be increased only when the Trustees believe that it is in the best
interests of Class A shareholders to do so.
Class T shares of each fund have adopted a DISTRIBUTION AND SERVICE PLAN.
Under the Plans, Class T of each fund is authorized to pay FDC a monthly
distribution fee as compensation for its services and expenses in
connection with the distribution of Class T shares. Class T o f
TechnoQuant Grow th, Mid Cap, Equity Growth, Equity Income, Large Cap,
an d Growth & Incom e may pay FDC a distribution fee at an annual rate
of up to 0.75% of its average net assets, or such lesser amount as the
Trustees may determine from time to time. Class T of Growth
Opportunities, Strategic Opportunities, and Balanced may pay FDC a
distribution fee at an annual rate of up to 0.65% of its average net
assets, or such lesser amount as the Trustees may determine from time to
time. Class T of High Yield, Strategic Income, Mortgage Securities,
Government Investment, Intermediate Bond, High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income may pay FDC a
distribution fee at an annual rate of up to 0.40% of its average net
assets, or such lesser amount as the Trustees may determine from time to
time. Class T of Short-Fixed Income may pay FDC a distribution fee at an
annual rate of up to 0.15% of its average net assets, or such lesser amount
as the Trustees may determine from time to time
Class T of each of the Equity Funds currently pays FDC a monthly
distribution fee at an annual rate of 0.50% of its average net assets
throughout the month; Class T of each of the Bond Funds and the
Intermediate-Term Bond Funds currently pays FDC a monthly distribution fee
at an annual rate of 0.25% of its average net assets throughout the month;
and Class T of each of the Short-Term Bond Funds currently pays FDC a
monthly distribution fee at an annual rate of 0.15% of its average net
assets throughout the month. Class T distribution fee rates may be
increased only when the Trustees believe that it is in the best interests
of Class T shareholders to do so.
Up to the full amount of the Class A and Class T distribution fees may be
reallowed to investment professionals, as compensation for their services
in connection with the distribution of Class A and Class T shares and for
providing support services to Class A and Class T shareholders, based upon
the level of such services provided. These services may include, without
limitation, answering investor inquiries regarding the funds; providing
assistance to investors in changing dividend options, account designations,
and addresses; performing subaccounting and maintaining Class A and Class T
shareholder accounts; processing purchase and redemption transactions,
including automatic investment and redemption of investor account balances;
providing periodic statements showing an investor's account balance and
integrating other transactions into such statements; and performing other
administrative services in support of the shareholder.
Class B shares of each Equity Fund, Bond Fund, and Intermediate-Term
Bond Fund have adopted a DISTRIBUTION AND SERVICE PLAN. Under the
Plans, Class B of each fund is authorized to pay FDC a monthly distribution
fee as compensation for its services and expenses in connection with the
distribution of Class B shares. Class B of each fund may pay FDC a
distribution fee at an annual rate of up to 0.75% of its average net
assets, or such lesser amount as the Trustees may determine from time to
time.
Class B of each of the E quity F unds currently pays FDC a
monthly distribution fee at an annual rate of 0.75% of its average net
assets throughout the month. Class B of each of the Bond Funds and the
Intermediate-Term Bond Funds currently pays FDC a monthly distribution fee
at an annual rate of 0.65% of its average net assets throughout the month.
Class B distribution fee rates for each of the Bond Funds and
Intermediate-Term Bond Funds may be increased only when the Trustees
believe that it is in the best interests of Class B shareholders to do so.
In addition, pursuant to each Class B Plan, investment professionals are
compensated at an annual rate of 0.25% of C lass B's average net
assets throughout the month for providing personal service to and/or
maintenance of Class B shareholder accounts.
The Class A, Class T, and Class B Plans specifically recognize that FMR may
make payments from its management fee revenue, past profits, or other
resources to FDC for expenses incurred in connection with the distribution
of the applicable class's shares, including payments made to investment
professionals that provide shareholder support services or engage in the
sale of the applicable class's shares. The Board of Trustees of each fund
has authorized such payments.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the com pensation
of trustees who are not affiliated with Fidelity. A broker-dealer may use
a portion of the commissions paid by a fund to reduce that fund's custodian
or transfer agent fees.
The portfolio turnover rate for TechnoQuant Growth is projected to
exceed 200% for its first fiscal period ending November 30, 1997. The
portfolio rate for Growth & Income is not expected to exceed 200% for its
first fiscal period ending November 30, 1997.
The portfolio turnover rate for the fiscal year ended 1996 was _% for
Mid Cap, __% for Equity Growth, __% for Growth Opportunities, __% for
Strategic Opportunities,__% for Large Cap,__% for Equity Income, ___% for
Balanced, ___% for High Yield, ___% for Strategic Income, ___% for Mortgage
Securities , ___% for Government Investment,___% for Intermediate Bond,
___% for Short Fixed-Income, ___% for High Income Municipal, ___% for
Municipal Bond,___% for Intermediate Municipal Income, ___% for
Short-Intermediate Municipal Income, ___% for California Municipal Income,
and ___% for New York Municipal Income.
Portfolio turnover rates will vary from year to year. High turnover rates
increase transaction costs and may increase taxable capital gains. FMR
considers these effects when evaluating the anticipated benefits of
short-term investing.
YOUR ACCOUNT
TYPES OF ACCOUNTS
When you invest through a investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. Read your investment professional's program materials in
conjunction with this prospectus for additional service features or fees
that may apply. Certain features of the funds, such as minimum initial or
subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are on
the right.
The account guidelines that follow may not apply to certain retirement
accounts. For instance, municipal funds are not available for purchase in
retirement accounts. If you are investing through a retirement account or
if your employer offers a fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer or call your retirement benefits
number or your investment professional directly, as appropriate.
If you have selected Fidelity Advisor funds as an investment option through
an insurance company group pension program, please contact the provider
directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT (THE FOLLOWING OPTIONS ARE AVAILABLE ONLY FOR TAXABLE FUNDS)
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.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 701/2 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS 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.
(solid bullet) MONEY PURCHASE/PROFIT SHARING PLANS (KEOGH PLANS) are
tax-deferred pension accounts designated for employees of unincorporated
businesses or for persons who are self-employed.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your investment professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A and
Class T shares of each fund: the offering price and the NAV. If you pay a
front-end sales charge or qualify for a reduction as described on page
____, your Class A or Class T share price will be the offering price. If
you qualify for a front-end sales charge waiver as described on page __,
your Class T share price will be the NAV. When you buy Class A or Class T
shares at the offering price, the transfer agent deducts the appropriate
sales charge and invests the rest in Class A or Class T shares of the fund.
Class B's NAV is also calculated every business day. Class B shares of each
fund are sold without a front-end sales charge and may be subject to a CDSC
upon redemption. For information on how the CDSC is calculated, see
"Transaction Details," page .
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted. The offer ing price
and NAV are normally calculated at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to buy shares to the transfer agent before the close of business on
the day you place your order.
The transfer agent must receive payment within three business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
Share certificates are not available for Class A, Class T, or Class B
shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this prospectus, call your investment
professional.
If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
investment professional for more information and a retirement account
application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500*
For Fidelity Advisor retirement accounts $500
Through regular investment plans** $1,000*
TO ADD TO AN ACCOUNT $250*
For Fidelity Advisor retirement accounts $100
Through regular investment plans** $100*
MINIMUM BALANCE $1,000*
For Fidelity Advisor retirement accounts NONE
* ACCOUNT MINIMUMS ARE WAIVED FOR PURCHASES INTO CLASS T NON-RETIREMENT
ACCOUNTS WITH DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST ACCOUNT.
** AN ACCOUNT MAY BE OPENED WITH A MINIMUM OF $1,000, PROVIDED THAT A
REGULAR INVESTMENT PLAN IS ESTABLISHED AT THE TIME THE ACCOUNT IS OPENED.
FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES", PAGE .
PURCHASE AMOUNTS OF MORE THAN $100,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
investment professional or refer to the account application.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE (small solid bullet) Contact your investment professional or, if (small solid bullet) Contact your investment
professional or, if
YOUR INVESTMENT you are investing through a broker-dealer or you are investing through a broker-dealer
PROFESSIONAL
(phone_graphic) insurance representative, call or insurance representative, call
1-800-522-7297. If you are investing 1-800-522-7297. If you are investing
through a bank representative, call through a bank representative, call
1-800-843-3001. 1-800-843-3001.
(small solid bullet) Exchange from the same class of another (small solid bullet) Exchange from the same
class of another
Fidelity Advisor fund or from another Fidelity Advisor fund or from another
Fidelity fund account with the same Fidelity fund account with the same
registration, including name, address, and registration, including name, address, and
taxpayer ID number. taxpayer ID number.
Mail
(mail_graphic) (small solid bullet) Complete and sign the account application. (small solid bullet) Make your check
payable to the complete
Make your check payable to the complete name of the fund of your choice and note
name of the fund of your choice and note the applicable class. Indicate your fund
the applicable class. Mail to the address account number on your check and mail to
indicated on the application. the address printed on your account
statement.
(small solid bullet) Exchange by mail: call
your investment
professional for instructions.
In Person
(hand_graphic) (small solid bullet) Bring your account application and check to (small solid bullet) Bring your check
to your investment
your investment professional. professional.
Wire
(wire_graphic) (small solid bullet) Not available (small solid bullet) Wire to:
Banker's Trust Co.
Routing # 021001033
Fidelity DART Depository
Account # 00159759
FBO: (Account name)
(Account number)
Specify the complete name of the fund of
your choice, note the applicable class, and
include your account number and
your name.
Automatically
(automatic_graphic)(small solid bullet) Not available. (small solid bullet) Use Fidelity Advisor
Systematic
Investment Program. Sign up for this
service when opening your account, or
call your investment professional to begin
the program.
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted, less any
applicable CDSC. NAV is normally calculated at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to sell shares to the transfer agent before the close of business on
the day you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to shares of the same class of
another Fidelity Advisor fund or shares of other Fidelity funds, which can
be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR ACCOUNT SHARES, please leave at
least $1,000 worth of shares in the account to keep it open (account
minimum balances do not apply to retirement and Fidelity Defined Trust
Accounts ).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity Advisor account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
signed certificates (if previously issued) and
(small solid bullet) Any other applicable requirements listed in the table
on page .
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
Unless otherwise instructed, Fidelity will send a check to the record
address.
CHECKWRITING
If you have a checkbook for your account in Short Fixed-Income or
Short-Intermediate Municipal Income, you may write an unlimited number of
checks. The minimum amount for a check is $500. Do not, however, try to
close out your account by check.
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ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE All account types except retirement (small solid bullet) Maximum check request: $100,000.
YOUR INVESTMENT
PROFESSIONAL
(phone_graphic) All account types (small solid bullet) You may exchange to the same class of
other Fidelity Advisor funds or to other
Fidelity funds if both accounts are
registered with the same name(s),
address, and taxpayer ID number.
Mail or in Person
(mail_graphic)
(hand_graphic) Individual, Joint Tenant,
Sole Proprietorship, (small solid bullet) The letter of instruction must be signed by
UGMA, UTMA all persons required to sign for
transactions, exactly as their names
appear on the account and sent to your
investment professional.
Retirement account (small solid bullet) The account owner should complete a
retirement distribution form. Contact your
investment professional or, if you
purchased your shares through a
broker-dealer or insurance representative,
call 1-800-522-7297. If you purchased your
shares through a bank representative, call
1-800-843-3001.
Trust (small solid bullet) The trustee must sign the letter indicating
capacity as trustee. If the trustee's name is
not in the account registration, provide a
copy of the trust document certified within
the last 60 days.
Business or Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the account
must sign the letter.
Executor, Administrator, (small solid bullet) For instructions, contact your investment
Conservator/Guardian professional or, if you purchased your
shares through a broker-dealer or
insurance representative, call
1-800-522-7297. If you purchased your
shares through a bank representative, call
1-800-843-3001.
Wire (wire_graphic)All account types except retirement (small solid bullet) You must sign up for the wire feature
before using it. To verify that it is in place,
contact your investment professional or, if
you purchased your shares through a
broker-dealer or insurance representative,
call 1-800-522-7297. If you purchased your
shares through a bank representative, call
1-800-843-3001. Minimum wire: $500.
(small solid bullet) Your wire redemption request must be
received by the transfer agent before 4:00
p.m. Eastern time for money to be wired
on the next business day.
Check
(check_graphic) For all non-retirement
Short Fixed-Income (small solid bullet) Minimum check: $500.
and Short-Intermediate
Municipal Income (small solid bullet) All account owners must sign a signature
accounts only. card to receive a checkbook.
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INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction ,that
affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed, even if you have more than one account in a
fund. Call your investment professional if you need additional copies of
financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Class A or Class T shares
and buy the same class shares of other Fidelity Advisor funds, the same
class of shares of Fidelity Advisor Focus Funds, or Initial Class shares of
Daily Money Fund: U.S. Treasury Portfolio, Daily Money Fund: Money Market
Portfolio, and Daily Tax-Exempt Money Fund; by telephone or in writing. You
may sell your Class B shares and buy Class B shares of other Fidelity
Advisor funds, Fidelity Advisor Focus Funds, or Class B shares of Daily
Money Fund: U.S. Treasury Portfolio, by telephone or in writing. The shares
you exchange will carry credit for any front-end sales charge you
previously paid in connection with their purchase.
N ote that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictio ns governing exchanges, including circumstances under
which a shareholder's exchange privilege may be suspended or revoked, see
"Exchange Restrictions," page .
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
rede mptions from your account. Accounts with a value of $10,000 or more
in Class A or Class T shares are eligible for this program. Because of
Class A's and Class T's front-end sales charge, you may not want to set up
a systematic withdrawal plan during a period when you are buying Class A
or Class T shares on a regular basis.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for retirement, a home, educational expenses, and other
long-term financial goals. Certain restrictions apply for retirement
accounts. Call your investment professional for more information.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
$1,000 $100 quarterly, application.
or semi-annually (small solid bullet) For existing accounts, call your investment professional for an
application.
(small solid bullet) To change the amount or frequency of your investment, contact
your investment professional directly or, if you purchased your
shares through a broker-dealer or insurance representative, call
1-800-522-7297. If you purchased your shares through a bank
representative, call 1-800-843-3001. Call at least 10 business
days prior to your next scheduled investment date (20 business
days if you purchased your shares through a bank).
</TABLE>
TO DIRECT DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST TO CLASS T OF A
FIDELITY ADVISOR FUND
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MINIMUM MINIMUM SETTING UP OR CHANGING
INITIAL ADDITIONAL (small solid bullet) For a new or existing account, ask your investment professional
Not Not for the appropriate enrollment form.
Applicable Ap (small solid bullet) To change the fund to which your distributions are directed,
plicable contact your investment professional for instructions.
</TABLE>
FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your investment professional after both accounts
semi-annually, or are opened.
annually (small solid bullet) To change the amount or frequency of your investment, contact
your investment professional directly or, if you purchased your
shares through a broker-dealer or insurance representative, call
1-800-522-7297. If you purchased your shares through a bank
representative, call 1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be processed must
have a minimum balance of $10,000. The account into which the
exchange is being processed must have a minimum of $1,000.
(small solid bullet) Both accounts must have the same registrations and taxpayer ID
numbers.
(small solid bullet) Call at least 2 business days prior to your next scheduled
exchange date.
</TABLE>
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. Each fund pays capital gains, if any, in
December and may pay additional capital gains after the close of its
fiscal year. Normally, dividends for Growth & Income, Equity Income, and
Balanced are distributed in March, June, September and December; dividends
for TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, and Large Cap are distributed in December;
dividends for Strategic Income, High Yield, Mortgage Securities Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bon d, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income are declared daily and paid monthly.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(registered trademark) PROGRAM. Your dividend
distributions will be automatically invested in the same class of shares of
another identically registered Fidelity Advisor fund. You will be sent a
check for your capital gain distributions or your capital gain
distributions will be automatically reinvested in additional shares of the
same class of the fund.
If you select distribution option 2, 3, or 4 and the U.S. Postal Service
cannot deliver your checks, or if your checks remain uncashed for six
months, those checks will be reinvested in your account at the current NAV
and your election may be converted to the Reinvestment Option. To change
your distribution option, call your investment professional directly or, if
you purchased your shares through a broker-dealer or insurance
representative, call 1-800-522-7297. If you purchased your shares through a
bank representative, call 1-800-843-3001.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 1/2 years old, you can receive distributions in
cash .
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge. If you direct Class A or
Class T distributions to a fund with a front-end sales charge, you will not
pay a sales charge on those purchases.
When each of TechnoQuant Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income, Equity
Income, and Balanced deducts a distribution from its NAV, the reinvestment
price is the applicable class's NAV at the close of business that day.
Dividends from High Yield, Strategic Income, Mortgage Securities,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income will be reinvested at the applicable class's NAV on
the la st day of the month. Capital gain distributions from the Bond
Funds, the Intermediate-Term Bond Funds, and the Short-Term Bond Funds will
be reinvested at the NAV as of the date the applicable fund deducts the
distributions from its NAV. Distribution checks will be mailed within seven
days, or longer for a December ex-dividend date.
TAXES
As with any investment, you should consider how an investment in the
funds could affect you. Below are some of the funds' tax implications.
If your account is not a tax-deferred retirement account, you shou ld
be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Interest income that High Income Municipal,
Municipal Bon d, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income earn is distributed to shareholders as income dividends. Interest
that is federally tax-free remains tax-free when it is distributed.
Distributions from each fund (except High Income Municipal,
Municip a l Bond, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income), however, are subject to federal income tax . Each fund (except
California Municipal Income and New York Municipal Income) may also be
subject to state or local taxes. If you live outside the United States,
your distributions from these funds could also be taxed by the country in
which you reside.
For federal tax purposes income and short-term capital gain distributions
for each fund (except High Income Municipal, Municipal Bond, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income) are taxed as dividends; long-term
capital gain distributions are taxed as long-term capital gains.
However for shareholders of High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Shor t-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, gain on the
sale of tax-free bonds results in taxable distributions. Short-term capital
gains and a portion of the gain on bonds purchased at a discount are taxed
as dividends, long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Mutual fund dividends from U.S. Government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not qualify for the benefit.
Gin nie Mae securities and other mortgage-backe d securities are
not able exceptions in most states. In addition, some states may impose
intangible property taxes. You should consult your own tax adviser for
details and up-to-date information on the tax laws in your state.
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.
Every January, the transfer agent will send you and the IRS a statement
showing the taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each of High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Intermed iate Municipal Income,
California Municipal Income, and New York Municipal Income may invest up to
100% of its assets in these securities. Individuals who are subject to the
tax must report this interest on their tax returns.
A portion of the dividends from High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Interme diate Municipal Income,
California Municipal Income, and New York Municipal Income may be free from
state or local taxes. Income from investments in your state are often
tax-free to you. Each year, the transfer agent will send you a breakdown of
each of these funds' income from each state to help you calculate your
taxes.
To the extent that California Municipal Income's income dividends are
derived from interest on California state tax-free investments, they will
be free from California state personal income tax. Distributions derived
from obligations that are not California state tax-free obligations, as
well as distributions from short or long-term capital gains, are subject to
California state personal income tax. Corporate taxpayers should note that
the fund's income dividends and other distributions are not exempt from
California state franchise or corporate income taxes.
To the extent that New York Municipal Income's income dividends are derived
from state tax-free investments, they will be free from New York State and
City personal income taxes.
During the fiscal year ended 1996, ___% of the income dividends from
High Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income was free from federal income tax. During the fiscal
year ended 1996, ___% of California Municipal Income fund's income
dividends was free from California taxes, and ___% of New York Municipal
Income fund's income dividends was free from New York taxes. During the
fiscal year ended 1996, ____% of ( funds to be determined ), income
dividends were subject to the federal alternative minimum ta x.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are
subject to capital gains tax. A capital gain or loss is the difference
between the cost of your shares and the price you receive when you sell
them.
Whenever you sell shares of a fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares when a class has realized but not
yet distributed income or capital gains, you will pay the full price for
the shares and then receive a portion of the price back in the form of a
taxable distribution.
CURRENCY CONSIDERATIONS. For funds that can invest in foreign securities,
if a fund's dividends exceed its taxable income in any year, which is
sometimes the result of currency-related losses, all or a portion of the
fund's dividends may be treated as a return of capital to shareholders for
tax purposes. To minimize the risk of a re turn of capital,each fun d
may adjust its dividends to take currency fluctuations into account, which
may cause the dividends to vary. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain
or a lower reported capital loss when you sell your shares. The statement
you receive in January will specify if any distributions included a return
of capital.
Undistributed net gains from currency transactions, if any, will
generally be distributed as a separate dividend in December.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes o n each
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. FSC normally calculates each class's NAV and offering price
as of the close of business of the N YSE, normally 4:00 p.m. Eastern
time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting that
class's pro rata share of the value of the applicable fund's liabilities,
subtracting the liabilities allocated to that class, and dividing the
result by the number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market
quotations. Fore ign 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.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value. In addition, if quotations are not readily available, or
if the values have been materially affected by events occurring after the
closing of a foreign market, assets may be valued by a method that
the Board of Trustees believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) is the applicable class's NAV,
divided by the sum of one minus the sales charge percentage. Class A has a
maximum sales charge of 5.25% of the offering price for the Equity Funds;
4.25% of the offering price for the Bond Funds; 3.25% of the offering price
for the Intermediate-Term Bond Funds; and 1.50% of the offering price for
the Short-Term Bond Funds. Class T has a maximum sales charge of 3.50% of
the offering price for the Equity Funds and the Bond Funds; 2.75% of the
offering price for the Intermediate-Term Bond Funds; and 1.50% of the
offering price for the Short-Term Bond Funds. THE REDEMPTION FEE (price to
sell one share) is the applicable class's NAV minus any applicable CDSC.
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS A
EQUITY FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 5.25% 5.54% 4.75%
$50,000 to $99,999 4.25% 4.44% 3.75%
$100,000 to $249,999 3.25% 3.36% 2.75%
$250,000 to $499,999 2.50% 2.56% 2.00%
$500,000 to $999,999 2.00% 2.04% 1.75%
$1,000,000 or more 1.00% 1.01% 0.75%
BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 4.25% 4.44% 3.75%
$50,000 to $99,999 3.50% 3.63% 3.00%
$100,000 to $249,999 3.00% 3.09% 2.50%
$250,000 to $499,999 2.00% 2.04% 1.75%
$500,000 to $999,999 1.50% 1.52% 1.25%
$1,000,000 or more 0.50% 0.53% 0.50%
INTERMEDIATE-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 3.25% 3.36% 2.75%
$50,000 to $99,999 2.75% 2.83% 2.25%
$100,000 to $249,999 2.25% 2.30% 1.75%
$250,000 to $499,999 1.75% 1.78% 1.50%
$500,000 to $999,999 1.25% 1.27% 1.00%
$1,000,000 or more 0.50% 0.53% 0.50%
SHORT-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None None None
SALES CHARGES AND INVESTMENT PROFESSIONAL
CONCESSIONS - CLASS T
EQUITY FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 3.50% 3.63% 3.00%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.50% 2.56% 2.00%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 3.50% 3.63% 3.00%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.50% 2.56% 2.00%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
INTERMEDIATE-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $49,999 2.75% 2.83% 2.25%
$50,000 to $99,999 2.25% 2.30% 2.00%
$100,000 to $249,999 1.75% 1.78% 1.50%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
SHORT-TERM BOND FUNDS: Sales Charge Investment
Profession
al
Concession
as % of
Offering
Price
As a % of As an
Offering approxim
Price ate % of
Net
Amount
Invested
Up to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None* None* *
* SEE SECTION ENTITLED FINDERS FEE.
FINDERS FEE. On eligible purchases of Class T shares in amounts of $1
million or more, investment professionals will be compensated with a fee at
the rate of 0.25% of the amount purchased. Finders fees are not paid to
trust departments.
Any assets on which a finders fee has been paid will bear a contingent
deferred sales charge (Class T CDSC) if they do not remain in Class T
shares of the Fidelity Advisor funds, or Initial Class shares of
Daily Money Fund: U.S. Treasury Portfolio, Daily Money Fund: Money Market
Portfolio, or Daily Tax-Exempt Money Fund, for a period of at least one
uninterrupted year. The Class T CDSC will be 0.25% of the lesser of the
cost of the shares at the initial date of purchase or the value of the
shares at redemption, not including any reinvested dividends or capital
gains. Class T CDSC shares representing reinvested dividends and capital
gains, if any, will be redeemed first, followed by other Class T CDSC
shares that have been held for the longest period of time.
Shares held by an insurance company separate account will be aggregated at
the client (e.g., the contract holder or plan sponsor) level, not at the
separate account level. Upon request, anyone claiming eligibility for the
0.25% fee with respect to shares held by an insurance company separate
account must provide FDC access to records detailing purchases at the
client level.
With respect to employee benefit plans, the Class T CDSC does not apply to
the following types of redemptions; (i) plan loans or distributions or (ii)
exchanges to non-Advisor fund investment options. With respect to
Individual Retirement Accounts, the Class T CDSC does not apply to
redemptions made for disability, payment of death benefits, or required
partial distributions starting at age 70. Your investment professional
should advise the transfer agent at the time your redemption order is
placed if you qualify for a waiver of the Class T CDSC.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the following schedules:
EQUITY FUNDS
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 5%
1 year to less than 2 years 4%
2 years to less than 3 years 3%
3 years to less than 4 years 3%
4 years to less than 5 years 2%
5 years to less than 6 years 1%
6 years to less than 7 years [A] 0%
BOND FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 5%
1 year to less than 2 years 4%
2 years to less than 3 years 3%
3 years to less than 4 years 3%
4 years to less than 5 years 2%
5 years to less than 6 years 1%
6 years to less than 7 years [A] 1%
INTERMEDIATE-TERM BOND FUNDS:
From Date of Purchase Contingent
Deferred
Sales Charge
Less than 1 year 3%
1 year to less than 2 years 2%
2 years to less than 3 years 1%
3 years to less than 4 years [ B ] 0%
[A] AFTER A MAXIMUM HOLDING PERIOD OF SEVEN YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND.
SEE "CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
[B] AFTER A MAXIMUM HOLDING PERIOD OF FOUR YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS A SHARES OF THE SAME FIDELITY ADVISOR FUND.
SEE "CONVERSION FEATURE" BELOW FOR MORE INFORMATION.
When exchanging Class B shares of one fund for Class B shares of another
Fidelity Advisor fun d, Fidelity Advisor Focus Fund or Cl ass B shares
of Daily Money Fund: U.S. Treasury Portfolio, your Class B shares retain
the CDSC schedule in effect when they were originally purchased.
Investment professionals with whom FDC has agreements receive as
compensation from FDC a concession equal to 4.00% (2.00% for the
Intermediate-Term Bond funds) of your purchase of Class B shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. Class
B shares, acquired through distributions (dividends or capital gains) will
not be subject to a CDSC. In determining the applicability and rate of any
CDSC at redemption, Class B shares representing reinvested dividends and
capital gains, if any, will be redeemed first, followed by Class B shares
that have been held for the longest period of time.
CONVERSION FEATURE. After a maximum holding period of seven years
from the initial date of purchase (four years for the Intermediate-Term
Bond Funds), Class B shares and any capital appreciation associated with
those shares, convert automatically to Class A shares of the same Fidelity
Advisor fund. Conversion to Class A shares will be made at NAV. At the time
of conversion, a portion of the Class B shares purchased through the
reinvestment of dividends or capital gains (Dividend Shares) will also
convert to Class A shares. The portion of Dividend Shares that will convert
is determined by the ratio of your converting Class B non-Dividend Shares
to your total Class B non-Dividend Shares.
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your investment
professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A,
Class T, or Class B shares of a fund, you may reinvest an amount equal to
all or a portion of the redemption proceeds in the same class of the fund
or any of the other Fidelity Advisor funds, at the NAV next determined
after receipt of your investment order, provided that such reinvestment is
made within 30 days of redemption. Under these circumstances, the dollar
amount of the CDSC, if any, you paid on Class T or Class B shares will be
reimbursed to you by reinvesting that amount in Class T shares or Class B
shares, as applicable. You must reinstate your shares into an account with
the same registration. This privilege may be exercised only once by a
shareholder with respect to a fund and certain restrictions may apply. For
purposes of the CDSC holding period schedule, the holding period of your
Class T or Class B shares will continue as if the shares had not been
redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthor ized
transactions if it do es not follow reasonable procedures designed to
verify the identity of the caller. Fidelity and the transfer agent will
request personalized security codes or other information, and may also
record calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations, and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. 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 shares will be purchased at the
next NAV or offering price, as applicable, 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) The funds do not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or the
transfer agent has incurred.
(small solid bullet) Automated Purchase Orders: For shares of the Bond
Funds, the Intermediate-Term Bond Funds, and the Short-Term Bond Funds, you
begin to earn dividends as of the day your funds are received.
(small solid bullet) Other Purchases: For shares of the Bond Funds, the
Intermediate-Term Bond Funds, and the Short-Term Bond Funds, you begin to
earn dividends as of the first business day following the day your funds
are received.
AUTOMATED PURCHASE ORDERS. Class A, Class T, and Class B shares
can be purchased or sold through investment professionals utilizing an
automated order placement and settlement system that guarantees payment for
orders on a specified date.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next business
day, the order will be canceled and the financial institution will be
liable for any losses.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
Federal Reserve check, or automatic invest ment plans.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your order 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) Shares of High Yield, Strategic Income, Mortgage
Securities, Government Investment, Intermediate Bond, Short-Fixed Income,
High Income Munic ipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
T HE TRANSFER AG ENT 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. 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 a
systematic investment program, certain (Network Level I and III) accounts
which are maintained through National Securities Clearing Corporation
(NSCC), or if total assets in Fidelity mutual funds exceed $50,000.
Eligibility for the $50,000 waiver is determined by aggregating Fidelity
mutual fund accounts (excludin g contractual plans) maintained (i) by
FIIOC and (ii) through NSCC; provided those accounts are registered under
the same primary social security number.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be
given 30 days' notice to reestablish the minimum balance. If you do not
increase your balance, the transfer agent reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at the
NAV, minus any applicable CDSC, on the day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of investment professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to investment professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Class A, Class T,
or Class B shares of a fund for the same class of shares of other Fidelity
Advisor funds at NAV; Cl ass A or Class T shares for Initial Class
shares of Daily Money Fund: U.S. Treasury Portfolio , Daily Money
Fund: Money Market Portfolio, or Daily Tax-Exempt Money Fund; and Class B
shares for Class B share s of Daily Money Fun d: U.S. Treasury
Portfolio. However, you should note the following:
(small solid bullet) The fund or class you are exchanging into must
be a vaila ble for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund or class , read
its prospectus.
(small solid bullet) If you have held Class A or Class T shares of Short
Fixed-Income or Short-Intermediate Municipal Income for less than six
months and you exchange into Class A or Class T of another Advisor fund,
you pay the difference between that fund's Class A or Class T front-end
sales charge and any front-end sales charge you may have previously paid in
connection with the shares you are exchanging.
(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 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 a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
(small solid bullet) Any exchanges of Class T or Class B shares are not
subject to a CDSC.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the se exchange
privilege s in the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A
and Class T shares according to the Sales Charge Schedule shown on page __
. Please refer to the funds' SAI for more details about each plan or call
your investment professional.
If you purchased your shares through a broker-dealer or insurance
representative, call 1-800-522-7297. If you purchased your shares through a
bank representative, call 1-800-843-3001.
Your purchases and existing balances of Class A, Class T, and Class B
shares may be included in the following programs for purposes of qualifying
for a Class A or Class T front-end sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A or Class T shares of a
single Fidelity Advisor fund or to combined purchases of (i) Class A, Class
T, and Class B shares of any Fidelity Advisor fund, (ii) Class B shares of
Daily Money Fund: U.S. Treasury Portfolio, and (iii) Initial Class shares
of Daily Money Fund: U.S. Treasury Portfolio, Daily Money Fund: Money
Market Portfolio, and Daily Tax-Exempt Money Fund acquired by exchange from
any Fidelity Advisor fund. The minimum investment eligible for a quantity
discount is $50,000, except that the minimum investment for the
Short-Term Bond Funds is $500,000.
To qualify for a quantity discount, investing in a fund's Class A and Class
T shares for several accounts at the same time will be considered a single
transaction (Combined Purchase), as long as shares are purchased through
one investment professional and the total is at least $50,000 (or at least
$500,000 for the Short-Term Bond funds).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A and Class T shares by adding to your new purchase of Class A and
Class T shares the value of all of the Fidelity Advisor fund Class A, Class
T, and Class B shares held by you, your spouse, and your children under age
21. You can also add the value of Initial Class and Class B shares
of Daily Money Fund: U.S. Treasury Portfolio, and Initial Class
shares of Daily Money Fund: Money Market Portfolio, and Daily Tax-Exempt
Money Fund acquired by exchange from any Fidelity Advisor fund.
A LETTER OF INTENT (the Letter) lets you receive the same reduced front-end
sales charge on purchases of Class A and Class T shares made during a
13-month period as if the total amount invested during the period had been
invested in a single lump sum. (see Quantity Discounts above.) You must
file your non-binding Letter with the transfer agent within 90 days of the
start of your purchases. Your initial investment must be at least 5% of the
amount you plan to invest. Out of the initial investment, Class A or Class
T shares equal to 5% of the dollar amount specified in the Letter will be
registered in your name and held in escrow. You will earn income dividends
and capital gain distributions on escrowed Class A and Class T shares.
Neither income dividends nor capital gain distributions reinvested in
additional Class A or Class T shares will apply toward completion of the
Letter. The escrow will be released when your purchase of the total amount
has been completed . You are not obligated to complete the Letter, and in
such a case, sufficient escrowed Class A or Class T shares will be redeemed
to pay any applicable front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS T
SHARES:
1. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of investment
professionals having agreements with FDC;
2. Purchased by a current or former trustee or officer of a Fidelity fund
or a current or retired officer, director or regular employee of FMR
Corp. or Fidelity International Limited or their direct or indirect
subsidiaries (a Fidelity trustee or employee), the spouse of a Fidelity
trustee or employee, a Fidelity trustee or employee acting as custodian for
a minor child, or a person acting as trustee of a trust for the sole
benefit of the minor child of a Fidelity trustee or employee;
3. Purchased by a charitable organization (as d efined for purposes of
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or
more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined for
p urposes of Section 5 01(c)(3) of the Internal Revenue Code);
5. Purchased for a Fidelity or Fidelity Advisor account with the proceeds
of a distribution (i) from an employee benefit plan that qualified for
waiver (11) or had a minimum of $3 million in plan assets invested in
Fidelity funds; or (ii) from an insurance company separate account
qualifying under (6) below, or used to fund annuity contracts purchased by
employee benefit plans having in the aggregate at least $3 million in plan
assets invested in Fidelity funds. (Distributions other than those
transferred to an IRA account must be transferred directly into a Fidelity
account.)
6. Purchased for an insurance company separate account used to fund annuity
contracts for employee benefit plans which, in the aggregate, have more
than 200 eligible employees or a minimum of $1 million in plan assets
invested in Fidelity Advisor funds;
7. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC;
9. Purchased by a trust institution or bank trust department (excluding
assets described in (11) and (12) below) that has executed a participation
agreement with FDC specifying certain asset minimums and qualifications,
and marketing restrictions. Assets managed by third parties do not qualify
for this waiver;
10. Purchased for use in a broker-dealer managed account program, provided
the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee be nefit plan assets do
not qualify for this waiver;
11. Purchased as part of an employee benefit plan having more than (i) 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor funds; or (ii) 25 eligible employees or $250,000 of plan
assets invested in Fidelity Advisor funds that subscribe to the Advisor
Retirement Connection or similar FIIS-sponsored program;
12. Purchased as part of an employee benefit plan through an intermediary
that has execute d a participation agreement with FDC specifying
certain asset minimums and qualifications, and marketing, program and
trading restrictions;
13. Purchased on a discretionary basis by a registered investment advisor
which is not part of an organization primarily engaged in the brokerage
business, that has executed a participation agreement with FDC specifying
certain asset minimums and qualifications, and marketing, program and
trading restrictions. Employee benefit plan assets do not qualify for this
waiver; or
14. Purchased with distributions of income, principal, and capital gains
from Fidelity Defined Trusts.
In order to continue to qualify for waivers (9), (10) and (13), eligible
in termediaries with existing Class T accounts will be required to
sign and comply with a participation agreement. Investors prior to June 30,
1995 that have not signed a participation agreement will be allowed
to continue investing in Class T shares under the terms of their current
relationship until June 30, 1997, after which they will be prevented from
making new or subsequent purchases in Class T load waived, except that
employee benefit plans will be permitted to make additional purchases of
Class T shares load waived.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. Employee benefit plan investors must meet additional requirements
specified in the funds' SAI.
If you are investing through an account managed by a broker-dealer, if you
have authorized an investment adviser to make investment decisions for you,
or if you are investing through a trust department, you may qualify
to purchase Class T shares without a sales charge (as described in (9),
(10) and (13), above) or Institutional Class shares. Because Institutional
Class shares have no sales charge, and do not pay a distribution fee or a
shareholder service fee, Institutional Class shares are expected to have a
higher total return than Class A, Class T, or Class B shares. Contact
y our investment professional to discuss if you qualify.
THE CDSC ON CLASS B SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that Class B shares are
redeemed within one year following the death or the initial determination
of disability; or
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts.
Your investment professional should call Fidelity for more information.
APPENDIX A
DESCRIPTION OF MOODY'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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds 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;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds 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 issues
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. Those bonds in the Aa, A, Baa, Ba, and B groups
which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, Baa1, and B1.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
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 highest-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt 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 category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB - rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B - rating.
CC - The rating CC typically is applied to debt subordinated to senior debt
that 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 also will
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.
DESCRIPTION OF MOODY'S MUNICIPAL 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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds 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 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;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds 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 issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
There are nine basic rating categories for long-term obligations. They
range from AAA (highest quality) to C (lowest quality). Those bonds within
the AA, A, BAA, BA and B categories that Moody's believes possess the
strongest credit attributes within those categories are designated by the
symbols AA1, A1, BAA1, BA1 and B1.
DESCRIPTION OF S&P'S MUNICIPAL 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 than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt 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 category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - 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.
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do not
constitute an offer by the funds or by FDC to sell or to buy shares of the
funds to any person to whom it is unlawful to make such offer.
APPENDIX B
MID CAP - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
MID CAP - CLASS A
Lipper Mid Cap Funds AverageA
S&P Mid Cap 400 Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MID CAP - CLASS A
EQUITY GROWTH - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS A
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY GROWTH - CLASS A
GROWTH OPPORTUNITIES - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS A
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
A
STRATEGIC OPPORTUNITIES - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - CLASS A
Lipper Capital Appreciation FundsC
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS A
LARGE CAP - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
LARGE CAP - CLASS A
Lipper G rowth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) LARGE CAP - CLASS A
EQUITY INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS A
Lipper Equity Income Funds AverageD
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY INCOME - CLASS A
BALANCED - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS A
Lipper Balanced Funds AverageE
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) BALANCED - CLASS A
HIGH YIELD - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS A
Lipper High Current Yield Funds
AverageF
Merrill Lynch High Yield Master Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH YIELD - CLASS A
STRATEGIC INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS A
Lipper General Bond Funds AverageG
Merrill Lynch High Yield Master Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC INCOME - CLASS A
MORTGAGE SECURITIES - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MORTGAGE SECURITIES- CLASS A
Lipper U.S. Mortgage Funds AverageH
Salomon Brothers Mortgage Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MORTGAGE SECURITIES CLASS A
GOVERNMENT INVESTMENT - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS A
Lipper General U.S. Government
Funds AverageJ
Salomon Brothers Treasury/Agency
Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS A
INTERMEDIATE BOND - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS A
Lipper Intermediate Investment Grade
Debt Funds AverageJ
Lehman Brothers Intermediate
Government/Corporate Bond Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS A
SHORT FIXED-INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - CLASS A
Lipper Short Investment Grade Bond
Funds AverageK
Lehman Brothers 1-3 Year
Government/Corporate Bond Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT FIXED-INCOME - CLASS A
HIGH INCOME MUNICIPAL - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS A
Lipper High Yield Municipal Bond
Funds AverageL
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS A
MUNICIPAL BOND - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - CLASS A
Lipper General Municipal Debt Funds
AverageM
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MUNICIPAL BOND- CLASS A
INTERMEDIATE MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME -
CLASS A
Lipper Intermediate Municipal Debt
Funds AverageN
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS A
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
SHORT-INTERMEDIATE MUNICIPAL
INCOME - CLASS A
Lipper Short- Intermediate Municipal
Debt Funds AverageO
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT-INTERMEDIATE MUNICIPAL
INCOME - CLASS A
CALIFORNIA MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
CALIFORNIA MUNICIPAL INCOME - CLASS
A
Lipper California Municipal Debt
Funds
AverageP
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) CALIFORNIA YORK MUNICIPAL
INCOME - CLASS A
NEW YORK MUNICIPAL INCOME - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
NEW YORK MUNICIPAL INCOME - CLASS
A
Lipper New York Municipal Debt
Funds
AverageQ
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) NEW YORK MUNICIPAL INCOME -
CLASS A
MID CAP - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
MID CAP - CLASS T
Lipper Mid Cap Funds AverageA
S&P Mid Cap 400 Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MID CAP - CLASS T
EQUITY GROWTH - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS T
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY GROWTH - CLASS T
GROWTH OPPORTUNITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS T
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
T
STRATEGIC OPPORTUNITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - CLASS T
Lipper Capital Appreciation FundsC
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS T
LARGE CAP - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
LARGE CAP - CLASS T
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) LARGE CAP - CLASS T
EQUITY INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS T
Lipper Equity Income Funds AverageD
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY INCOME - CLASS T
BALANCED - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS T
Lipper Balanced Funds AverageE
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) BALANCED - CLASS T
HIGH YIELD - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS T
Lipper High Current Yield Funds
AverageF
Merrill Lynch High Yield Master Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH YIELD - CLASS T
STRATEGIC INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS T
Lipper General Bond Funds AverageG
Merrill Lynch High Yield Master Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC INCOME - CLASS T
MORTGAGE SECURITIES - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MORTGAGE SECURITIES- CLASS T
Lipper U.S. Mortgage Funds AverageH
Salomon Brothers Mortgage Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MORTGAGE SECURITIES CLASS T
GOVERNMENT INVESTMENT - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS T
Lipper General U.S. Government
Funds AverageJ
Salomon Brothers Treasury/Agency
Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS T
INTERMEDIATE BOND - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS T
Lipper Intermediate Investment Grade
Debt Funds AverageJ
Lehman Brothers Intermediate
Government/Corporate Bond Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS T
SHORT FIXED-INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - CLASS T
Lipper Short Investment Grade Bond
Funds AverageK
Lehman Brothers 1-3 Year
Government/Corporate Bond Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT FIXED-INCOME - CLASS T
HIGH INCOME MUNICIPAL - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS T
Lipper High Yield Municipal Bond
Funds AverageL
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS T
MUNICIPAL BOND- CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - CLASS T
Lipper General Municipal Debt Funds
AverageM
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MUNICIPAL BOND- CLASS T
INTERMEDIATE MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME -
CLASS T
Lipper Intermediate Municipal Bond
Funds AverageN
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS A
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
SHORT-INTERMEDIATE MUNICIPAL
INCOME - CLASS T
Lipper Short Municipal Debt Funds
AverageO
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT-INTERMEDIATE MUNICIPAL
INCOME - CLASS T
CALIFORNIA MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
CALIFORNIA MUNICIPAL INCOME - CLASS
T
Lipper California Municipal Debt
Funds
AverageP
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) CALIFORNIA YORK MUNICIPAL
INCOME - CLASS T
NEW YORK MUNICIPAL INCOME - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
NEW YORK MUNICIPAL INCOME - CLASS
T
Lipper New York Municipal Debt
Funds
AverageQ
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) NEW YORK MUNICIPAL INCOME -
CLASS T
MID CAP - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
MID CAP - CLASS B
Lipper Mid Cap Funds AverageA
S&P Mid Cap 400 Index
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MID CAP - CLASS B
EQUITY GROWTH - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - CLASS B
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY GROWTH - CLASS B
GROWTH OPPORTUNITIES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - CLASS B
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GROWTH OPPORTUNITIES - CLASS
B
STRATEGIC OPPORTUNITIES - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES - CLASS B
Lipper Capital Appreciation FundsC
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS B
LARGE CAP - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
LARGE CAP - CLASS B
Lipper Growth Funds AverageB
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
CLASS B
EQUITY INCOME - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - CLASS B
Lipper Equity Income Funds AverageD
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY INCOME - CLASS B
BALANCED - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - CLASS B
Lipper Balanced Funds AverageE
S&P 500
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) BALANCED - CLASS B
HIGH YIELD - CLASS B
<ERROR: WIDE TABLE>
ERROR: The Following Table: "3x11" is Too Wide!
Table Width is 158 characters.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total
returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - CLASS B
Lipper High Current Yield Funds
AverageF
Merrill Lynch High Yield Master Index
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH YIELD - CLASS B
STRATEGIC INCOME - CLASS B
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - CLASS B
Lipper General Bond Funds AverageG
Merrill Lynch High Yield Master Index
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC INCOME - CLASS B
MORTGAGE SECURITIES - CLASS B
Calendar year
total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MORTGAGE SECURITIES- CLASS B
Lipper U.S. Mortgage Funds AverageH
Salomon Brothers Mortgage Index
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MORTGAGE SECURITIES - CLASS B
GOVERNMENT INVESTMENT - CLASS B
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT - CLASS B
Lipper General U.S. Government
Bond Funds AverageJ
Salomon Brothers Treasury/Agency
Index
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
CLASS B
INTERMEDIATE BOND - CLASS B
Calendar year
total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - CLASS B
Lipper Intermediate Investment Grade
Bond Funds AverageJ
Lehman Brothers Intermediate
Government/Corporate Bond Index
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE BOND - CLASS B
HIGH INCOME MUNICIPAL - CLASS B
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL - CLASS B
Lipper High Yield Municipal Bond
Funds AverageL
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
CLASS B
MUNICIPAL BOND- CLASS B
Calendar year
total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - CLASS B
Lipper General Municipal Debt Funds
AverageM
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MUNICIPAL BOND- CLASS B
INTERMEDIATE MUNICIPAL INCOME - CLASS B
Calendar year
total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME -
CLASS B
Lipper Intermediate Municipal Bond
Funds AverageN
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - CLASS B
CALIFORNIA MUNICIPAL INCOME - CLASS B
Calendar year total returns+ 1996
CALIFORNIA MUNICIPAL INCOME - CLASS
B
Lipper California Municipal Debt
Funds
AverageP
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) CALIFORNIA YORK MUNICIPAL
INCOME - CLASS B
NEW YORK MUNICIPAL INCOME - CLASS B
Calendar year total returns+ 1995 1996
NEW YORK MUNICIPAL INCOME - CLASS
B
Lipper New York Municipal Debt
Funds
AverageQ
Consumer Price Index
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) NEW YORK MUNICIPAL INCOME -
CLASS B
</TABLE>
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING CLASS A OR CLASS T'S MAXIMUM
FRONT-END SALES CHARGE OR CLASS B'S APPLICABLE CONTINGENT DEFERRED SALES
CHARGE.
[F] I NITIAL OFFERING OF CLASS A SHARES FOR EACH FUND (EXCEPT MORTGAGE
SECURITIES AND MUNICIPAL BOND) TOOK PLACE ON SEPTEMBER 3, 1996. RETURNS
PRIOR TO SEPTEMBER 3, 1996 (EXCEPT FOR EQUITY GROWTH, EQUITY INCOME,
INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME) ARE THOSE OF CLASS T,
THE ORIGINAL CLASS OF EACH FUND AND REFLECT CLASS T'S THEN APPLICABLE 12B-1
FEE ( 0.65% FOR EQUITY FUNDS PRIOR TO JANUARY 1, 1996). FOR EQUITY GROWTH,
EQUITY INCOME, INTERMEDIATE BOND,AND INTERMEDIATE MUNICIPAL INCOME RETURNS
BETWEEN SEPTEMBER 10, 1992 AND SEPTEMBER 3, 1996 ARE THOSE OF CLASS T AND
REFLECT CLASS T'S THEN APPLICABLE 12B-1 FEE ( 0.65% FOR EQUITY FUNDS PRIOR
TO JANUARY 1, 1996). RETURNS BETWEEN COMMENCEMENT OF OPERATIONS AND
SEPTEMBER 10, 1992 REFLECT THE RETURNS OF INSTITUTIONAL CLASS, THE ORIGINAL
CLASS OF EACH FUND WHICH DOES NOT HAVE A 12B-1 FEE. CLASS A'S RETURNS WOULD
HAVE BEEN LOWER IF 12B-1 FEES WERE REFLECTED PRIOR TO SEPTEMBER 10, 1992.
CLASS A, CLASS T, AND CLASS B SHARES OF MORTGAGE SECURITIES ARE
EXPECTED TO COMMENCE OPERATIONS ON FEBRUARY 28, 1997. RETURNS PRIOR TO THAT
DATE ARE THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES
NOT BEAR A 12B-1 FEE. CLASS T AND CLASS A RETURNS WOULD HAVE BEEN LOWER IF
THEIR RESPECTIVE 12B-1 FEES WERE REFLECTED IN RETURNS PRIOR TO THAT DATE.
CLASS B RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE (INCLUDING A
SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN RETURNS PRIOR TO THAT DATE.
CLASS A OF MUNICIPAL BOND IS EXPECTED TO COMMENCE OPERATIONS ON FEBRUARY
28, 1997. RETURNS BETWEEN JULY 1, 1996 AND FEBRUARY 28, 1997 ARE THOSE OF
CLASS T AND REFLECT CLASS T'S 0.25% 12B-1 FEE. RETURNS PRIOR THAT DATE ARE
THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR
A 12B-1 FEE. CLASS A'S RETURNS WOULD HAVE BEEN LOWER IF ITS 12B-1 FEE WAS
REFLECTED IN RETURNS PRIOR TO JULY 1, 1996.
INITIAL OFFERING OF CLASS T SHARES FOR EQUITY GROWTH, EQUITY INCOME,
INTERMEDIATE BOND, AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON
SEPTEMBER 10, 1992, AND BEAR A 12B-1 FEE (AT THEN CURRENTLY APPLICABLE
RATES FOR EQUITY GROWTH AND EQUITY INCOME OF 0.65%, AND FOR INTERMEDIATE
BOND AND INTERMEDIATE MUNICIPAL INCOME OF 0.25%) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF
INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF EACH FUND WHICH DOES NOT BEAR A
12B-1 FEE. CLASS T SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE
BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES OF EQUITY GROWTH WILL TAKE PLACE ON
OR ABOUT JANUARY 2, 1997. CLASS B SHARES BEAR A 12B-1 FEE (INCLUDING A
SHAREHOLDER SERVICING FEE), WHICH IS NOT REFLECTED IN PRIOR RETURN
DATES. RETURNS BETWEEN SEPTEMBER 10, 1992 AND DECEMBER 31, 1995 ARE THOSE
OF CLASS T AND REFLECT CLASS T'S THEN APPLICABLE 0.65% 12B-1 FEE. RETURNS
PRIOR TO SEPTEMBER 10, 1992 ARE THOSE OF INSTITUTIONAL CLASS, THE
ORIGINAL CLASS OF THE FUND, WHICH DOES NOT BEAR A 12B-1 FEE. CLASS B
RETURNS WOULD HAVE BEEN LOWER IF ITS 12-1 FEE (INCLUDING A SHAREHOLDER
SERVICING FEE) HAD BEEN REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES OF BALANCED WILL TAKE PLACE ON OR ABOUT
JANUARY 2, 1997. CLASS B SHARES BEAR A 12B-1 FEE (INCLUDINGA SHAREHOLDER
SERVICING FEE), WHICH IS NOT REFLECTED IN PRIOR RETURN DATES. RETURNS
BETWEEN JANUARY 6, 1987 AND DECEMBER 31, 1995 ARE THOSE OF CLASS T AND
REFLECT CLASS T'S THEN APPLICABLE 0.65% 12B-1 FEE.. CLASS B RE TURNS
WOULD HAVE BEEN LOWER IF ITS 12-1 FEE (INCLUDING A SHAREHOLDER SERVICING
FEE) HAD BEEN REFLECTED IN PRIOR DATE RETURNS.
CLASS B OF GROWTH OPPORTUNITIES IS EXPECTED TO COMMENCE OPERATIONS ON
FEBRUARY 28, 1997. RETURNS PRIOR TO THAT DATE ARE THOSE OF CLASS T, THE
ORIGINAL CLASS OF THE FUND AND REFLECT CLASS T'S THEN APPLICABLE 12B-1 FEE
( 0.65% PRIOR TO JANUARY 1, 1996). CLASS B SHARE RETURNS WOULD HAVE BEEN
LOWER HAD ITS 12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) BEEN
REFLECTED IN PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR EQUITY INCOME, INTERMEDIATE BOND,
AND INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JUNE 30, 1994, AND BEAR A
12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) (AT A THEN CURRENTLY
APPLICABLE COMBINED RATE OF 1.00% FOR BOND FUNDS) WHICH IS NOT REFLECTED IN
PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE 30, 1994, AND SEPTEMBER 10,
1992, ARE THOSE OF CLASS T AND INSTITUTIONAL CLASS SHARES, RESPECTIVELY.
CLASS T RETURNS INCLUDE A THEN CURRENTLY APPLICABLE 12B-1 FEE OF 0.65% FOR
EQUITY INCOME, AND 0.25% FOR INTERMEDIATE BOND AND INTERMEDIATE MUNICIPAL
INCOME. INSTITUTIONAL CLASS, THE ORIGINAL CLASS OF THESE FUNDS, DOES NOT
BEAR A 12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS
12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN PRIOR
DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR STRATEGIC OPPORTUNITIES TOOK PLACE
ON JUNE 30, 1994, AND BEAR A 12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING
FEE) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS. RETURNS PRIOR TO JUNE
30, 1994, AND AUGUST 20, 1986, ARE THOSE OF CLASS T AND INITIAL CLASS
SHARES, RESPECTIVELY. CLASS T RETURNS INCLUDE A THEN APPLICABLE 12B-1 FEE
OF 0.65%. INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, DOES NOT BEAR A
12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE
(INCLUDING A SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN PRIOR DATE
RETURNS.
INITIAL OFFERING OF CLASS B SHARES FOR HIGH YIELD, GOVERNMENT INVESTMENT,
AND HIGH INCOME MUNICIPAL TOOK PLACE ON JUNE 30, 1994, AND BEAR A 12B-1 FEE
(INCLUDING A SHAREHOLDER SERVICING FEE) (AT A THEN CURRENTLY APPLICABLE
COMBINED RATE OF 1.00%) WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JUNE 30, 1994, ARE THOSE OF CLASS T SHARES, THE ORIGINAL
CLASS OF THESE FUNDS AND INCLUDE THEN APPLICABLE CLASS T 12B-1 FEES OF
0.25%. CLASS B RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE (INCLUDING
A SHAREHOLDER SERVICING FEE) BEEN REFLECTED IN PRIOR DATE RETURNS.
[A] THE LIPPER MID CAP FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[B] THE LIPPER GROWTH FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER___MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[C] THE LIPPER CAPITAL APPRECIATION FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[D] THE LIPPER EQUITY INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[E] THE LIPPER BALANCED FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER___MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[F] THE LIPPER HIGH CURRENT YIELD FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[G] THE LIPPER GENERAL BOND FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[H] THE LIPPER U.S. MORTGAGE FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[I] THE LIPPER GENERAL U.S. GOVERNMENT BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[J] THE LIPPER INTERMEDIATE INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[K] THE LIPPER SHORT INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[L] THE LIPPER HIGH YIELD MUNICIPAL BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[M] THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[N] THE LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[O] THE LIPPER SHORT MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[P] THE LIPPER CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[Q] THE LIPPER NEW YORK MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
TechnoQuant is a trademark of FMR Corp.
FIDELITY ADVISOR INSTITUTIONAL CLASS PROSPECTUS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b,c .............................. *
3 a .............................. *
b .............................. *
c .............................. Performance, Appendix
d .............................. Cover Page
4 a i............................. Charter
ii........................... Investment Principles and Risks; Securities and
Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices
5 a .............................. Charter
b i............................. Cover Page; FMR and Its Affiliates
ii........................... FMR and Its Affiliates; Charter; Breakdown of
Expenses
iii.......................... Expenses; Breakdown of Expenses
c .............................. FMR and Its Affiliates
d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates; Breakdown of Expenses
f .............................. Expenses
g .............................. Expenses; FMR and Its Affiliates
5A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers
iii.......................... *
b ............................. FMR and Its Affiliates
c .............................. Charter
d .............................. Cover Page; Who May Want to Invest
e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
d .............................. How to Buy Shares
e .............................. Transaction Details; Breakdown of Expenses
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY ADVISOR FUNDS
INSTITUTIONAL CLASS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy
of the each fund's most recent financial report and portfolio listing, or a
copy of the Statement of Additional Information (SAI) dated February 28,
1997. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov). The SAI is incorporated herein by
reference (legally forms a part of the prospectus). For a free copy of
either document, contact Fidelity Distributors Corporation (FDC), 82
Devonshire Street, Boston, MA 02109, or your investment professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
HIGH YIELD, STRATEGIC INCOME, AND HIGH INCOME MUNICIPAL MAY EACH INVEST
WITHOUT LIMITATION IN LOWER-QUALITY DEBT SECURITIES, SOMETIMES CALLED "JUNK
BONDS." INVESTORS SHOULD CONSIDER THAT THESE SECURITIES CARRY GREATER
RISKS, SUCH AS THE RISK OF DEFAULT, THAN OTHER DEBT SECURITIES. REFER TO
"INVESTMENT PRINCIPLES AND RISKS" ON PAGE 15 FOR FURTHER INFORMATION.
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.
ACOMI-pro-0297
GROWTH FUNDS:
Fidelity Advisor TechnoQuantTM Growth Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS:
Fidelity Adviso r Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund (formerly Advisor Income & Growth
Fund)
TAXABLE INCOME FUNDS:
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS:
Fidelity Advisor High Income Municipal Fund
Fidelity Adv isor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS:
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
PROSPECTUS
FEBRUARY 28, 1997(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS 3 WHO MAY WANT TO INVEST
4 EXPENSES Institutional Class's yearly operating
expenses.
9 FINANCIAL HIGHLIGHTS A summary of each fund's financial
data.
10 PERFORMANCE How each fund has done over time.
THE FUNDS IN DETAIL 13 CHARTER How each fund is organized.
15 INVESTMENT PRINCIPLES AND RISKS Each fund's overall
approach to investing.
25 BREAKDOWN OF EXPENSES How operating costs are
calculated and what they include.
YOUR ACCOUNT 28 TYPES OF ACCOUNTS Different ways to set up your
account,
including tax-sheltered retirement plans.
29 HOW TO BUY SHARES Opening an account and making
additional investments.
31 HOW TO SELL SHARES Taking money out and closing your
account.
31 INVESTOR SERVICES Services to help you manage your
account.
SHAREHOLDER AND 34 DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
35 TRANSACTION DETAILS Share price calculations and the
timing of purchases and redemptions.
37 EXCHANGE RESTRICTIONS
37 APPENDIX A
40 APPENDIX B
</TABLE>
KEY FACTS
WHO MAY WANT TO INVEST
Institutional Class shares are offered to accounts managed (i) by a bank
trust department and other trust institutions, (ii) by a broker-dealer and
(iii) by a registered investment advisor (RIA) on a discretionary basis
(collectively, eligible intermediaries).
Shares are available through eligible intermediaries that have signed a
participation agreement with FDC. The participation agreement specifies
certain aggregate asset minimums and asset qualifications, trading
guidelines, marketing restrictions and program requirements. Eligible
intermediaries with existing Institutional Class accounts will be required
to sign and comply with a participation agreement in order to purchase
additional shares. Investors prior to June 30, 1995 that have not signed a
participation agreement will be allowed to continue investing in
Institutional Class shares under the terms of this relationship until June
30, 1997, after which they will be prevented from making new or subsequent
purchases in Institutional Class, except that employee benefit plans will
be permitted to make additional purchases of Institutional Class shares.
In addition, Institutional Class shares are available through certain
eligible intermediaries that meet qualifications established by FDC but
have not signed a participation agreement.
TechnoQuantTM Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, Large Cap, Growth & Income, Equity Income,
Balanced, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond, and Int ermediate Municipal Income are diversified funds.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income are non-diversified funds.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified fund.
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, Large Cap, Growth & Income, Equity Income, and
Balanced are designed for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns.
TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, and Large Cap are designed for investors who want to be
invested in the stock market for its long-term growth potential. These
funds invest for growth and do not pursue income. Growth & Income, Equity
Income, and Balanced are designed for those investors who seek a
combination of growth and income from equity and some bond investments.
Tec hnoQuant Growth is designed to provide an alternative to more
traditional styles of investing for growth-oriented investors. The fund
utilizes computer-aided quantitative analysis emphasizing technical
factors, such as historical price and volume relationships.
High Yield and Strategic Income are designed for investors who want high
current income with some potential for capital growth from a portfolio of
debt instruments with a focus on lower-quality debt securities and
income-producing equity securities. These funds may be appropriate for
long-term, aggressive investors who understand the potential risks and
rewards of investing in lower-quality debt securities, including defaulted
securities.
Mortgage Securities is designed for investors who seek high current
income from a portfolio of mortgage-related securities of all types.
Government Investment is designed for investors who seek high current
income from a portfolio of U.S. Government securities in a manner
consis t e nt with preserving principal.
Intermediate Bond and Short Fixed-Income are designed for investors who
seek high current income from a portfolio of investment-grade debt
securities consist e nt with capital preservation.
High Income Municipal, Municipal Bond, Intermediate Municipal
Income, and Short-Intermediate Municipal Income are designed for investors
in higher tax brackets who seek high current income that is free
from federal income tax. Municipal Bond, Intermediate Municipal Income,
and Short-Intermediate Municipal Income also invest consistent with
consideration of capital preservation. High Income Municipal focuses on
lower-quality debt securities and may be appropriate for long-term,
aggressive investors who understand the potential risks and rewards of
investing in lower-quality debt securities, including defaulted securities.
California Municipal Income is designed for investors in higher tax
brackets who seek high current income that is free from federal and
California personal income taxes. New York Municipal Income is designed for
investors in higher tax brackets who seek high current income that is free
from federal and New York State and City personal income taxes.
The value of each fund's investments and, as applicable, the income they
generate, will vary from day to day, and generally reflect changes in
market conditions, interest rates and other company, political, and
economic news. In the short term, stock prices can fluctuate dramatically
in response to these factors. The securities of small, less well-known
companies may be more volatile than those of larger companies. Bond
values fluctuate based on changes in interest rates and the credit quality
of the issuer, and may be subject to prepayment risk, which can limit their
price appreciation potential in periods of declining interest rates.
Over time, however, stocks, although more volatile, have shown greater
growth potential than other types of securities. Investments in foreign
securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to
currency fluctuations.
The inve stments of Strategic Income, Mortgage Securities, Government
Investment, Intermediate Bond, and Short Fixed-Income are also subject to
prepayments, which can lower a fund's yield, particularly in periods of
declining interest rates.
In addition, S trategic Income may also be appropriate for investors
who want to pursue their investment goals in markets outside of the United
States. By including international investments in your portfolio, you can
achieve additional diversification and participate in growth opportunities
around the world.
Each fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
Each fund is composed of multiple classes of shares. All classes of a
fund have a common investment objective and investment portfolio. Class A
and Class T shares have a front-end sales charge and pay a distribution
fee. Class T shares may be subject to a contingent deferred sales charge
(CDSC). Class B shares do not have a front-end sales charge, but do
have a CDSC, and pay a distribution fee and a shareholder service fee.
Because Institutional Class shares have no sales charge, and do not pay a
distribution fee or a shareholder service fee, Institutional Class shares
are expected to have a higher total return than Class A, Class T , or
Class B shares. You may obtain more information about Class A, Class
T , and Class B shares, which are not offered through this
prospectus, by calling 1-800-843-3001 or from your investment professional.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy or
sell Institutional Class shares of a fund. In addition, you may be charged
an annual maintenance fee if your account balance falls below $2,500. See
"Transaction Details", page 35, for an explanation of how and when these
charg es apply.
Maximum sales charge on purchases and None
reinvested distributions
Maximum deferred sales None
charge
Redemption fee None
Exchange fee None
Annual account maintenance fee $12.0
(for accounts under $2,500) 0
ANNUAL OPERATING EXPENSES are paid out of each fund's assets. Each fund
pays a management fee to Fidelity Management & Research Company (FMR) that,
for Growth Opportunities and S trategic Op portunities, varies based
on performance. Each fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports.
Institutional Class's expenses are factored into its share price or
dividends and are not charged directly to shareholder accounts (see
"Breakdown of Expenses" on page 24).
The following figures are based on estimated or historical expenses of
the Institutional Class of each fund, adjusted to reflect current fees, and
are calculated as a percentage of average net assets of the Institutional
Class of each fund. A portion of the brokerage commissions that certain of
the funds pay is used to reduce fund expenses. Including these
reductions, total operating expenses would have been ___% for [Fund
name(s)].
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Institutional Class shares, assuming a 5% annual return and
full redemption at the end of each time period:
EQUITY FUNDS
Operating Expenses Examples
TECHNOQUANT GROWTH Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses %[A]
Total operating expenses %
MID CAP Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses %[A]
Total operating expenses %
EQUITY GROWTH Management fee[B] (after % After 1 $
fee reduction) year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
GROWTH OPPORTUNITIES Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
STRATEGIC OPPORTUNITIES Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
LARGE CAP Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses %[A]
Total operating expenses %
GROWTH & INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses [A]
Total operating expenses %
EQUITY INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
BALANCED Management fee (after % After 1 $
fee reduction) [C] year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
[A] B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
[B] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.33% TO 0.30%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE ___% AND TOTAL OPERATING EXPENSES WOULD BE __%.
[C] EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO IMPLEMENT A
MANAGEMENT FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM
0.20% TO 0.15%. IF THIS AGREEMENT WAS NOT IN EFFECT, THE MANAGEMENT FEE
WOULD BE ___% AND TOTAL OPERATING EXPENSES WOULD BE __%.
TAXABLE INCOME FUNDS
Operating Expenses Examples
HIGH YIELD Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
STRATEGIC INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after % After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
MORTGAGE SECURITIES Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after %[A] After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
GOVERNMENT INVESTMENT Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after % After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
INTERMEDIATE BOND Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses % After 5 $
years
Total operating expenses % After 10 $
years
SHORT FIXED-INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after % After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
MUNICIPAL FUNDS
Operating Expenses Examples
HIGH INCOME MUNICIPAL Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
MUNICIPAL BOND Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after %[A] After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
[A] B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INTERMEDIATE MUNICIPAL INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after %[A] After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after % After 5 $
reimbursement) years
Total operating expenses % After 10 $
years
</TABLE>
STATE MUNICIPAL FUNDS
Operating Expenses Examples
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after %[A]
reimbursement)
Total operating expenses %
NEW YORK MUNICIPAL INCOME Management fee % After 1 $
year
12b-1 fee (Distribution None After 3 $
fee) years
Other expenses (after % After 5
reimbursement) years
Total operating expenses % After 10
years
</TABLE>
[A] B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
FMR has voluntarily agreed to reimburse the Institutional Class of certain
funds to the extent that total operating expenses as a percentage of their
respective average net assets exceed the following rates:
Effective
Date
TechnoQuant Growth 1.50 12/31 /9
% 6
Mid Cap 1.50 2/26/96
%
Large Cap 1.50 2/26/96
%
Growth & Income 1.50 12/31 /9
% 6
Balanced 1.25 10/30/9
% 5
High Yield 1.10 7/1/95
%
Strategic Income 1.10 7/1/95
%
Mortgage Securities %
Government Investment 0.75 7/1/95
%
Intermediate Bond 0.75 7/1/95
%
Short-Fixed Income 0.75 8/30/96
%
High Income Municipal 0.75 7/1/95
%
Municipal Bond 0.75 7/1/96
%
Intermediate Municipal Income 0.75 7/1/95
%
Short-Intermediate Municipal Income 0.75 7/1/95
%
California Municipal Income 0.75 8/1/95
%
New York Municipal Income 0.75 8/1/95
%
If these agreements were not in effect, other expenses and total operating
expenses of the Institutional Class of each fund , as a percentage of
average net assets, would have been the following amounts:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Other Expenses Total Operating Expenses
TechnoQuant Growth[A]
Mid Cap[A]
Large Cap
Growth & Income
Balanced
High Yield
Strategic Income
Mortgage Securities
Government Investment
Intermediate Bond
Short Fixed-Income
High Income
Municipal
Municipal Bond
Intermediate
Municipal Income
Short-Intermediate
Municipal Income
California Municipal
Income
New York Municipal
Income
</TABLE>
* B ASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
Expenses eligible for reimbursement do not include interest, taxes,
brokerage commissions, and extraordinary expen ses.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for certain funds and these
funds' financial statements are included in each fund's Annual Report and
have been audited by ___________________, independent accountants. Their
reports on the financial statements and financial highlights are included
in each Annual Report. The financial statements, the financial highlights,
and the reports are incorporated by reference into the funds' SAI, which
may be obtained free of charge from FDC or your investment professional.
TechnoQuant Growth and Growth & Income are expected to commence operations
on or about December 31, 1996.
[TABLES TO BE INSERTED BELOW.]
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD.
For Mortgage Securities, the fiscal year runs from August 1 to July 31.
For Growth Opportunities, Balanced, High Yield, Government Investment,
Short Fixe d-Income, High Income Municipal, California Municipal Income
and New York Municipal Income, the fiscal year runs from November 1 to
October 31. For TechnoQuant Growth, Mid Cap, Equity Growth, Large Cap,
Growth & Income, Equity Income, Intermediate Bond, Intermediate
Municipal Income, and Short-Intermediate Municipal Income, the fiscal
year runs from December 1 to November 30. For Strategic Opportunities,
Strategic Income, and Municipal Bond, the fiscal year runs from January 1
to December 31. The tables below show the Institutional Class's performance
over past fiscal years. Performance history will be available for
TechnoQuant Growth and Growth & Income after the funds have been in
operation for six months. For additional charts presenting the
Institutional Class's calendar year performance, see Appendix B, beginning
on page 40.
GROWTH FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/Life Past 1 year Past 5 years 10 Years/Life
of fund+ of fund+
TECHNOQUANT GROWTH [B] % % % % % %
MID CAP[B] % % % % % %
EQUITY GROWTH [B] % % % % % %
GROWTH OPPORTUNITIES [C] % % % % % %
STRATEGIC OPPORTUNITIES [C] % % % % % %
LARGE CAP[B] % % % % % %
GROWTH & INCOME [B] % % % % % %
EQUITY INCOME [B] % % % % % %
BALANCED [A] % % % % % %
</TABLE>
TAXABLE INCOME FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/Life Past 1 year Past 5 years 10 Years/Life
of fund+ of fund+
HIGH YIELD [A] % % % %
STRATEGIC INCOME [C] % % % % % %
MORTGAGE SECURITIES [D] % % % %
GOVERNMENT INVESTMENT [A] % % % % % %
INTERMEDIATE BOND [B] % % % % % %
SHORT FIXED-INCOME [A] % % % % % %
</TABLE>
MUNICIPAL FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/Life Past 1 year Past 5 years 10 Years/Life
of fund+ of fund+
HIGH INCOME MUNICIPAL [A] % % % % % %
MUNICIPAL BOND[C] % % % % % %
INTERMEDIATE MUNICIPAL INCOME [B] % % % %
SHORT-INTERMEDIATE MUNICIPAL INCOME [B} % % % % % %
</TABLE>
STATE MUNICIPAL FUNDS - INSTITUTIONAL CLASS
Average Annual Total Return* Cumulative Total Return
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Past 1 year Past 5 years 10 Years/Life Past 1 year Past 5 years 10 Years/Life
of fund+ of fund+
CALIFORNIA MUNICIPAL INCOME[A] % % % % % %
NEW YORK MUNICIPAL INCOME [A] % %
</TABLE>
A PERIOD ENDED OCTOBER 31, 1996
B PERIOD ENDED NOVEMBER 30, 1996
C PERIOD ENDED DECEMBER 31, 1996
D PERIOD ENDED JULY 31, 1996
+ LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 18,
1987 FOR GROWTH OPPORTUNITIES; JANUARY 6, 1987 FOR BALANCED; JANUARY 5,
1987 FOR HIGH YIELD; OCTOBER 31, 1994 FOR STRATEGIC INCOME; JANUARY 7, 1987
FOR GOVERNMENT INVESTMENT; SEPTEMBER 16, 1987 FOR SHORT-FIXED INCOME AND
HIGH INCOME MUNICIPAL; MARCH 16, 1994 FOR SHORT-INTERMEDIATE MUNICIPAL
INCOME; AUGUST 21, 1995 FOR NEW YORK MUNICIPAL INCOME; AND FEBRUARY 20 FOR
MID CAP, LARGE CAP, AND CALIFORNIA MUNICIPAL INCOME) THROUGH THE ANNUAL
PERIODS ENDED 1996.
* INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES FOR GROWTH OPPORTUNITIES,
BALANCED, HIGH YIELD, STRATEGIC INCOME, GOVERNMENT INVESTMENT, SHORT
FIXED-INCOME, HIGH INCOME MUNICIPAL, AND SHORT-INTERMEDIATE MUNICIPAL
INCOME TOOK PLACE ON JULY 3, 1995 AND DO NOT BEAR A SALES LOAD OR 12B-1
FEE. RETURNS PRIOR TO JULY 3, 1995 ARE THOSE OF CLASS T SHARES, THE
ORIGINAL CLASS OF THESE FUNDS AND INCLUDE A CLASS T 12B-1 FEE (AT A THEN
CURRENTLY APPLICABLE RATE OF 0.65% FOR GROWTH OPPORTUNITIES AND BALANCED;
0.25% FOR HIGH YIELD, STRATEGIC INCOME, GOVERNMENT INVESTMENT, AND HIGH
INCOME MUNICIPAL, AND 0.15% FOR SHORT FIXED-INCOME AND SHORT-INTERMEDIATE
MUNICIPAL INCOME). INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES FOR
STRATEGIC OPPORTUNITIES TOOK PLACE ON JULY 3, 1995. INSTITUTIONAL CLASS
SHARES DO NOT BEAR A SALES LOAD OR 12B-1 FEE. RETURNS PRIOR TO JULY 3,
1995, ARE THOSE OF CLASS T SHARES AND INCLUDE A THEN CURRENTLY APPLICABLE
CLASS T 12B-1 FEE OF 0.65%. RETURNS PRIOR TO AUGUST 20, 1986, ARE THOSE OF
INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR A 12B-1
FEE. INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES FOR MUNICIPAL BOND TOOK
PLACE ON JULY 2, 1996. INSTITUTIONAL CLASS SHARES DO NOT BEAR A SALES LOAD
OR 12B-1 FEE. RETURNS PRIOR TO JULY 2, 1996 ARE THOSE OF INITIAL CLASS, THE
ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR A 12B-1 FEE.
If FMR had not reimbursed certain class expenses during these periods,
total returns would have been lower.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given period,
assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as
actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
This difference may be significant for funds whose investments are
denominated in foreign securities.
In calculating yield, a fund may from time to time use a security's coupon
rate instead of its yield to maturity in order to reflect the risk premium
on that security. This practice will have the effect of reducing a fund's
yield.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE COMPETITIVE FUNDS AVERAGE is each fund's applicable Lipper Funds
Average, which reflects the performance of mutual funds with similar
objectives. These averages, published by Lipper Analytical Services, Inc.,
exclude the effect of sales charges.
STANDARD & POOR'S 500 INDEX (S&P 500) is a widely recognized,
unmanaged index of common stocks.
STANDARD & POOR'S MIDCAP 400 INDEX is a widely recognized, unmanaged index
of 400 medium-capitalization stocks.
MERRILL LYNCH HIGH YIELD MASTER INDEX is a market capitalization weighted
index of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of at least one year and have a credit rating lower
than BBB-/Baa3, but are not in default.
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX is a market value
weighted performance benchmark for government and corporate fixed-rate debt
issues with maturities between one and three years.
SALOMON BROTHERS MORTGAGE INDEX is a market capitalization weighted index
of 15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC), and
FNMA and FHLMC balloon mortgages with fixed-rate coupons.
SALOMON BROTHERS TREASURY/AGENCY INDEX is a market capitalization
weighted index of U.S. Treasury and U.S. government agency securities with
fixed-rate coupons and weighted average lives of at least one year.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is a
market value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 10 years.
Unlike Institutional Class's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
The Institutional Class of each growth or growth and income fund may quote
its adjusted net asset value including all distributions paid. This value
may be averaged over specified periods and may be used to calculate a
class's moving average.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, please contact your investment
professional, or call 1-800-843-3001.
TOTAL RETURNS AND YIELDS 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 sharehold ers' money
and invests it toward a specified goal. TechnoQuant Growth, Equity Growth,
Mid Cap, Large Cap, and Growth & Income are diversified funds of Fidelity
Advisor Series I, a Massachusetts business trust organized on June 24,
1983. Growth Opportunities, Balanced, H igh Yield, Government
Investment, and Short Fixed-Income are diversified funds of Fidelity
Advisor Series II, a Massachusetts business trust organized on April 24,
1986. Equity Income is a diversified fund of Fidelity Advisor Series III, a
Massachusetts business trust organized on May 17, 1982. Intermediate Bond
is a diversified fund of Fidelity Advisor Series IV, a Massachusetts
business trust organized on May 6, 1983. High Income Municipal is a
diversified fund and California Municipal Income and New York Municipal
Income are non-diversified funds of Fidelity Advisor Series V, a
Massachusetts business trust organized on April 24, 1986. Intermediate
Municipal Income is a diversified fund and Short-Intermediate Municipal
Income is a non-diversified fund of Fidelity Advisor Series VI, a
Massachusetts business trust organized on June 1, 1983. Strategic Income is
a non-diversified fund and Strategic Opportunities is a diversified fund of
Fidelity Advisor Series VIII, a Massachusetts busi ness trust organized
on September 23, 1983. Mortgage Securities is a diversified fund of
Fidelity Income Fund, a Massachusetts business trust organized on August 7,
1984. Municipal Bond is a diversified fund of Fidelity Municipal Trust, a
Massachusetts business trust organized on June 22, 1984. Each trust is
an open-end management investment company. There is a remote possibility
that one fund might become liable for a misstatement in the prospectus
about another fund.
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 the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS 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.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. For shareholders
of TechnoQuant Growth, Mid Cap, Equity Growth, Strategic Opportunities,
Large Cap, Growth & Income , and Strategic Income, you are entitled to
one vote for each share you own. For shareholders of Growth Opportunities,
Equity Income, Balanced, High Yield , Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond , Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income, the number of votes you are entitled to is based upon the dollar
value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The funds employ various Fidelity
companies to perform activities required for their operation.
The funds are managed by FMR, which chooses each fund's investments and
handles its business affairs. FMR chooses investments with the assistance
of foreign affiliates for all funds except Mortgage Securities, Government
Investment, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income.
Affiliates may assist FMR with foreign securities:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for TechnoQuant
Growth, Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity Income, Balanced, High
Yield, Strategic Income, Intermediate Bond, and Short Fixed-Income.
(small solid bullet) Fidelity Management & Research Far East Inc. (FMR Far
East), in Tokyo, Japan, serves as a sub-adviser for TechnoQuant Growth, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Intermediate Bond, and Short Fixed-Income.
(small solid bullet) Fidelity International Investment Advisors (FIIA), in
Pembroke, Bermuda, serves as a sub-adviser for Strategic Income.
(small solid bullet) Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.), in Kent, England, serves as a sub-adviser for
Strategic Income.
(small solid bullet) Fidelity Investment Japan Ltd. (FIJ), in Tokyo,
Japan serves as a sub-adviser for Strategic Income.
As of December 31, 1996, FMR advised funds having approximately __ million
shareholder accounts with a total value of more than $___ billion.
John H. Carlson is lead manager of Advisor Strategic Income, which he
has managed since August 1995, and is manager of the fund's emerging market
investments. Mr. Carlson also manages Advisor Emerging Markets Income
and New Markets Income. Previously, he was executive director of emerging
markets at Lehman Brothers International, London. From 1990 to 1992, Mr.
Carlson was executive vice president of capital markets for Daiwa
Securities America.
C. Robert Chow is manager of Advisor Equity Income, which he has managed
since March 1996. Previously, he managed Select Paper and Forest Products,
Select Computers, and Select Insurance. In addition, he was an equity
analyst covering consumer finance and household products. Mr. Chow joined
Fidelity in 1989.
Bettina E Doulton is lead manager and vice president of Advisor Balanced,
which she has managed since March 1996. Ms. Doulton also manages Advisor
Annuity Income & Growth, and Puritan(registered trademark). Previously, she
managed Advisor Equity Income, VIP Equity-Income, Value, Select Automotive,
and was assistant to Peter Lynch on Magellan(registered trademark). Ms.
Doulton also served as an analyst following the automotive and tire
industry as well as the gaming and lodging industry. Ms. Doulton joined
Fidelity in 1986.
Margaret L. Eagle is vice president and manager of Advisor High Yield,
which she has managed since it began in January 1987, and has been manager
of Advisor Strategic Income's high yield investments since January 1996.
Previously, she managed Spartan High Income, High Income (now Capital &
Income), and several pension fund accounts. She also managed the bond
portion of Puritan(registered trademark). Ms. Eagle joined Fidelity in
1980.
George Fischer is manager of Advisor Municipal Bond, which he has managed
since October 1995. He also manages Spartan Bond Strategist, Insured
Municipal Income, and various trust accounts. Mr. Fischer joined Fidelity
in 1989.
Kevin E. Grant is vice president of Advisor Balanced and has been manager
of its fixed-income investments since March 1996. Mr. Grant is also vice
president and manager of Advisor Intermediate Bond, and manager of Advisor
Strategic Income's U.S. government and domestic investment-grade
investments. Mr. Grant is also the manager of Advisor Mortgage Securities
which he has managed since 1993. In addition, he manages the fixed-income
investments of Puritan. Mr. Grant also manages Advisor World Limited Term
Bond, Spartan Ginnie Mae, and Ginnie Mae. Previously, he was vice president
and chief strategist for mortgage-backed securities at Morgan Stanley and
an investment director at Aetna. Mr. Grant joined Fidelity in 1993.
Lawrence Greenberg is vice president and manager of Advisor Equity Growth,
which he has managed since June 1996. Mr. Greenberg also manages
VIP:Growth, Growth Company, and Emerging Growth. Mr. Greenberg joined
Fidelity in 1986.
Robert C. Ives is manager of Advisor Government Investment, which he has
managed since February 1995. Mr. Ives also manages Spartan Government
Income and Government Securities. Previously, he managed Ginnie Mae,
Spartan Ginnie Mae and Mortgage Securities. Mr. Ives joined Fidelity in
1991, and received an M.B.A. from the University of Chicago.
Jonathan M. Kelly has been manager of Advisor Strategic Income's foreign
bond investments in developed markets since January 1996. Previously, he
managed Advisor Emerging Markets Income, and New Markets Income. Mr. Kelly
joined Fidelity in 1991, after receiving his M.B.A. from the Wharton School
at the University of Pennsylvania. Mr. Kelly worked in the money management
field prior to business school.
Timothy A. Krochuk is manager of Advisor TechnoQuant Growth, which he has
managed since inception. Previously, he was a quantitative analyst. Mr.
Krochuk joined Fidelity in 1992.
Harris B. Leviton is vice president and manager of Advisor Strategic
Opportunities, which he has managed since March 1996. Previously, he
managed Retirement Growth, Select Electronics, and Convertible Securities.
Mr. Leviton joined Fidelity in 1986.
Norman U. Lind is vice president and manager of Advisor Short-Intermediate
Municipal Income, which he has managed since October 1995 and is also
manager of Advisor New York Municipal Income which he has managed since
August 1995, New York Tax-Free Insured, New York Tax-Free High Yield,
Spartan New York Municipal High Yield, Spartan Intermediate Municipal,
Spartan Short-Intermediate Municipal, and Spartan New York Intermediate
Municipal. Previously, he served as the leader of the municipal bond
research group. Mr. Lind joined Fidelity in 1986.
Charles S. Morrison is manager of Advisor Short Fixed-Income, which he has
managed since February 1995. Mr. Morrison also manages Spartan Short-Term
Income, Short-Term Bond, and Short-term World Income. Mr. Morrison is vice
president of Fidelity Management Trust Company. Mr. Morrison joined
Fidelity in 1987.
David L. Murphy is manager of Advisor Intermediate Municipal Income, which
he has managed since March 1995. Mr. Murphy also manages High Yield
Tax-Free, Spartan Municipal Income, and Limited Term Municipals.
Previously, he managed Advisor Short-Intermediate Municipal Income, Spartan
Short-Intermediate Municipal, Spartan Intermediate Municipal, Spartan New
Jersey Municipal High-Yield, and Spartan New York Intermediate Municipal.
Mr. Murphy joined Fidelity in 1989.
Tanya M. Roy is manager of Advisor High Income Municipal, which she has
managed since August 1995. Ms. Roy also manages Aggressive Tax-Free and
Spartan Aggressive Municipal. Previously, she managed Municipal Bond and
was a municipal bond analyst. Ms. Roy joined Fidelity in 1989.
Jonathan D. Short is manager of Advisor California Municipal Income, which
he has managed since February 1996. Mr. Short also manages Minnesota
Municipal Income, Spartan Arizona Municipal Income, California Municipal
Income, California Insured Municipal Income, Spartan California Municipal
High Yield, and Spartan California Intermediate Municipal. Previously, he
was a municipal bond analyst. Mr. Short joined Fidelity in 1990, after
receiving his M.B.A. from the Massachusetts Institute of Technology.
Thomas Sprague is manager of Advisor Large Cap, which he has managed since
March 1996. Mr. Sprague also manages Large Cap Stock, Trust Earnings
Growth, and Advisor World U.S. Large Cap. Previously, he managed Select
Environmental Services, Select Electronics, Select Software, and Select
Computer Services. Mr. Sprague joined Fidelity in 1989.
Beth Terrana is manager of Advisor Growth & Income which she has managed
since inception. She also manages another Fidelity fund. Since joining
Fidelity in 1988, Ms. Terrana has worked as a portfolio manager.
Jennifer S. Uhrig is manager of Advisor Mid Cap, which she has managed
since February 1996. Ms. Uhrig also manages Mid Cap Stock. Previously,
she managed Select Retailing, Select Developing Communications, and Select
Telecommunications. Ms. Uhrig joined Fidelity in 1987.
George A. Vanderheiden is vice president and manager of Advisor Growth
Opportunities, which he has managed since November 1987. Mr. Vanderheiden
also manages Destiny I and Destiny II. He is a managing director of FMR
Corp. and leader of the growth group. Mr. Vanderheiden joined Fidelity in
1971.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs certain
transfer ag ent servicing functions for the Institutional Class of each
fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. Members of the Edward C. Johnson 3d family are the predominant owners
of a class of shares of common stock representing approximately 49% of the
voting power of FMR Corp. Under the Investment Company Act of 1940 (the
1940 Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
Fidelity International Limited (FIL), is the parent company of FIIA, FIJ,
and FIIAL U.K. The Johnson family group also owns, directly or indirectly,
more than 25% of the voting common stock of FIL.
UMB Bank, n.a. (UMB) is the transfer agent for High Income Mu nicipal,
Interm ediate Municipal Income, Municipal Bond, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income, although it employs FIIOC to perform these functions for the
Institutional Class of each fund. UMB is located at 1010 Grand Avenue,
Kansas City, Missouri 64106.
A broker-dealer may use a portion of the commissions paid by a fund
to reduce custodian or transfer agent fees for that fund. 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 value of each fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions. Bond values fluctuate based on changes in interest rates,
market conditions, other economic and political news, and on their quality
and maturity. In general, bond prices rise when interest rates fall and
fall when interest rates rise. This effect is usually more pronounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk.
Funds which invest in foreign securities have increased economic and
political risks as they are exposed to events and factors in the various
world markets. This is especially true for funds that invest in emerging
markets. Also, because many 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
investment techniques to either increase or decrease a fund's investment
exposure to any currency.
The total return from a bond includes both income and price gains or
losses. In selecting investments for a bond fund, FMR considers a bond's
expected income together with its potential for price gains or losses.
While income is generally the most important component of bond returns over
time, a bond fund's emphasis on income does not mean the fund invests only
in the highest-yielding bonds available, or that it can avoid losses of
principal.
FMR generally focuses on assembling a portfolio of bonds that it believes
will provide the best balance between risk and return within the range of
eligible investments for the fund. FMR's evaluation of a potential
investment includes an analysis of the credit quality of the issuer, its
structural features, its current price compared to FMR's estimate of its
long-term value, and any short-term trading opportunities resulting from
market inefficiencies.
FMR may use various investment techniques to hedge a portion of the funds'
risks, but there is no guarantee that these strategies will work as FMR
intends. It is important to note that neither the funds nor their yields
are guaranteed by the U.S. Government. When you sell your shares, they may
be worth more or less than what you paid for them.
TECHNOQUANT GROWTH FUND seeks growth of capital by investing
mainly in common stocks. However, the fund has the flexibility to invest in
other types of equity securities and debt securities as well. The fund's
security selection process utilizes computer-aided, quantitative analysis.
FMR's computer models use many types of data, but emphasize technical
factors such as historical price and volume relationships. Fundamental
criteria, such as earnings estimates, and dividend yield may also be
considered.
FMR's emphasis on technical analysis can result in the fund holding
different types of stocks at different times. For example, the fund may
also hold stocks of companies with large or small market capitalization or
high or low price/earnings ratios. The fund's focus may change rapidly
based on FMR's analysis of the most current information. At times, the fund
may be concentrated in a small number of market sectors or securities.
MID CAP FUND seeks long-term growth of capital by investing primarily in
equity securities of companies with medium market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance in
other market capitalizations and security types.
Medium market capitalization companies are those whose market
capitalization falls within the capitalization range of the S&P MidCap 400
at the time of the fund's investment. The S&P MidCap 400 Index is an
unmanaged index of medium-capitalization stocks. Companies whose
capitalization falls outside this range after purchase continue to be
considered medium-capitalized for purposes of the 65% policy. As of
________, the S&P MidCap 400 included companies with capitalizations of
between $__ million and $__ billion.
Investing in medium capitalization stocks may involve greater risk than
investing in large capitalization stocks, since they can be subject to more
abrupt or erratic movements. However, they tend to involve less risk than
stocks of small capitalization companies.
EQUITY GROWTH FUND seeks capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics. FMR
normally invests at least 65% of the fund's total assets in common and
preferred stock. The fund looks for domestic and foreign companies with
above-average growth characteristics compared to the average of the
companies included in the S&P 500. The S&P 500 is a registered trademark of
Standard & Poor's.
Growth may be measured by factors such as earnings or gross sales.
Companies with strong growth potential often have new products,
technologies, distribution channels, or other opportunities. As a general
rule, these companies may include smaller, less well-known companies, and
companies whose stocks have higher than average price/earnings (P/E)
ratios. The market prices of these stocks may be particularly sensitive to
economic, market, or company news. FMR may also pursue growth in larger or
revitalized companies or companies that hold a strong position in the
market. These growth characteristics may be found in mature or declining
industries.
GROWTH OPPORTUNITIES FUND seeks capital growth by investing primarily in
common stocks and securities convertible into common stocks. FMR normally
invests at least 65% of the fund's total assets in securities of companies
that FMR believes have long-term growth potential. Although the fund
invests primarily in common stock and securities convertible into common
stock, it has the ability to purchase other securities, such as preferred
stock and bonds, that may produce capital growth. The fund may invest in
foreign securities without limitation.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation." FMR normally invests at least 65% of the fund's total assets in
these securities. The term "special situation" refers to FMR's
identification of an unusual, and possibly non-repetitive, development
taking place in a company or a group of companies in an industry.
A special situation may involve one or more of the following
characteristics:
(small solid bullet) A technological advance or discovery, the offering of
a new or unique product or service, or changes in consumer demand or
consumption forecasts.
(small solid bullet) Changes in the competitive outlook or growth potential
of an industry or a company within an industry, including changes in the
scope or nature of foreign competition or the development of an emerging
industry.
(small solid bullet) New or changed management, or material changes in
management policies or corporate structure.
(small solid bullet) Significant economic or political occurrences abroad,
including changes in foreign or domestic import and tax laws or other
regulations.
(small solid bullet) Other events, including natural disasters, favorable
litigation settlements, or a major change in demographic patterns.
"Special situations" often involve breaks with past experience. They can be
relatively aggressive investments. In seeking capital appreciation, the
fund also may invest in securities of companies not involving a special
situation, but which are companies with valuable fixed assets and whose
securities are believed by FMR to be undervalued in relation to the
companies' assets, earnings, or growth potential. FMR intends to invest
primarily in common stocks and securities that are convertible into common
stocks; however, it also may invest in debt securities of all types and
quality if FMR believes that investing in these securities will result in
capital appreciation. The fund may invest up to 30% of its assets in
foreign investments.
LARGE CAP FUND seeks long term growth of capital by investing primarily in
equity securities of companies with large market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance
in other market capitalizations and security types.
FMR defines large market capitalization companies as those with market
capitalizations of $1 billion or more at the time of the fund's investment.
Companies whose capitalization falls below this level after purchase
continue to be considered large-capitalized for purposes of the 65% policy.
Companies with large market capitalizations typically have a large number
of publicly held shares and a high trading volume, resulting in a high
degree of liquidity. These tend to be quality companies with strong
management organizations. However, large capitalization companies may have
less growth potential than smaller companies and may be able to react less
quickly to changes in the marketplace.
GROWTH & INCOME FUND seeks high total return through a
combination of current income and capital appreciation. The fund invests
mainly in equity securities. The fund expects to invest the majority of its
assets in domestic and foreign equity securities, with a focus on those
that pay current dividends and show potential earnings growth. However, the
fund may buy debt securities as well as equity securities that are not
currently paying dividends, but offer prospects for capital appreciation or
future income.
EQUITY INCOME FUND seeks a yield which exceeds the composite dividend yield
of securities comprising the S&P 500. In addition, consistent with the
primary objective of obtaining income, the fund will consider the potential
for achieving capital appreciation. Under normal conditions, FMR normally
invests at least 65% of the fund's total assets in income-producing equity
securities. For purposes of this policy, equity securities are defined as
common and preferred stocks. The balance of the fund's assets will tend to
be invested in debt securities, a high percentage of which are expected to
be convertible into common stocks.
The fund seeks to achieve a yield that beats that of the S&P 500. The fund
does not intend to invest in securities of issuers without proven earnings
and/or credit histories. Because the fund invests for income, as well as
capital appreciation, investors should not expect capital appreciation
comparable with funds which seek only capital appreciation. The yield on
the fund's assets generally will increase or decrease from year to year in
accordance with market conditions and in relation to the changes in yields
of the stocks included in the S&P 500.
BALANCED FUND seeks both income and growth of capital by investing in a
diversified portfolio of equity and fixed-income securities with income,
growth of income, and capital appreciation potential. FMR manages the fund
to maintain a balance between stocks and bonds. When FMR's outlook is
neutral, it will invest approximately 60% of the fund's assets in stocks
and other equity securities and the remainder in bonds and other
fixed-income securities. FMR may vary from this target if it believes
stocks or bonds offer more favorable opportunities, but will always invest
at least 25% of the fund's total assets in fixed-income senior securities
(including debt securities and preferred stock).
The fund may buy securities that are not currently paying income but offer
prospects for future income. The fund may invest in securities of foreign
issuers. In selecting investments for the fund, FMR will consider such
factors as the issuer's financial strength, its outlook for increased
dividend or interest payments, and the potential for capital gains.
HIGH YIELD FUND seeks a combination of a high level of income and the
potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks . FMR normally invests at least 65% of the fund's total
assets in these securities.
The fund may also invest in securities issued or guaranteed by the U.S.
Government, any state or any of their respective subdivisions, agencies or
instrumentalities, and securities of foreign issuers, including securities
of foreign governments. The fund may invest up to 35% of its total assets
in equity securities, including common stocks, warrants and rights.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
The fund invests primarily in fixed-income securities, allocated among four
general investment categories: high yield securities, U.S. Government and
investment grade securities, emerging market securities, and foreign
developed market securities. The fund's neutral mix, or the benchmark for
its combination of investments in each category over time, is approximately
40% high yield, 30% U.S. Government and investment-grade, 15% emerging
markets and 15% foreign developed markets.
FMR regularly reviews the fund's allocation and makes changes gradually
over time to favor investments that it believes provide the most favorable
outlook for achieving the fund's objective. In normal market environments,
FMR expects the fund's asset allocation to approximate the neutral mix
within a range of plus or minus 10% of assets per category. There are no
absolute limits on the percent of assets invested in each category,
however, and FMR reserves the right to change the neutral mix from time to
time.
The HIGH YIELD category includes high-yielding, lower-quality debt
securities consisting mainly of U.S. securities of a quality grade lower
than BBB. The U.S. GOVERNMENT AND INVESTMENT-GRADE category includes
mortgage securities, U.S. Government securities, government agency
securities and other U.S. dollar-denominated securities of investment-grade
quality. The EMERGING MARKET category includes corporate and governmental
debt securities of issuers located in emerging markets. The FOREIGN
DEVELOPED MARKET category includes corporate and governmental debt
securities of issuers located in developed foreign markets. These
investment categories are only general guidelines, and FMR may use its
judgment as to which category an investment falls within. The fund may also
make investments that do not fall within these categories.
By allocating its investments across different types of fixed-income
securities, the fund attempts to moderate the significant risks of each
investment category through diversification. Diversification, when
successful, can mean higher returns with decreased volatility. However,
each of the fund's four investment categories may experience periods of
volatile returns, and it is possible for all investment categories to
decline at the same time.
MORTGAGE SECURITIES seeks high current income, consistent with prudent
investment risk, by investing primarily in mortgage-related securities.
When consistent with its goal, the fund may also consider the potential for
capital gain. FMR normally invests at least 65% of the fund's total assets
in mortgage-related securities. The fund may also invest in U.S.
government securities and instruments related to U.S. government
securities.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between two and 10 years.
However, the reaction of mortgage securities to changes in interest rates
can be difficult to predict since mortgage securities are subject to
prepayment of principal and can be structured in a complex manner. As of
November 30, 1996, the fund's dollar-weighted average maturity was
approximately _ years.
GOVERNMENT INVESTMENT FUND s eeks high current income by investing in
U.S. government securities and instruments related to U.S. government
securities under normal conditions. FMR normally invests the fund's assets
only in U.S. government securities, repurchase agreements, and other
instruments related to U.S. government securities. Under normal conditions,
FMR invests at least 65% of the fund's total assets in U.S. government
securities and repurchase agreements for U.S. Government securities. Other
instruments may include futures or options on U.S. government securities or
interests in U.S. government securities that have been repackaged by
dealers or other third parties.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to government bonds with maturities between five and 12 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately ___ years.
INTERMEDIATE BOND FUND s eeks high current income by investing in U.S.
dollar-denominated investment-grade debt securities under normal
conditions. When consistent with its primary objective, the fund may also
seek capital appreciation. The fund normally maintains a dollar-weighted
average maturity between three and 10 years.
As of November 30, 1996, the fund's dollar-weighted average maturity was
approximately ___ years. In determining a securi ty's maturity for
purposes of calculating the fund's average maturity, an estimate of the
average time for its principal to be paid may be used. This can be
substantially shorter than its stated final maturity.
SHORT FIXED-INCOME FUND se eks high current income, consistent with the
preservation of capital, by investing in U.S. dollar-denominated
investment-grade debt securities under normal conditions. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation. FMR normally invests at least 65% of the fund's total assets
in fixed-income securities of all types which may include convertible and
zero coupon securities.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of three years or less under
normal conditions. In determining a security's maturity for purposes of
calculating the fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially shorter
than its stated final maturity. As of October 31, 1996, the fund's
dollar-weighted average maturity was approximately ___ years.
HIGH INCOME MUNICIPAL FUND se eks high current income that is free from
federal income tax by investing in municipal securities of any quality
under normal conditions. Since the fund can emphasize lower-quality
securities, FMR's research and analysis is an integral part of choosing the
fund's investments. FMR normally invests so that at least 80% of the fund's
assets are invested in securities whose interest is free from federal
income tax. In addition, FMR may invest all of the fund's assets in
municipal securities issued to finance private activities. The interest
from these securities is a tax preference item for the purposes of the
federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds of comparable quality with maturities between
12 and 20 years. As of October 31, 1996, the fund's dollar-weighted average
maturity was approximately ___ years.
MUNICIPAL BOND FUND se eks high current income that is free from federal
income tax, consistent with preservation of capital, by investing primarily
in investment-grade municipal bonds under normal conditions. FMR normally
invests so that at least 80% of the fund's assets are invested in municipal
securities whose interest is free from federal income tax. In addition, FMR
may invest all of the fund's assets in municipal securities issued to
finance private activities. The interest from these securities is a tax
preference item for the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of December 31, 1996, the fund's dollar-weighted average maturity was
approximately ___ years.
INTERMEDIATE MUNICIPAL INCOME FUND see ks high current income, consistent
with preservation of capital, that is free from federal income tax by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's are invested in
securities whose interest is free from federal income tax. In addition, FMR
may invest all of the fund's assets in municipal securities issued to
finance private activities. The interest from these securities is a tax
preference item for the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between three and 10 years
under normal conditions. FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between seven and 10 years. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately ___ years.
SHORT INTERMEDIATE MUNICIPAL INCOME FUND s eeks high current income that
is free from federal income tax, consistent with preservation of capital by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that 80% of the fund's assets are invested in
municipal securities whose interest is free from federal income tax. In
addition, FMR may invest all of the fund's assets in municipal securities
issued to finance private activities. The interest from these securities is
a tax preference item for the purposes of the federal alternative minimum
tax.
Although the fund can invest in securities of any maturity, the fund
maintains a dollar-weighted average maturity of between two and five years
under normal conditions. As of November 30, 1996, the fund's
dollar-weighted average maturity was approximately ___ years.
CALIFORNIA MUNICIPAL INCOME FUND seeks hig h current income that is free
from federal income tax and California state personal income tax by
investing in investment-grade municipal securities under normal conditions.
FMR normally invests so that at least 80% of the fund's assets are invested
in securities whose interest is free from federal and California income
taxes. In addition, FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from these
securities is a tax preference item for the purposes of the federal
alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately ___ years.
The performance of California Municipal Income is affected by the economic
and political conditions within the state of California. California
suffered a severe economic recession between 1990- 1993, which resulted in
broad-based revenue shortfalls for the State and many local governments.
California's fiscal condition has improved as its economy has been in a
sustained recovery since 1994. During the recession, the State
substantially reduced local assistance, and further reductions could
adversely affect the financial condition of cities, counties and other
government agencies facing constraints in their own revenue collections.
California's long-term credit rating has been reduced in the past several
years. California voters in the past have passed amendments to the
California Constitution and other mea sures that limit the taxing and
spending authority of California governmental entities, and future voter
initiatives could result in adverse consequences affecting California
municipal bonds.
NEW YORK MUNICIPAL INCOME FUND seeks high current income that is
free from federal income tax and New York State and City personal income
taxes by investing in investment-grade municipal securities under normal
conditions. FMR normally invests so that at least 80% of the fund's assets
are invested in securities whose interest is free from federal and New York
State and City personal income taxes. In addition, FMR may invest all of
the fund's assets in municipal securities issued to finance private
activities. The interest from these securities is a tax preference item for
the purposes of the federal alternative minimum tax.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between eight and 18 years. As
of October 31, 1996, the fund's dollar-weighted average maturity was
approximately __ years.
The performance of New York Municipal Income is affected by the economic
and political conditions within the state of New York. Both New York City
and State have recently experienced significant financial difficulty, and
both the City's and the State's credit ratings are among the lowest in the
country.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to its investment strategy.
Each of TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, Large Cap, Growth & Income, Equity Income,
Balanced, High Yield, and Strategic Income reserves the right to invest
without limitation in preferred stocks and investment-grade debt
instruments for temporary, defensive purposes.
Each of Mortgage Securities, Government Investment, Intermediate Bond, and
Short Fixed-Income reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, and Short-Intermediate Municipal Income do not expect to invest in
federally taxable obligations. California Municipal Income and New York
Municipal Income do not expect to invest in federally or state taxable
obligations. Each of High Income Municipal, Municipal Bond, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income, reserves the right to invest without
limitation in short-term instruments, to hold a substantial amount of
uninvested cash, or to invest more than normally permitted in taxable
obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each fund's investments are contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Fund holdings and recent investment strategies are detailed in each funds'
financial reports, which are sent to shareholders twice a year. For a free
SAI or financial report, call your investment professional.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
RESTRICTIONS: With respect to 75% of its total assets, each of
TechnoQuant Growth, Mid Cap, Growth Opportunities, Large Cap,
Growth & Income, Equity Income, Balanced, High Yield, Mortgage
Securities, Government Investment, Intermediate Bond, Short Fixed-Income,
High Income Municipal, Municipal Bond, and Intermediate Municipal Income
may not purchase more than 10% of the outstanding voting securities of a
single issuer. For TechnoQuant Growth and Growth & Income, this
limitation does not apply to investment company securities.
With respect to 100% of its total assets, each of Equity Growth and
Strategic Opportunities may not purchase more than 10% of the outstanding
voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer generally pays the investor a
fixed, variable, or floating rate of interest, and must repay the amount
borrowed at maturity. Other debt securities, such as zero coupon bonds, do
not pay interest, but are sold at a discount from their face values.
Debt securities, loans, and other direct debt have varying levels of
sensitivity to changes in interest rates and varying degrees of quality.
Longer-term bonds and zero coupon bonds are generally more sensitive to
interest rate changes than short-term bonds.
Taxable lower-quality debt securities (sometimes called "junk bonds"), and
tax-exempt lower-quality debt securities (sometimes called "municipal 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.
The table on the following page provides a summary of ratings assigned to
debt holdings (not including money market instruments) in the funds'
portfolios. These figures are dollar-weighted averages of month-end
portfolio holdings during the fiscal year ended 1996, and are presented as
a percentage of total security investments. These percentages are
historical and do not necessarily indicate a fund's current or future debt
holdings.
FISCAL YEAR ENDED 1996Emerging Markets Income
DEBT HOLDINGS, BY RATING
(AS A % OF INVESTMENTS IN EACH RATING CATEGORY) (AS A % OF INVESTMENTS IN
EACH RATING CATEGORY)
INVESTMENT GRADE* LOWER QUALITY*
STANDARD & POOR'S CORPORATION AAA, AA, A BBB BB B CCC CC,C D NR
EQUITY FUNDS:
TechnoQuant Growth
Equity Growth
Growth Opportunities
Strategic Opportunities
Growth & Income
Equity Income
Balanced
TAXABLE INCOME FUNDS:
High Yield
Strategic Income
Mortgage Securities
Government Investment
Intermediate Bond
Short Fixed-Income
MUNICIPAL FUNDS:
High Income Municipal
Municipal Bond
Intermediate Municipal Income
Short Intermediate Municipal Income
New York Municipal Income
MOODY'S INVESTORS SERVICE, INC. Aaa, Aa, A Baa Ba B Caa Ca C NR
EQUITY FUNDS:
TechnoQuant Growth .
Equity Growth
Growth Opportunities
Strategic Opportunities
Growth & Income
Equity Income
Balanced
TAXABLE INCOME FUNDS:
High Yield .
Strategic Income
Mortgage Securities
Government Investment
Intermediate Bond
Short Fixed-Income
MUNICIPAL FUNDS:
High Income Municipal
Municipal Bond
Intermediate Municipal Income
Short Intermediate Municipal Income
New York Municipal Income
__________________________________________________________________________
____________________________
(AS A % OF INVESTMENTS)
SECURITIES NOT
RATED BY
MOODY'S OR S&P (dagger)
Investment Grade (double dagger)
Lower Quality(double dagger)
Total
* FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
* FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.
(dagger) THE DOLLAR-WEIGHTED AVERAGE PERCENTAGES REFLECTED IN THE TABLE MAY
INCLUDE SECURITIES RATED BY NATIONALLY RECOGNIZED
RATING SERVICES, AS WELL AS UNRATED SECURITIES.
(double dagger) AS DETERMINED BY FMR
RESTRICTIONS: For each of TechnoQuant Growth, Mid Cap, Equity Growth,
Growth Opportunities, Strategic Opportunities, Large Cap, Growth & Income,
Equity Income, Balanced, purchase of a debt security is consistent with a
fund's debt quality policy if it is rated at or above the stated level by
Moody's Investors Service (Moody's) or rated in the equivalent categories
by Standard & Poor's (S&P), or is unrated but judged to be of equivalent
quality by FMR.
Each of Mid Cap, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Equity Income, Growth & Income, and Income &
Growth currently intends to limit its investments in lower than Baa-quality
debt securities to less than 35% of its assets.
TechnoQuant Growth currently intends to limit its investments in lower
than Baa- quality debt sec urities to 5% of its assets.
Municipal Bond invests in investment-grade securities. A security is
considered to be investment-grade if it is judged by FMR to be of
equivalent quality to securities rated Baa or BBB or higher by Moody's or
S&P, respectively. However, the fund will limit its investments in medium
quality securities, as judged by FMR to one-third of its total assets; will
not purchase securities rated below Baa or BBB by Moody's or S&P,
respectively; and will not invest more than 20% of its total assets in
securities not rated by Moody's and S&P.
Each of Mortgage Securities, Short Fixed-Income, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income normally invests in investment-grade
securities, but reserves the right to invest up to 5% of its assets in
below investment-grade securities. A security is considered to be
investment-grade if it is rated investment-grade by Moody's, S&P, Duff &
Phelps Credit Rating Co. (Duff & Phelps), or Fitch Investors Service, L.P.
(Fitch), or is unrated but judged by FMR to be of equivalent quality.
Intermediate Bond invests only in investment-grade securities, and will
limit its investments in medium quality securities to 5% of its assets. A
security is considered to be investment-grade or medium quality if it is
rated investment-grade or medium quality, respectively, by Moody's, S&P,
Duff & Phelps, or Fitch, or is unrated but judged by FMR to be of
equivalent quality.
High Income Municipal does not currently intend to invest more than 10% of
its total assets in bonds that are in default.
U.S. GOVERNMENT SECURITIES ar e high-qu ality debt instruments issued
or guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. Government. Not all U.S. Government securities are backed by the
full faith and credit of the United States. For example, U.S. Government
securities such as those issued by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. Other U.S.
Government securities such as those issued by the Federal Farm Credit Banks
Funding Corporation are supported only by the credit of the entity that
issued them.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. The value of some or all municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders. A fund may own a municipal security directly
or through a participation interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of
credit and liquidity enhancement, including letters of credit, guarantees,
puts and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These arrangements
expose a fund to the credit risk of the entity providing the credit or
liquidity support. Changes in the credit quality of the provider could
affect the value of the security and the fund's share price.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of California or New York or its counties, municipalities,
authorities, or other subdivisions. The ability of issuers to repay their
debt can be affected by many factors that impact the economic vitality of
either the state or a region within the state.
Other state municipal securities include obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, Puerto Rico, and their
political subdivisions and public corporations. The economy of Puerto Rico
is closely linked to the U.S. economy and will be affected by the strength
of the U.S. dollar, interest rates, the price stability of oil imports, and
the continued existence of favorable tax incentives.
OTHER INSTRUMENTS may include securities of closed-end investment
companies.
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 the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issuers of foreign debt securities may be unwilling to pay
interest and repay principal when due, a nd may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in developing countries, more
volatile than U.S. investments.
ASSET-BACKED SECURITIES include interests in pools of the following:
purchase contracts, financing leases, or sales agreements entered into by
municipalities; lower-rated debt securities; or consumer loans. The value
of these securities may be significantly affected by changes in interest
rates, the market's perception of issuers, and the creditworthiness of the
parties involved. Certain asset-backed securities rely on continued
payments by a municipality, and may also be subject to prepayment risk.
MORTGAGE SECURITIES are interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. government or by private entities.
The price of a mortgage security may be significantly affected by changes
in interest rates. Some mortgage securities may have a structure that makes
their reaction to interest rates and other factors difficult to predict,
making their price highly volatile. Also, mortgage securities, especially
stripped mortgage-backed securities, are subject to prepayment risk.
During periods of declining interest rates, borrowers are more likely to
prepay their mortgages. Prepayments can limit price appreciation and
result in proceeds generally being reinvested in lower-yielding securities.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
STRIPPED SECURITIES are the separate income or principal compo nents of a
debt security. The risks associated with stripped securities are similar to
those of other debt securities, although stripped securities may be more
volatile, and the value of certain types of stripped securities may move in
the same direction as interest rates. U.S. Treasury securities that have
been stripped by a Federal Reserve Bank are obligations issued by the U.S.
Treasu ry.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
temporarily transfers possession of a portfolio instrument to another party
in return for cash. This could increase the risk of fluctuation in the
fund's yield or in the market value of its assets.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or another party. In exchange for this benefit, a fund may accept a
lower intere st rate. Demand features and standby commitments are types
of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
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 changes in 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.
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, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that the fund supply additional cash to a borrower on demand.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to a fund.
RESTRICTIONS. Each fund (except High Yield and Strategic Income) may not
purchase a security if, as a result, more than 10% of its assets would be
invested in illiquid securities.
High Yield and Strategic Income may not purchase a security if, as a
result, more than 15% of its assets would be invested in illiquid
securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading practices
in which payment and delivery for the securities take place at a future
date. The market value of a security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities, in a
pooled account of repurchase agreements, and in a money market fund
available only to funds and accounts managed by FMR or its affiliates,
whose goal is to seek a high level of current income (exempt from federal
income tax in the case of a tax-free money market fund) while maintaining a
stable $1.00 share price. A major change in interest rates or a default on
the money market fund's investments could cause its share price to change.
RESTRICTIONS: California Municipal Income and New York Municipal Income do
not currently intend to invest in a money market fund. California Municipal
Income, New York Municipal Income, High Income Municipal, Municipal Bond,
Intermediate Municipal Income, and Short-Intermediate Municipal Income do
not currently intend to invest in a pooled account of repurchase
agreements. Equity Growth and Strategic Opportunities will not invest in a
money market fund.
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 or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
changes in the market value of a single issuer or industry.
RESTRICTIONS: With respect to 100% of its total assets each of Equity
Growth and Strategic Opportunities may not purchase a security if, as a
result, more than 5% would be invested in the securities of any one issuer.
This limitation does not apply to U.S. Government securities.
With respect to 75% of its total assets each of TechnoQuant Growth,
Mid Cap, Growth Opportunitie s, Large Cap, Growth & Income, Equity
Income, Balanced, High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond and Intermediate Municipal Income may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any one issuer. This limitation does not apply to U.S. Government
securities or, for TechnoQuant Growth and Growth & Income, investment
company securities.
Strategic Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income are considered non-diversified.
Generally, to meet federal tax requirements at the close of each quarter,
each 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. This limitation does not apply to
U.S. Government securities.
A fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government securities.
Each of High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income may invest more than 25% of its total assets
in tax-free securities that finance similar types of projects.
BORROWING. Each 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 a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets; however, Government Investment, High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income do not
currently intend to make loans.
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.
TECHNOQUANT GROWTH FUND seeks capital growth.
MID CAP FUND seeks long-term growth of capital.
EQUITY GROWTH FUND seeks to achieve capital appreciation by investing
primarily in common and preferred stock and securities convertible into the
common stock of companies with above-average growth characteristics .
Under normal conditions, the fund will invest at least 65% of its assets in
common and preferred stock.
GROWTH OPPORTUNITIES FUND seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
STRATEGIC OPPORTUNITIES FUND seeks capital appreciation by investing
primarily in securities of companies believed by FMR to involve a "special
situation." Under normal conditions, the fund will invest at least 65% of
its total assets in companies involving a special situation. FMR intends to
invest primarily in common stocks and securities that are convertible into
common stocks; however, it also may invest in debt securities of all types
and quality if FMR believes that investing in these securities will result
in capital appreciation. The fund may invest up to 30% of its assets in
foreign investments.
LARGE CAP FUND seeks long-term growth of capital.
GROWTH & INCOME FUND seeks high total return through a combination of
current income and capital appreciation.
EQUITY INCOME FUND seeks a yield from dividend and interest income which
exceeds the composite dividend yield on securities comprising the S&P 500.
In addition, consistent with the primary objective of obtaining dividend
and interest income, the fund will consider the potential for achieving
capital appreciation.
BALANCED FUND seeks both income and gr owth of capital by
investing in a diversified portfolio of equity and fixed-income securities
with income, growth of income, and capital appreciation potential.
HIGH YIELD FUND seeks a combination of a high level of income and the
potential for capital gains by investing in a diversified portfolio
consisting primarily of high-yielding, fixed-income and zero coupon
securities, such as bonds, debentures and notes, convertible securities and
preferred stocks.
STRATEGIC INCOME FUND seeks a high level of current income by investing
primarily in debt securities. The fund may also seek capital appreciation.
MORTGAGE SECURITIES FUND s eeks high current income, consistent with
prudent investment risk, by investing primarily in mortgage-related
securities. When consistent with its goal, the fund may also consider the
potential for capital gain.
GOVERNMENT INVESTMENT FUND seeks a high level of current income by
investing primarily in obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.
INTERMEDIATE BOND FUND seeks to provide a high rate of income through
investment primarily in investment-grade fixed-income obligations.
SHORT FIXED-INCOME FUND seeks to obtain a high level of current income,
consistent with the preservation of capital, by investing primarily in a
broad range of investment-grade fixed-income securities. Where appropriate
the fund will take advantage of opportunities to realize capital
appreciation.
HIGH INCOME MUNICIPAL FUND seeks to provide a high current yield by
investing in a diversified portfolio of municipal obligations whose
interest is not included in gross income for purposes of calculating
federal income tax. The fund normally invests at least 80% of its net
assets in municipal obligations whose interest is free from federal income
tax.
MUNICIPAL BOND FUND seeks to provide h igh current income that is free
from federal income tax, consistent with preservation of capital, by
investing in investment-grade municipal securities under nor mal
conditions.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
INTERMEDIATE MUNICIPAL INCOME FUND seeks the highest level of income exempt
from federal income taxes that can be obtained consistent with the
preservation of capital. The fund normally invests at least 80% of its net
assets in securities whose interest is free from federal income tax.
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND seeks as high a level of current
income, exempt from federal income tax, as is consistent with preservation
of capital. The fund normally invests at least 80% of its net assets in
municipal obligations whose interest is free from federal income tax.
CALIFORNIA MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and California state personal income tax by
investing primarily in municipal securities. The fund normally invests at
least 80% of its net assets in securities whose interest is free from
federal and California income taxes.
NEW YORK MUNICIPAL INCOME FUND seeks a high level of current income free
from federal income tax and New York State and City personal income taxes
by investing primarily in municipal securities. The fund normally invests
at least 80% of its net assets in securities whose interest is free from
federal and New York State and City personal income taxes.
With respect to 75% of its total assets each of TechnoQuant Growth, Mid
Cap, Growth Opportunities, Large Cap, Growth & Income, Equity Income,
Balanced, High Yield, Mortgage Securities, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Municipal
Bond , and Intermediate Municipal Income may not purchase a security if,
as a result, more than 5% would be invested in the securities of any one
issuer. With respect to 100% of its total assets, each of Equity Growth and
Strategic Opportunities may not purchase a security if, as a result, more
than 5% would be invested in the securities of any one issuer. This
limitation does not apply to U.S. Government securities or, for TechnoQuant
Growth and Growth & Income, investment company securities.
With respect to 75% of its total assets, each of TechnoQuant Growth, Mid
C ap, Growth Opportunities, Large Cap, Growth & In come, Equity
Income, Balanced, High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, M unicipal Bond and Intermediate Municipal Income may not
purchase more than 10% of the outstanding voting securities of a single
issuer. With respect to 100% of its total assets, each of Equity Growth and
Strategic Opportunities may not purchase more than 10% of the outstanding
voting securities of a single issuer. This limitation does not apply to
U.S. Government securities or, for TechnoQuant Growth and Growth & Income,
investment company securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government securities.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each class's assets are reflected in that
class's share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain of the funds. Each fund also
pays OTHER EXPENSES, which are explained on page 26.
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 a 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
The management fee is calculated and paid to FMR every month. Equity Income
pays FMR a monthly management fee at an annual rate of 0.50% of its
average net assets. The fee for TechnoQuant Growth, Mid Cap, Equity
Growth, Large Cap, Growth & Income, Balanced, High Y ield, Strategic
Income, Government Investment, Intermediate Bond, Short Fixed-Income, High
Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income is calculated by adding a group fee rate to an
individual fee rate, and multiplying the result by the fund's average net
assets. The fee for Growth Opportunities and Strategic Opportunities, is
determined by taking a basic fee and then applying a performance
adjustment. The performance adjustment either increases or decreases the
management fee, depending on how well each fund has performed relative to
the S&P 500.
The group fee rate is based on the average net assets of all the mutual
funds advised by F MR. For TechnoQuant Growth, Mid Cap, Equity Growth,
Growth Opportunities, Strategic Opportunities, Large Cap , Growth &
Income and Balanced, this rate cannot rise above 0.52%, and it drops as
total assets under management increase. For High Yield, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income, this rate cannot rise above 0.37%, and it drops as
total assets under management increase. The basic fee rate is calculated
monthly by adding a group fee rate to an individual fund fee rate, and
multiplying the result by each fund's average net assets.
The performance adjustment rate is calculated monthly by comparing the
performance of Growth Opportunities and Strategic Opportunities to that of
the S&P 500 over the most recent 36-month period. The difference is
translated into a dollar amount that is added to or subtracted from the
basic fee. The maximum annualized performance adjustment rate is " 0.20%.
Investment performance will be measured separately for each class of shares
offered by Growth Opportunities and Strategic Opportunities and the least
of the results obtained will be used in calculating the performance
adjustment.
The following table states the management fee for each fund for its most
recent fiscal year end.
Group Individual Total
Fee Rate Fund Fee Manageme
Rate nt Fee
TechnoQuant Growth [A] 0.30%
Mid Cap [A] 0.30%
Equity Growth 0.30%
[B]
Growth Opportunities [C] 0.30%
Strategic Opportunities [C] 0.30%
Large Cap [A] 0.30%
Growth & Income [A] 0.20%
Equity Income n/a n/a 0.50%
Balanced 0.15%[D
]
High Yield 0.45%
Strategic Income 0.45%
Mortgage Securities 0.30%
Government Investment 0.30%
Intermediate Bond 0.30%
Short Fixed-Income 0.30%
High Income Municipal Fund 0.20%
Municipal Bond Fund 0.25%
Intermediate Municipal Income 0.25%
Short-Intermediate Municipal Income 0.25%
California Municipal Income [A] 0.25%
New York Municipal Income 0.25%
[A] ESTIMATED
[B] EFFECTIVE AUGUST 1, 1994, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.33% TO 0.30%. IF THIS REDUCTION WAS NOT IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN 0.64%.
[C] THE BASIC FEE RATE FOR THE FISCAL YEAR ENDED 1996 WAS __% FOR GROWTH
OPPORTUNITIES AND __% FOR STRATEGIC OPPORTUNITIES.
[D]EFFECTIVE AUGUST 1, 1996, FMR VOLUNTARILY AGREED TO REDUCE THE FUND'S
INDIVIDUAL FUND FEE RATE FROM 0.20% TO 0.15%. IF THIS REDUCTION WAS NOT IN
EFFECT, THE TOTAL FEE WOULD HAVE BEEN __%.
FMR HAS SUB-ADVISORY AGREEMENTS with four affiliates: FMR U.K., FMR Far
East, FIJ, and FIIA. FIIA in turn has a sub-advisory agreement with FIIAL
U.K. These sub-advisers are compensated for providing FMR with investment
research and advice on issuers based outside the United States. FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively, of the
costs of providing these services. FMR pays FIJ and FIIA a fee equal to 30%
of its management fee rate associated with investments for which the
sub-adviser provided investment advice.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K., FMR Far East, FIJ, and FIIA a fee equal to 50%
of its management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis. FIIA pays FIIAL U.K. a fee
equal to 110% of the cost of providing these services.
For the fiscal year ended 1996, FMR, on behalf of each fund with a
sub-advisory agreement paid FMR U.K., FMR Far East, FIJ and FIIA fees equal
to ___%, of each fund's average net assets.
OTHER EXPENSES
While the management fee is a significant component of each fund's annual
operating costs, the funds have other expenses as well.
FIIOC performs transfer agency, dividend disbursing and share holder
servicing functions for the Institutional Class of TechnoQuant Growth, Mid
Cap, Equity Growth, Growth Opportunities, Strategic Opportunities, Large
Cap, Growth & Income, Equity Income, Balanced, High Yield, Strategic
Income, Government Investment, Mortgage Securities, I ntermediate Bond,
and Short Fixed-Income (the Taxable Funds). Fidelity Service Co. (FSC)
calculates the NAV and dividends for the Institutional Class of the Taxable
Funds, and maintains the general accounting records and administers the
securities lending program for the Taxable Funds.
For th e fiscal year ended 1996, transfer agent and pricing and
bookkeeping fees paid (as a percentage of average net assets) amounted to
the following. The amounts disclosed are before reimbursements, if any.
Each Fund
Institutiona to FSC
l Class to
FIIOC
TechnoQuant Growth
Mid Cap
Growth Opportunities
Strategic Opportunities
Large Cap
Growth & Income
Equity Income
Balanced
High Yield
Strategic Income
Government Investment
Mortgage Securities
Intermediate Bond
Short Fixed-Income
UMB has entered into a sub-arrangement with FIIOC. FIIOC performs transfer
agency, dividend disbursing and shareholder services for t he
Institutional Class of High Income Municipal, Municipal Bond,
Inte rmediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income (the Municipal
Funds). UMB has also entered into a sub-arrangement with FSC. FSC
calculates the NAV and dividends for the Institutional Class of the
Municipal Funds, and maintains the general accounting records for each of
the Municipal Funds. All of the fees are paid to FIIOC and FSC by UMB,
which is reimbursed by the Institutional Class or the fund, as appropriate,
for such payments.
For the fiscal year ended 1996, transfer agent and pricing and bookkeeping
fees paid (as a percentage of average net assets) amounted to the
following. The amounts disclosed are before reimbursements, if any.
UMB to UMB to
FIIOC on FSC on
behalf of behalf of
Institutiona each fund
l Class
High Income Municipal
Municipal Bond [A]
Intermediate Municipal Income
Short-Intermediate Municipal Income
California Municipal Income
New York Municipal Income
[A] PROJECTIONS ARE BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
The Institutional Class of each fund has adopted a DISTRIBUTION AND SERVICE
PLAN. Each plan recognizes that FMR may use its management fee revenues, as
well as its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of Institutional
Class shares. FDC directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of, or
provide shareholder support services for, Institutional Class shares. The
Board of Trustees of each fund has authorized such payments.
Each fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity. A broker-dealer may use a
portion of the commissions paid by a fund to reduce that fund's custodian
or transfer agent fees.
The portfolio turnover rate for TechnoQuant Growth is projected to
exceed 200% for its first fiscal period ending November 30, 1997. The
portfolio turnover rate for Growth & Income is not expected to 200% for
i ts first fiscal period ending November 30, 1997.
The portfolio turnover rate for the fiscal year ended 1996 was __% for
[Fund Names]. 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.
YOUR ACCOUNT
TYPES OF ACCOUNTS
When you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. Read your investment professional's program materials in
con junction with this prospectus for additional service features or
fees that may apply. Certain features of the funds, such as minimum initial
or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed on the right.
The account guidelines that follow may not apply to certain funds or to
certain retirement accounts. For instance, municipal funds are not
available for purchase in r etirement accounts. If you are investing
through a retirement account or if your employer offers a fund through a
retirement program, you may be subject to additional fees. For more
information, please refer to your program materials, contact your employer,
or call your retirement benefits number or your investment professional
directly, as appropriate.
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 (THE FOLLOWING OPTIONS ARE AVAILABLE ONLY FOR
TAXABLE FUNDS)
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.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal
age under 701/2 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(solid bullet) 401(K) PLANS 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.
(solid bullet) MONEY PURCHASE/PROFIT SHARING PLANS (KEOGH PLANS) are
tax-deferred pension accounts designated for employees of unincorporated
businesses or for persons who are self-employed.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your investment professional.
HOW TO BUY SHARES
INSTITUTIONAL CLASS'S SHARE PRICE, called NAV, is calculated every business
day. Institutional Class shares are sold without a sales charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted. NAV is normally calculated at 4:00 p.m. Eastern
time.
It is the responsibility of your investment professional to transmit your
order to buy shares to Fidelity before the close of business on the day you
place your order.
The transfer agent must receive payment within three business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
Share certificates are not available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described below. If there is no account application
accompanying this prospectus, call your investment professional or
1-800-843-3001.
If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
investment professional for more information and a retirement account
application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $ 2,500
For Fidelity Advisor retirement accounts $ 500
Through regular investment plans* $ 1,000
TO ADD TO AN ACCOUNT $ 250
For Fidelity Advisor retirement accounts $ 100
Through regular investment plans* $ 100
MINIMUM BALANCE $1,000
For Fidelity Advisor retirement accounts NONE
*An account may be opened with a minimum of $1,000 provided that a regular
payment plan is established at the time the account is opened. For more
information about regular investment plans, please refer to "Investor
Services", on page 33.
For further information on opening an account, please consult your
investment professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE (small solid bullet) Exchange from the
same class of another (small solid bullet) Exchange from the same class of another
1-800-843-3001
OR YOUR Fidelity Advisor fund or from another Fidelity Advisor fund or from another
INVESTMENT
PROFESSIONAL Fidelity fund account with the same Fidelity fund account with the same
registration, including name, address, and registration, including name, address, and
taxpayer ID number. taxpayer ID number.
Mail
(mail_graphic) (small solid bullet) Complete and sign the
account application. (small solid bullet) Make your check payable to the complete
Make your check payable to the complete name of the fund of your choice and note
name of the fund of your choice and note the applicable class. Indicate your fund
the applicable class. Mail to the address account number on your check and mail to
indicated on the application. the address printed on your account
statement.
(small solid bullet) Exchange by mail: call 1-800-843-3001 or
your investment professional for instructions.
In Person
(hand_graphic) (small solid bullet) Bring your account
application and check to (small solid bullet) Bring your check to your investment
your investment professional. professional.
Wire
(wire_graphic) (small solid bullet) Call 1-800-843-3001 to set
up your account (small solid bullet) Not available for retirement accounts.
and to arrange a wire transaction. Not (small solid bullet) Wire to:
available for retirement accounts. Banker's Trust Co.
(small solid bullet) Wire to: Routing # 021001033
Banker's Trust Co. Fidelity DART Depository
Routing # 021001033 Account # 00159759
Fidelity DART Depository FBO: (account name)
Account #00159759 (account number)
FBO: (account name)
(account number) specify the complete name of the fund of
your choice, note the applicable class and
Specify the complete name of the fund of include your account number and your
your choice, note the applicable class and name.
include your new account number and your
name.
Automatically
(automatic_
graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Advisor Systematic
Investment Program. Sign up for this
service when opening your account, or
call your investment professional to begin
the program.
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted. NAV is
normally calculated at 4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to sell shares to Fidelity before the close of business on the day
you place your order.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY ADVISOR RETIREMENT ACCOUNT, your request must
be made in writing, except for exchanges to shares of the same class of
another Fidelity Advisor fund or shares of other Fidelity funds, which can
be requested by phone or in writing.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR ACCOUNT SHARES, leave at least
$1,000 worth of shares in the account to keep it open (account minimums do
not apply to retirement accounts).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration,
(small solid bullet) You wish to set-up the bank wire feature, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments
P.O. Box 770002
Cincinnati, OH 45277-0081
Unless otherwise instructed, the transfer agent will send a check to the
record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PHONE All account types except retirement (small solid bullet) Maximum check request: $100,000.
1-800-843-3001 OR YOUR
INVESTMENT PROFESSIONAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(phone_graphic) All account types (small solid bullet) You may exchange to the same class of other
Fidelity Advisor funds or to other Fidelity funds if
both accounts are registered with the same
name(s), address, and taxpayer ID number.
Mail or in Person
(mail_graphic)
(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of instruction must be signed by all
Sole Proprietorship, UGMA, UTMA persons required to sign for transactions, exactly
as their names appear on the account.
Retirement account (small solid bullet) The account owner should complete a retirement
distribution form. Call 1-800-843-3001 or your
investment professional to request one.
Trust (small solid bullet) The trustee must sign the letter indicating capacity
as trustee. If the trustee's name is not in the
account registration, provide a copy of the trust
document certified within the last 60 days.
Business or Organization (small solid bullet) At least one person authorized by corporate
resolution to act on the account must sign the
letter.
Executor, Administrator, (small solid bullet) Call 1-800-843-3001 or your investment
Conservator/Guardian professional for instructions.
Wire
(wire_graphic) All account types except retirement (small solid bullet) You must sign up for the wire feature before using
it. To verify that it is in place, call 1-800-843-3001.
Minimum wire: $1,000.
(small solid bullet) Your wire redemption request must be received
by the transfer agent before 4:00 p.m. Eastern
time for money to be wired on the next business
day.
</TABLE>
INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction that
affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed, even if you have more than one account in the
fund. Call your investment professional if you need additional copies of
financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds or shares of
other Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page 37.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Accounts with a value of $10,000 or
more in Institutional Class are eligible for this program.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for retirement, a home, educational expenses, and other
long-term financial goals. Certain restrictions apply for retirement
accounts. Call your investment professional for more information.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate section on the
$1,000 $100 quarterly, application.
or semi-annually (small solid bullet) For existing accounts, call your investment professional for
an application.
(small solid bullet) To change the amount or frequency of your investment, contact
your investment professional directly, or call 1-800-843-3001. Call
at least 10 business days prior to your next scheduled investment
date.
</TABLE>
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. Each fund pays capital gains, if any, in
December and may pay additional capital gains after the close of its
fiscal year. Normally, dividends for Growth & Income, Equity Income, and
Balanced are distributed in March, June, September and December; dividends
for TechnoQuant Growth, Mid Cap, Equity Growth, Growth Opportunities,
Strategic Opportunities, and Large Cap are distributed in December;
dividends for Strategic Income, High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate
Municipal Income, California Municipal Income, and New York Municipal
Income are declared daily and paid monthly.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The funds offer four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS PROGRAM. Your dividend distributions will be
automatically invested in the same class of shares of another identically
registered Fidelity Advisor Fund. You will be sent a check for your capital
gain distributions or your capital gain distributions will automatically be
reinvested in additional shares of the same class of the fund.
If you select distribution option 2, 3, or 4 and the U.S. Postal Service
cannot deliver your checks, or if your checks remain uncashed for six
months, those checks will be reinvested in your account at the current
NAV and your election may be converted to the Reinvestment Option. To
change your distribution option, call your investment professional directly
or call 1-800-843-3001.
For retirement accounts, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
When each of TechnoQuant Growth, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income,
E quity Income and Balanced deducts a distribution from its NAV, the
reinvestment price is the applicable fund's NAV at the close of business
that day. Dividends from High Yield, Strategic Income, Mortgage Securities,
Government Investment, Intermediate Bond, Short Fixed-Income, High Income
Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income and New
York Municipal Income will be reinvested at the applicable class's NAV on
the last day of the month. Capital gain distributions from High Yield,
Strategic Income, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income
and New York Municipal Income will be reinvested at the NAV as of the date
the applicable fund deducts the distributions from its NAV. Distribution
checks will be mailed within seven days, or longer for a December
ex-dividend date.
TAXES
As with any investment, you should consider how an investment in the funds
could affect you. Below are some of the funds' tax implications. If your
account is not a tax-deferred retirement account, be aware of these tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, California Municipal Income, and New York Municipal Income earn is
distributed to shareholders as income dividends. Interest that is federally
tax-free remains tax-free when it is distributed. Distributions from each
fund (except High Income Municipal, Municipal Bond, Intermediate Municipal
Income, Short-Intermediate Municipal Income, California Municipal Income,
and New York Municipal Income), however, are subject to federal income tax.
Each fund (except California Municipal Income and New York Municipal
Income) may also be subject to state or local taxes. If you live outside
the United States, your distributions from these funds could also be taxed
by the country in which you reside.
For federal tax purposes, income and short-term capital gain distributions
for each fund (except High Income Municipal, Municipal Bond, Intermediate
Municipal Income, Short-Intermediate Municipal Income, California Municipal
Income, and New York Municipal Income) are taxed as dividends; long-term
capital gain distributions are taxed as long-term capital gains.
However, for shareholders of High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income, gain on the
sale of tax-free bonds results in taxable distributions. Short-term capital
gains and a portion of the gain on bonds purchased at a discount are taxed
as dividends; long-term capital gain distributions, if any, are taxed as
long-term capital gains.
Mutual fund dividends from U.S. Government securities are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some types of securities, such as repurchase agreements
and some agency-backed securities, may not qualify for the benefit. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on the
tax laws in your state.
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.
Every January, Fidelity will send you and the IRS a statement showing the
taxable distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each of High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income and New York Municipal Income may invest up to
100% of its assets in these securities. Individuals who are subject to the
tax must report this interest on their tax returns.
A portion of the dividends from High Income Municipal, Municipal Bond,
Intermediate Municipal Income, Short-Intermediate Municipal Income,
California Municipal Income, and New York Municipal Income may be free from
state or local taxes. Income from investments in your state are often
tax-free to you. Each year, the transfer agent will send you a breakdown of
each of these funds' income from each state to help you calculate your
taxes.
To the extent that California Municipal Income's income dividends are
derived from interest on California state tax-free investments, they will
be free from California state personal income tax. Distributions derived
from obligations that are not California state tax-free obligations, as
well as distributions from short or long-term capital gains, are subject to
California state personal income tax. Corporate taxpayers should note that
the fund's income dividends and other distributions are not exempt from
California state franchise or corporate income taxes.
To the extent that New York Municipal Income's income dividends are derived
from New York state-tax free investments, they will be free from New York
State and City personal income taxes.
During the fiscal year ended 1996, __% of the income dividends from each of
California Municipal Income and New York Municipal Income was free from
federal income tax and __% of New York Municipal Income Fund's income
dividends was free from New York taxes. During the fiscal year ended 1996,
___% of [FUNDS TO BE DETERMINED], income dividends were subject to the
federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of a fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares 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.
CURRENCY CONSIDERATIONS. For funds that can invest in foreign securities,
if a fund's dividends exceed its taxable income in any year, which is
sometimes the result of currency-related losses, all or a portion of the
fund's dividends may be treated as a return of capital to shareholders for
tax purposes. To minimize the risk of a return of capital, each fund may
adjust its dividends to take currency fluctuations into account, which may
cause the dividends to vary. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain
or a lower reported capital loss when you sell your shares. The statement
you receive in January will specify if any distributions included a return
of capital.
Undistributed net gains from currency transactions, if any, will generally
be distributed as a separate dividend in December.
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 funds, 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. Each class's NAV is normally calculated as of the close of
business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the
applicable fund's investments, cash, and other assets, subtracting that
class's pro rata share of the value of the applicable fund's liabilities,
subtracting the liabilities allocated to that class, and dividing the
result by the number of shares of that class that are outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
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. Short-term securities
with remaining maturities of sixty days or less for which quotations are
not readily available are valued on the basis of amortized cost. This
method minimizes the effect of changes in a security's market value. In
addition, if quotations are not readily available, or if the values
have been materially affected by events occurring after the closing of a
foreign market, assets are valued by a method that the Board of Trustees
believes accurately reflects fair value.
THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to
sell one share) of Institutional Class shares are its 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 and the transfer
agent 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 and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations, and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page 37. 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 shares will be purchased at the
next NAV 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) The funds do not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees a fund or the
transfer agent has incurred.
(small solid bullet) Other Purchases: For shares of High Yield, Strategic
Income, Government Investment, High Income Municipal, Municipal Bond,
California Municipal Income, New York Municipal Income, Intermediate Bond,
Intermediate Municipal Income, Short-Fixed Income, and Short-Intermediate
Municipal Income, you begin to earn dividends as of the first business day
following the day your funds are received.
(small solid bullet) Automated Purchase Orders: For shares of High Yield,
Strategic Income, Government Investment, High Income Municipal, Municipal
Bond, California Municipal Income, New York Municipal Income, Intermediate
Bond, Intermediate Municipal Income, Short-Fixed Income, and
Short-Intermediate Municipal Income, you begin to earn dividends as of the
day your funds are received.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next business
day, the order will be canceled and the financial institution will be
liable for any losses.
AUTOMATED PURCHASE ORDERS. Institutional Class shares can be purchased or
sold through investment professionals utilizing an automated order
placement and settlement system that guarantees payment for orders on a
specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order 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) Shares of High Yield, Strategic Income, Mortgage
Securities, Government Investment, Intermediate Bond, Short Fixed-Income,
High Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, California Municipal Income, and New
York Municipal Income will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $60.00 per shareholder. 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 a systematic investment program, certain (Network
Level I and III) accounts which are maintained through National Securities
Clearing Corporation (NSCC), or if total assets in Fidelity mutual funds
exceed $50,000. Eligibility for the $50,000 waiver is determined by
aggregating Fidelity mutual fund accounts (excluding contractual plans)
maintained (i) by FIIOC and (ii) through NSCC; provided those accounts are
registered under the same primary social security number.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be
given 30 days' notice to reestablish the minimum balance. If you do not
increase your balance, the transfer agent 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.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of investment professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to investment professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging your Institutional
Class shares for Institutional Class shares of other Fidelity Advisor funds
or for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund or class you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund or class, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you may have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, 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 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 a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify these exchange
privileges in the future.
APPENDIX A
DESCRIPTION OF MOODY'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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds 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;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds 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 issues
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. Those bonds in the Aa, A, Baa, Ba, and B groups
which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, Baa1, and B1.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
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 highest-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt 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 category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - The rating CC typically is applied to debt subordinated to senior debt
that 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 also will
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.
DESCRIPTION OF MOODY'S INVESTORS SERVICE MUNICIPAL 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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds 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 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;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds 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 issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
There are nine basic rating categories for long-term obligations. They
range from AAA (highest quality) to C (lowest quality). Those bonds within
the AA, A, BAA, BA and B categories that Moody's believes possess the
strongest credit attributes within those categories are designated by the
symbols AA1, A1, BAA1, BA1 and B1.
DESCRIPTION OF STANDARD & POOR'S MUNICIPAL 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 than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt 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 category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - 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.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do not
constitute an offer by the funds or by FDC to sell or to buy shares of the
funds to any person to whom it is unlawful to make such offer.
APPENDIX B
EQUITY GROWTH - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY GROWTH - INSTITUTIONAL CLASS
S&P 500
Lipper Growth Funds AverageB
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY GROWTH - INSTITUTIONAL
CLASS
MID CAP - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
MID CAP - INSTITUTIONAL CLASS
S&P Mid Cap 400
Lipper Mid Cap Funds AverageA
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MID CAP - INSTITUTIONAL CLASS
GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GROWTH OPPORTUNITIES - INSTITUTIONAL
CLASS
S&P 500
Lipper Growth Funds AverageB
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GROWTH OPPORTUNITIES -
INSTITUTIONAL CLASS
STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
STRATEGIC OPPORTUNITIES -
INSTITUTIONAL CLASS
S&P 500
Lipper Capital Appreciation FundsC
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC OPPORTUNITIES -
INSTITUTIONAL CLASS
LARGE CAP - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1996
LARGE CAP - INSTITUTIONAL CLASS
S&P 500
Lipper Growth Funds AverageB
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) LARGE CAP - INSTITUTIONAL
CLASS
EQUITY INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
EQUITY INCOME - INSTITUTIONAL CLASS
S&P 500
Lipper Equity Income Funds AverageD
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) EQUITY INCOME - INSTITUTIONAL
CLASS
BALANCED - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
BALANCED - INSTITUTIONAL CLASS
S&P 500
Lipper Balanced Funds AverageE
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) BALANCED - INSTITUTIONAL CLASS
HIGH YIELD - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH YIELD - INSTITUTIONAL CLASS
Merrill Lynch High Yield Master Index
Lipper High Current Yield Funds
AverageF
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH YIELD - INSTITUTIONAL
CLASS
STRATEGIC INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
STRATEGIC INCOME - INSTITUTIONAL
CLASS
Merrill Lynch High Yield Master Index
Lipper General Bond Funds AverageG
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) STRATEGIC INCOME -
INSTITUTIONAL CLASS
MORTGAGE SECURITIES - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MORTGAGE SECURITIES - INSTITUTIONAL
CLASS
Salomon Brothers Mortgage Index
Lipper U.S. Mortgage Funds AverageH
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MORTGAGE SECURITIES -
INSTITUTIONAL CLASS
GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
GOVERNMENT INVESTMENT -
INSTITUTIONAL CLASS
Salomon Brothers Treasury/Agency
Index
Lipper General U.S. Government
Funds AverageJ
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) GOVERNMENT INVESTMENT -
INSTITUTIONAL CLASS
INTERMEDIATE BOND - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE BOND - INSTITUTIONAL
CLASS
Lehman Brothers Intermediate
Government/Corporate Bond Index
Lipper Intermediate Investment Grade
Debt Funds AverageJ
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE BOND -
INSTITUTIONAL CLASS
SHORT FIXED-INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
SHORT FIXED-INCOME - INSTITUTIONAL
CLASS
Lehman Brothers 1-3 Year
Government/Corporate Bond Index
Lipper Short Investment Grade Bond
Funds AverageK
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT FIXED-INCOME -
INSTITUTIONAL CLASS
HIGH INCOME MUNICIPAL - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1988 1989 1990 1991 1992 1993 1994 1995 1996
HIGH INCOME MUNICIPAL -
INSTITUTIONAL CLASS
Lipper High Yield Municipal Bond
Funds AverageL
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) HIGH INCOME MUNICIPAL -
INSTITUTIONAL CLASS
MUNICIPAL BOND- INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MUNICIPAL BOND - INSTITUTIONAL CLASS
Lipper General Municipal Debt Funds
AverageM
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) MUNICIPAL BOND- INSTITUTIONAL
CLASS
INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
INTERMEDIATE MUNICIPAL INCOME -
INSTITUTIONAL CLASS
Lipper Intermediate Municipal Debt
Funds AverageN
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) INTERMEDIATE MUNICIPAL
INCOME - INSTITUTIONAL CLASS
SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
SHORT-INTERMEDIATE MUNICIPAL
INCOME - INSTITUTIONAL CLASS
Lipper Short- Intermediate Municipal
Debt Funds AverageO
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) SHORT-INTERMEDIATE MUNICIPAL
INCOME - INSTITUTIONAL CLASS
CALIFORNIA MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
CALIFORNIA MUNICIPAL INCOME -
INSTITUTIONAL CLASS
Lipper California Municipal Debt
Funds
AverageP
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) CALIFORNIA YORK MUNICIPAL
INCOME - INSTITUTIONAL CLASS
NEW YORK MUNICIPAL INCOME - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1995 1996
NEW YORK MUNICIPAL INCOME -
INSTITUTIONAL CLASS
Lipper New York Municipal Debt
Funds
AverageQ
Consumer Price Index
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 2, Col: 1, Value: nil
Row: 3, Col: 1, Value: nil
Row: 4, Col: 1, Value: nil
Row: 5, Col: 1, Value: nil
Row: 6, Col: 1, Value: nil
Row: 7, Col: 1, Value: nil
Row: 8, Col: 1, Value: nil
Row: 9, Col: 1, Value: nil
Row: 10, Col: 1, Value: nil
(LARGE SOLID BOX) NEW YORK MUNICIPAL INCOME -
INSTITUTIONAL CLASS
+ INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES FOR GROWTH
OPPORTUNITIES, BALANCED, HIGH YIELD, STRATEGIC INCOME, GOVERNMENT
INVESTMENT, SHORT FIXED-INCOME, HIGH INCOME MUNICIPAL, AND
SHORT-INTERMEDIATE MUNICIPAL INCOME TOOK PLACE ON JULY 3, 1995, AND DO NOT
BEAR A SALES LOAD OR 12B-1 FEE. RETURNS PRIOR TO JULY 3, 1995, ARE THOSE OF
CLASS T SHARES, THE ORIGINAL CLASS OF THESE FUNDS AND INCLUDE A CLASS T
12B-1 FEE (AT A THEN CURRENTLY APPLICABLE RATE OF 0.65% FOR GROWTH
OPPORTUNITIES AND BALANCED, 0.25% FOR HIGH YIELD, STRATEGIC INCOME,
GOVERNMENT INVESTMENT, AND HIGH INCOME MUNICIPAL, AND 0.15% FOR SHORT
FIXED-INCOME AND SHORT-INTERMEDIATE MUNICIPAL INCOME). INITIAL OFFERING OF
INSTITUTIONAL CLASS SHARES FOR STRATEGIC OPPORTUNITIES TOOK PLACE ON JULY
3, 1995. INSTITUTIONAL CLASS SHARES DO NOT BEAR A SALES LOAD OR 12B-1 FEE.
RETURNS PRIOR TO JULY 3, 1995, ARE THOSE OF CLASS T SHARES AND INCLUDE A
THEN CURRENTLY APPLICABLE CLASS T 12B-1 FEE OF 0.65%. RETURNS PRIOR TO
AUGUST 20, 1986, ARE THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND
WHICH DOES NOT BEAR A 12B-1 FEE. INITIAL OFFERING OF INSTITUTIONAL CLASS
SHARES OF MUNICIPAL BOND TOOK PLACE ON JULY 2, 1996. RETURNS PRIOR TO JULY
2, 1996, ARE THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND WHICH
DOES NOT BEAR A 12B-1 FEE. INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES
OF MORTGAGE SECURITIES IS SCHEDULED TO TAKE PLACE ON OR ABOUT FEBRUARY 28,
1997. RETURNS PRIOR TO THE INITIAL OFFERING DATE ARE THOSE OF THE INITIAL
CLASS, THE ORIGINAL CLASS OF THE FUND WHICH DOES NOT BEAR A 12-1 FEE.
[A] THE LIPPER MID CAP FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[B] THE LIPPER GROWTH FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER___MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[C] THE LIPPER CAPITAL APPRECIATION FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[D] THE LIPPER EQUITY INCOME FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[E] THE LIPPER BALANCED FUNDS AVERAGE CURRENTLY REFLECTS THE PERFORMANCE OF
OVER___MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[F] THE LIPPER HIGH CURRENT YIELD FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[G] THE LIPPER GENERAL BOND FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[H] THE LIPPER U.S. MORTGAGE FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[I] THE LIPPER GENERAL U.S. GOVERNMENT BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[J] THE LIPPER INTERMEDIATE INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY
REFLECTS THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[K] THE LIPPER SHORT INVESTMENT GRADE BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[L] THE LIPPER HIGH YIELD MUNICIPAL BOND FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[M] THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[N] THE LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[O] THE LIPPER SHORT MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[P] THE LIPPER CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS
THE PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
[Q] THE LIPPER NEW YORK MUNICIPAL DEBT FUNDS AVERAGE CURRENTLY REFLECTS THE
PERFORMANCE OF OVER ___ MUTUAL FUNDS WITH SIMILAR OBJECTIVES.
FIDELITY ADVISOR FUNDS:
CLASS A, CLASS T, CLASS B, INSTITUTIONAL CLASS, AND INITIAL CLASS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10.................................. Cover Page
..
11.................................. Cover Page
..
12.................................. Description of the Trust
..
13 Investment Policies and Limitations
a-c..............................
Portfolio Transactions
d.................................
14 Trustees and Officers
a-c..............................
15 a-c Trustees and Officers
.............................
16 a FMR; Portfolio Transactions
i..............................
Trustees and Officers
ii............................
Management Contracts
iii...........................
Management Contracts
b.................................
c, Contracts with FMR Affiliates
d.............................
Management Contracts
e.................................
Distribution and Service Plans
f.................................
*
g.................................
Description of the Trust
h.................................
Contracts with FMR Affiliates
i.................................
17 Portfolio Transactions
a-d.............................
e............................. *
18 Description of the Trust
a.................................
*
b.................................
19 Additional Purchase, Exchange and Redemption
a................................. Information
Valuation; Additional Purchase, Exchange and
b................................. Redemption Information
*
c.................................
20.................................. Distributions and Taxes
..
21 a, Contracts with FMR Affiliates; Distribution and
b............................. Service Plans
*
c.................................
22 a *
.............................
b Performance
................................
23.................................. Financial Statements
..
</TABLE>
* Not Applicable
FIDELITY ADVISOR FUNDS
CLASS A, CLASS T, CLASS B, INSTITUTIONAL CLASS, AND INITIAL CLASS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1997
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectuses
(dated February 28, 1997) for Class A, Class T, and Class B, Institutional
Class, and Initial Class shares. Initial Class shares are only available to
current Initial Class shareholders. Please retain this document for future
reference. The funds' financial statements and financial highlights,
included in their respective Annual Reports for the most recent fiscal
period, are incorporated herein by reference. To obtain an additional
copy of this SAI, a Prospectus or any Annual Report, please call
Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts 02109 or your investment professional.
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Considerations Affecting Canada 53
Special Considerations Affecting Latin America 54
Special Considerations Affecting Japan, the Pacific Basin, and Southeast Asia 55
Special Considerations Affecting Europe 58
Special Considerations Affecting Africa 60
Special Considerations Affecting New York
Special Considerations Affecting California
Special Considerations Affecting Puerto Rico
Portfolio Transactions
Valuation
Performance
Additional Purchase, Exchange, and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers 153
Management Contracts 158
Contracts with FMR Affiliates 174
Distribution and Service Plans 179
Description of the Trusts 184
Financial Statements 187
Appendix 187
</TABLE>
ACOM-ptb-0297
For more complete information on any Fidelity mutual fund, including
charges and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money.
GROWTH FUNDS
Fidelity Advisor TechnoQuantTM Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund (formerly Fidelity Advisor Income &
Growth Fund)
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate
Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
Fidelity Advisor California Municipal Income Fund
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
(FMR U.K.)
Fidelity Management & Research (Far East) Inc.
(FMR Far East)
Fidelity International Investment Advisors (FIIA)
Fidelity International Investment Advisors (U.K.)
Limited (FIIAL U.K.)
Fidelity Investments Japan Limited (FIJ)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENTS
Fidelity Investments Institutional Operations Company (FIIOC) (Class A,
Class T, Class B, and Institutional Class - Taxable Funds)
UMB Bank, n.a. (UMB) (Class A, Class T, Class B, Institutional Class, and
Initial Class - Municipal Funds)
Fidelity Service Co. (FSC) (Initial Class - Taxable)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets or other circumstances will not be considered when determining
whether the investment complies with a fund's investment policies and
limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 (1940 Act)) of the fund.
However, except for the fundamental investment limitations listed below and
the policies restated in the "Fundamental Policies" paragraph on page , the
investment policies and limitations described in this SAI are not
fundamental and may be changed without shareholder approval.
TECHNOQUANTTM GROWTH FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to 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 (iv)
would exceed 10% of the fund's net assets.
(vi) 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.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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 the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
45.
OVERSEAS FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than obligations issued or guaranteed by the
government of the United States, its agencies or instrumentalities) if, as
a result thereof: (i) more than 5% of the fund's total assets would be
invested in the securities of such issuer or (ii) the fund would hold more
than 10% of the outstanding voting securities of such issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of its total assets (including the amount
borrowed), less liabilities (other than borrowings). Any borrowings that
come to exceed 33 1/3% of the fund's total assets by reason of a decline in
net assets will be reduced within three days (exclusive of Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite any issue of securities, except to the extent that the fund
may be deemed to be an underwriter within the meaning of the Securities Act
of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than obligations issued or
guaranteed by the government of the United States, its agencies or
instrumentalities) if, as a result thereof, more than 25% of the fund's
total assets (taken at current value) would be invested in the securities
of issuers having their principal business activities in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the price
at which they are valued.
(v) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable or invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock 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 (iv) would
exceed 15% of the fund's net assets.
(vi) 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).
(vii) 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 (i) to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger, or (ii) to securities of other open-end
investment companies managed by FMR or a successor or affiliate purchased
pursuant to an exemptive order granted by the SEC.
(viii) 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.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 10% of the fund's net assets.
Included in that amount, but not to exceed 2% of net assets, are warrants
whose underlying securities are not traded on principal domestic or foreign
exchanges. Warrants acquired by the fund in units or attached to securities
are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitation (viii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
MID CAP FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to 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 (iv)
would exceed 10% of the fund's net assets.
(vi) 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.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years continuous operation.
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Warrants
acquired by the fund in units or attached to securities are not subject to
this restriction.
(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 (ix), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
EQUITY GROWTH FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the Government of the United States, its agencies or
instrumentalities) if, as a result (a) more than 5% of the fund's total
assets (taken at current value) would be invested in the securities of such
issuer, or (b) the fund would hold more than 10% of the voting securities
of such issuer;
(2) make short sales of securities (unless it owns or by virtue of its
ownership of other securities has the right to obtain, securities
equivalent in kind and amount to the securities sold), provided, however,
that the fund may purchase or sell futures contracts;
(3) purchase any securities on margin, except for such short-term credits
as are necessary for the clearance of transactions, provided, however, that
the fund may make initial and variation margin payments in connection with
purchases or sales of futures contracts or of options on futures contracts;
(4) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of the fund's total assets (including the
amount borrowed) less liabilities (not including borrowings). Any
borrowings that come to exceed 33 1/3% of the value of the fund's total
assets by reason of a decline in net assets will be reduced within 3 days
(exclusive of Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(5) underwrite any issue of securities (to the extent that the fund may be
deemed to be an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities);
(6) purchase the securities of any issuer (other than obligations issued or
guaranteed by the Government of the United States, its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets (taken at current value) would be invested in the securities of
issuers having their principal business activities in the same industry;
(7) purchase or sell real estate (but this shall not prevent the fund from
investing in marketable securities issued by companies such as real estate
investment trusts which deal in real estate or interests therein and
participation interests in pools of real estate mortgage loans);
(8) 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);
(9) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties, except (i)
through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies and limitations, or (ii)
by engaging in repurchase agreements with respect to portfolio securities;
(10) purchase securities of other investment companies (except in the open
market where no commission other than the ordinary broker's commission is
paid, or as a part of a merger or consolidation, and in no event may
investments in such securities exceed 10% of the total assets of the fund);
(11) purchase the securities of any issuer if, as a result, more than 5% of
the fund's total assets (taken at current value) would be invested in the
securities of companies which, including predecessors, have a record of
less than three years of continuous operation; or
(12) invest in oil, gas, or other mineral exploration or development
programs.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund 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 (4)). 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.
(iii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iv) 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
(iii) would exceed 10% of the fund's net assets.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (a) lending money (up to 5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(vii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(viii) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
GROWTH OPPORTUNITIES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which
they are valued.
(v) The fund does not currently intend to 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 (iv)
would exceed 10% of the fund's net assets.
(vi) 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 limit does not apply to purchases of debt securities or
to repurchase agreements.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower cost or market, in excess of 5% of the fund's net assets. Included in
that amount, but not to exceed 2% of net assets, may be warrants that are
not listed on the New York Stock Exchange or the American Stock Exchange.
Warrants acquired by the fund in units or attached to securities are not
subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" on page .
STRATEGIC OPPORTUNITIES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the government of the United States, its agencies, or
instrumentalities) if, as a result thereof, more than 5% of the fund's
total assets (taken at current value) would be invested in the securities
of such issuer;
(2) purchase the securities of any issuer, if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of
such issuer to be held in the fund's portfolio;
(3) issue senior securities (except to the extent that issuance of one or
more classes of shares of the fund in accordance with an order issued by
the Securities and Exchange Commission may be deemed to constitute issuance
of a senior security);
(4) make short sales of securities, (unless it owns, or by virtue of its
ownership of other securities has the right to obtain, at no additional
cost, securities equivalent in kind and amount to the securities sold);
provided, however, that the fund may enter into forward foreign currency
exchange transactions; and further provided that the fund may purchase or
sell futures contracts;
(5) purchase any securities or other property on margin, (except for such
short-term credits as are necessary for the clearance of transactions);
provided, however, that the fund may make initial and variation margin
payments in connection with purchases or sales of futures contracts or
options on futures contracts;
(6) borrow money except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of the value of the fund's total assets (including the
amount borrowed) less liabilities (not including borrowings). Any
borrowings that come to exceed 33 1/3% of the fund's total assets by reason
of a decline in net assets, will be reduced within three days (exclusive of
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation. The fund will not purchase securities for investment while
borrowings equaling 5% or more of its total assets are outstanding;
(7) underwrite any issue of securities (except to the extent that the fund
may be deemed to be an underwriter within the meaning of the Securities Act
of 1933 in the disposition of "restricted securities");
(8) purchase the securities of any issuer (other than obligations issued or
guaranteed by the government of the United States, its agencies, or
instrumentalities) if, as a result thereof, more than 25% of the fund's
total assets would be invested in the securities of one or more issuers
having their principal business activities in the same industry;
(9) purchase or sell real estate (but this shall not prevent the fund from
investing in marketable securities issued by companies such as real estate
investment trusts which deal in real estate or interests therein and
participation interests in pools of real estate mortgage loans);
(10) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(11) lend any security or make any other loan if as a result, more than 33
1/3% of the fund's total assets would be lent to other parties except (i)
through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies, and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities;
(12) purchase securities of other investment companies (except in the open
market where no commission other than the ordinary broker's commission is
paid, or as part of a merger or consolidation, and in no event may
investments in such securities exceed 10% of the value of total assets of
the fund). The fund may not purchase or retain securities issued by other
open-end investment companies;
(13) invest more than 5% of the fund's total assets (taken at market value)
in the securities of companies which, including predecessors, have a record
of less than three years' continuous operation; or
(14) invest in oil, gas, or other mineral exploration or development
programs.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (6)). The fund will not
borrow from other funds advised by FMR or its affiliates if total
outstanding borrowings immediately after such borrowing would exceed 15% of
the fund's total assets.
(ii) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(iii) 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
(ii) would exceed 10% of the fund's net assets.
(iv) 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.)
(v) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(vi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(vii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" on page .
LARGE CAP FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to 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 (iv)
would exceed 10% of the fund's net assets.
(vi) 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.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years continuous operation.
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Warrants
acquired by the fund in units or attached to securities are not subject to
this restriction.
(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 limitations (ix), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
GROWTH & INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to 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 (iv)
would exceed 10% of the fund's net assets.
(vi) 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.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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 the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
45.
EQUITY INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable or invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock 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 (iv) would
exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except (a) by lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser, or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
For purposes of limitation (viii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
BALANCED FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to 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 (iv)
would exceed 10% of the fund's net assets.
(vi) 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.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of its net assets. Included in
that amount, but not to exceed 2% of the fund's net assets, may be warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange. Warrants acquired by the fund in units or attached to securities
are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas, other mineral
exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
EMERGING MARKETS INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
(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 with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except (a) by lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser, or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations
(a) and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 10% of the fund's net assets.
Included in that amount, but not to exceed 2% of net assets, are warrants
whose underlying securities are not traded on principal domestic or foreign
exchanges. Warrants acquired by the fund in units or attached to securities
are not subject to these restrictions.
(xii) 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.
(xiii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xiv) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (i), Subchapter M generally requires the fund
to invest no more that 25% of its total assets in securities of any one
issuer and to invest at least 50% of its total assets so that no more than
5% of the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For purposes of limitation (ix), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
HIGH YIELD FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the value of the fund's total assets would be invested
in the securities of that issuer, or (b) it would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable or invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock 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 (iv) would
exceed 15% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) 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.
(viii) The fund does not currently intend to purchase warrants, valued at
the lower of cost or market, in excess of 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of the fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(x) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (vii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
STRATEGIC INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); 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 with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL:
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans and loan participations or other forms of direct debt instruments
and, in connection therewith, assuming any associated unfunded loan
commitments of the sellers. (This limitation does not apply to purchases of
debt securities or to repurchase agreements.)
(vii) The fund does not currently intend to (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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral explorations or development programs or leases.
(xi) 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.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (i), Subchapter M generally requires the fund
to invest no more that 25% of its total assets in securities of any one
issuer and to invest at least 50% of its total assets so that no more than
5% of the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For purposes of limitation (ix), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
MORTGAGE SECURITIES FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase any security if, as a result thereof, more than 25% of the
value of its total assets would be invested in the securities of companies
having their principal business activities in the same industry (this
limitation does not apply to securities issued or guaranteed by the United
States government, its agencies or instrumentalities);
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (i) lending money (up to 7.5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (ii) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
mortgage-related securities or direct mortgage investments; or to
repurchase agreements.)
(vi) 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 brokers commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to (i) securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(vii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
45.
GOVERNMENT INVESTMENT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940.
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of issuers having their
principal business activities in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other investments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser, or (b) acquiring
loans, loan participations or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) 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 (i) to securities received as dividends, through
offers of exchange or as a result of a reorganization, consolidation or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xii) The fund does not currently intend to enter into any futures contract
or option on a futures contract if, as a result, the sum of initial margin
deposits on futures contracts and related options and premiums paid for
options on futures contracts the fund has purchased, after taking into
account unrealized profits and losses on such contracts would exceed 5% of
the fund's total assets.
(xiii) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
INTERMEDIATE BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment), in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of the fund's total assets would be lent to other parties (but this
limitation does not apply to purchases of debt securities or to repurchase
agreements).
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or fund for which FMR or an affiliate serves as
investment advisor or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by: (a) lending money (up to 7.5% of the fund's
net assets) to a registered investment company or fund for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments, and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(vii) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(viii) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(ix) The fund currently does not intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to (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 is sued by other open-end investment companies. Limitations
(a) and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (ix), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
SHORT FIXED-INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental limitation (3)). 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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to lend assets other than securities
to other parties, except by (i) lending money (up to 7.5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (ii) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of the
sellers. (This limitation does not apply to purchases of debt securities or
to repurchase agreements.)
(vi) 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 (i) to securities received as dividends, through
offers of exchange or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(vii) 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.
(viii) The fund does not currently intend to purchase warrants, valued at
the lower of cost or market, in excess of 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of the fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or attached
to securities are not subject to these restrictions.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (vii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" on page .
HIGH INCOME MUNICIPAL FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) 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.
(ix) The fund does not currently intend to invest in oil, gas or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (viii), 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 purposes of investment limitations (1) and (5), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" on page .
MUNICIPAL BOND FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser, or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vi) 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 (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(vii) 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.
(viii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(ix) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (1) and (5), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For purposes of limitation (vii), 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 fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page 44.
INTERMEDIATE MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of its total assets would be invested in the securities of
that issuer, or (b) the fund would hold more than 10% of the outstanding
voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933, in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements; or
(9) invest in companies for the purpose of exercising control or
management.
(10) 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 ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) 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 (i) securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) 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.
(ix) The fund does not currently intend to invest in oil, gas, other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
Trustees of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xi) 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 (viii), 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 purposes of investment limitations (1) and (5), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures contracts and options, see the
section entitled "Futures and Options" beginning on page .
SHORT-INTERMEDIATE MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in 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 INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the fund
currently intends to comply with certain diversification limits imposed by
Subchapter M.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) 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 (i) securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-end investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years continuous operation.
(x) The fund may not 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.)
(xi) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(xii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xiii) 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.
(xiv) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company managed by
Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitation (i), Subchapter M generally requires the fund
to invest no more than 25% of its total assets in securities of any one
issuer and to invest at least 50% of its total assets so that no more than
5% of the fund's total assets are invested in securities of any one issuer.
However, Subchapter M allows unlimited investments in cash, cash items,
government securities (as defined in Subchapter M) and securities of other
investment companies. These tax requirements are generally applied at the
end of each quarter of the fund's taxable year.
For purposes of limitation (ix), 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 purposes of investment limitations (4) and (i), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
NEW YORK MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in 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 INVESTMENT LIMITATIONS 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) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) 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.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years continuous operation.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to 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 (ix), 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 purposes of investment limitations (4) and (i), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
CALIFORNIA MUNICIPAL INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in 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 INVESTMENT LIMITATIONS 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) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) 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.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to 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 (ix), 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 purposes of investment limitations (4) and (i), FMR identifies the
issuer of a security depending on its terms and conditions. In identifying
the issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transaction, see the
section entitled "Futures and Options" beginning on page .
THE FOLLOWING PAGES CONTAIN MORE DETAILED INFORMATION ABOUT TYPES OF
INSTRUMENTS IN WHICH A FUND MAY IN VEST, STRATEGIES FMR MAY EMPLOY IN
PURSUIT OF A FUND'S INVESTMENT OBJECTIVE, AND A SUMMARY OF RELATED RISKS.
FMR MAY NOT BUY ALL OF THESE INSTRUMENTS OR USE ALL OF THESE TECHNIQUES
UNLESS IT BELIEVES THAT DOING SO WILL HELP THE FUND ACHIEVE ITS
GOAL.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may 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.
ASSET-BACKED SECURITIES represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend
upon payment of the underlying loans by individuals, although the
securities may be supported by letters of credit or other credit
enhancements. The value of asset-backed securities may also depend on the
creditworthiness of the servicing agent for the loan pool, the originator
of the loans, or the financial institution providing the credit
enhancement.
CLOSED-END INVESTMENT COMPANIES. A fund may purchase the shares of
closed-end investment companies to facilitate investment in certain
countries. Shares of closed-end investment companies may trade at a premium
or a discount to their net asset value.
DELAYED-DELIVERY TRANSACTIONS. A fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. A fund
may receive fees for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, a fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, a fund could miss a
favorable price or yield opportunity, or could suffer a loss.
A fund may renegotiate delayed-delivery transactions after they are entered
into, and may sell underlying securities before they are delivered, which
may result in capital gains or losses.
DIRECT INVESTMENT IN MORTGAGES. Although Mortgage Securities has
no current intention to invest directly in mortgages, it may in the future
invest up to 10% of the value of total assets directly in mortgages
securing residential real estate. These mortgages are normally available
from lending institutions which group together a number of mortgages
(usually 10 to 50) for resale and which act as servicing agent for the
purchaser with respect to, among other things, the receipt of principal and
interest payments. The vendor of such mortgages receives a fee from the
fund for acting as servicing agent. The vendor does not provide any
insurance or guarantees covering the repayment of principal or interest on
the mortgages. Unlike pass-through securities, these constitute direct
investment in mortgages inasmuch as the fund, rather than a financial
intermediary, becomes the mortgagee. At present, such investments are
considered to be illiquid by FMR. The fund will invest in such mortgages
only if FMR has determined through an examination of the mortgage loans and
their originators (which may include an examination of such factors as
percentage of family income dedicated to loan service and the relationship
between loan value and market value) that purchase of the mortgages should
not present a significant risk of loss to the fund.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve significant risks in addition to the risks inherent in U.S.
investments. 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 Depositary Receipts (ADRs), as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs), are certificates evidencing ownership of shares of a
foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and
interest and corporate actions. ADRs are alternatives to directly
purchasing the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
FANNIE MAES AND FREDDIE MACS are pass-through securities issued
by the Federal National Mortgage Association (FNMA) and the Federal Home
Loan Mortgage Corporation (FHLMC), respectively. FNMA and FHLMC, which
guarantee payment of interest and principal on Fannie Maes and Freddie
Macs, are federally chartered corporations supervised by the U.S.
Government and acting as governmental instrumentalities under authority
granted by Congress. FNMA is authorized to borrow from the U.S. Treasury
to meet its obligations. Fannie Maes and Freddie Macs are not backed by
the full faith and credit of the U.S. Government; however, their close
relationship with the U.S. Government makes them high quality securities
with minimal credit risks.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the municipal funds
do not intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, each municipal fund may
invest a portion of its assets in fixed-income obligations whose interest
is subject to federal income tax.
Should a municipal fund invest in federally taxable obligations, it would
purchase securities that, in FMR's judgment, are of high quality. These
would include those obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The funds' standards for high-quality, taxable
obligations are essentially the same as those described by Moody's Investor
Service (Moody's) in rating corporate obligations within its two
highest ratings of Prime-1 and Prime-2, and those described by Standard &
Poor's (S&P) in rating corporate obligations within its two highest
ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the municipal funds' distributions.
If such proposals were enacted, the availability of municipal obligations
and the value of the municipal funds' holdings would be affected and the
Trustees would reevaluate the municipal funds' investment objectives and
policies.
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. A 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 a 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, a 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, a 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 a fund had sold a security denominated in one currency
and purchased an equivalent security denominated in another. Cross-hedges
protect against losses resulting from a decline in the hedged currency, but
will cause a fund to assume the risk of fluctuations in the value of the
currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the funds will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing 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 a fund if currencies
do not perform as FMR anticipates. For example, if a currency's value rose
at a time when FMR had hedged a fund by selling that currency in exchange
for dollars, a fund would 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, a fund will realize a loss. There is no assurance that
FMR's use of currency management strategies will be advantageous to the
funds 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 the
security purchased by the fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of a
default by the counterparty, the fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the
fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve higher
credit risks than repurchase agreements in U.S. markets, as well as risks
associated with currency fluctuations. In addition, as with other emerging
market investments, repurchase agreements with counterparties located in
emerging markets or relating to emerging market securities may involve
issuers or counterparties with lower credit ratings than typical U.S.
repurchase agreements.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities 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 paragraphs pertain to futures and
options; Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, Options and Futures Relating to Foreign
Currencies, OTC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. Each fund will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and, if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of 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 it typically invests, 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 a fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Index (S&P
500(registered trademark)) or the Bond Buyer Municipal Bond Index.
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. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. Each fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; 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 each fund's investments in futures contracts and
options, and each fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible 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 options (OTC) (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows 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. A 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, a 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 a 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 a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government-stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR may
determine some restricted securities, municipal lease obligations,
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 10% or 15% of its
net assets (see each fund's non-fundamental investment limitations) 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.
High Income Municipal, Municipal Bond, Intermediate Municipal Income,
Short-Intermediate Municipal Income, New York Municipal Income, and
California Municipal Income currently intend to participate in this program
only as borrowers. A fund will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Interfund loans
and borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. A fund will lend
through the program only when the returns are higher than those available
from an investment in repurchase agreements. 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.
INVERSE FLOATERS have variable interest rates that typically move in the
opposite direction from prevailing short- term interest rate levels -
rising when prevailing short-term interest rates fall, and vice versa. This
interest rate feature can make the prices of inverse floaters
considerably more volatile than those of bonds with comparable maturities.
ISSUER LOCATION. FMR determines where an issuer is located by looking at
such factors as its country of organiza tion, the primary trading market
for its securities, and the location of its assets, personnel, sales, and
earnings. The issuer of a security is considered to be located in a
particular country if: (1) the security is issued or guaranteed by the
government of the country or any of its agencies, political subdivisions,
or instrumentalities, (2) the security has its primary trading market in
that country; or (3) the issuer is organized under the laws of 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%
o f 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 each 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, each 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.
A fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see each fund's investment
limitations). For purposes of these limitations, a fund generally will
treat the borrower as the "issuer" of indebtedness held by the fund. In the
case of loan participations where a bank or other lending institution
serves as financial intermediary between a fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require 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. A fund may purchase lower-quality
debt securities that have poor protection with respect to the payment of
interest and repayment of principal. These securities are often considered
to be speculative and involve greater risk of loss or price changes due to
changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience
may not provide an accurate indication of the future performance of the
high-yield bond market, especially during periods of economic recession.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield 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 a 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.
Each 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.
LOWER-QUALITY MUNICIPAL SECURITIES. A fund may invest a portion
of its assets in lower-quality municipal securities as described in the
Prospectus.
While the market for municipals is considered to be substantial, adverse
publicity and changing investor perceptions may affect the ability of
outside pricing services used by a fund to value its portfolio securities,
and a fund's ability to dispose of lower-quality bonds. The outside pricing
services are monitored by FMR and reported to the Board to determine
whether the services are furnishing prices that accurately reflect fair
value. The impact of changing investor perceptions may be especially
pronounced in markets where municipal securities are thinly traded.
A fund may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in
the best interest of the fund's shareholders.
MORTGAGE-BACKED SECURITIES. A fund may purchase mortgage-backed securities
issued by government and non- government entities such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security may be
an obligation of the issuer backed by a mortgage or pool of mortgages or a
direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations
(CMOs), make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and a
fund may invest in them if FMR determines they are consistent with the
fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
MUNICIPAL LEASES and participation interests therein may take the form of a
lease, an installment purchase, or a conditional sale contract, and are
issued by state and local governments and authorities to acquire land or a
wide variety of equipment and facilities. Generally, a fund will not hold
such obligations directly as a lessor of the property, but will purchase a
participation interest in a municipal obligation from a bank or other third
party. A participation interest gives a fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the
total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
MARKET DISRUPTION RISK. The value of municipal securities may be affected
by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL SECTORS:
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues
are restrictions on students' ability to pay tuition, availability of state
and federal funding, and general economic conditions. Student loan
revenue bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program. Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral during periods of forbearance. Other risks associated
with student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are generally
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways or other transit facilities.
Airport bonds are dependent on the general stability of the airline
industry and on the stability of a specific carrier that uses the airport
as a hub. Air traffic generally tracks broader economic trends and is also
affected by the price and availability of fuel. Toll road bonds are also
affected by the cost and availability of fuel as well as toll levels, the
presence of competing roads, and the general economic health of the area.
Fuel costs and availability also affect other transportation-related
securities, as does the presence of alternate forms of transportation, such
as public transportation.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, public resistance to rate
increases, costly environmental litigation, and Federal environmental
mandates are challenges faced by issuers of water and sewer bonds.
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 changes in 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.
REFUNDING CONTRACTS. A fund may purchase securities on a when-issued basis
in connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts require the issuer to sell and a fund to buy refunded
municipal obligations at a stated price and yield on a settlement date that
may be several months or several years in the future. A fund generally will
not be obligated to pay the full purchase price if it fails to perform
under a refunding contract. Instead, refunding contracts generally provide
for payment of liquidated damages to the issuer (currently 15-20% of the
purchase price). A fund may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the
liquidated damages provisions of the refunding contract. When required by
SEC guidelines, a fund will place liquid assets in a segregated custodial
account equal in amount to its obligations under refunding contracts.
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 a 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 each fund's (except Equity Growth's) current policy to
engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR. Equity
Growth will engage in repurchase agreement transactions only with banks of
the Federal Reserve System and primary dealers in U.S. Government
securities.
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, a 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 a 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
(NYSE) 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).
SHORT SALES. A fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security a fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. A fund currently intends to hedge no more than
15% of its total assets with short sales on equity securities underlying
its convertible security holdings under normal circumstances.
When a fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will be
required to hold them aside while the short sale is outstanding. A fund
will incur transaction costs, including interest expense, in connection
with opening, maintaining, and closing short sales.
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.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. A fund may acquire
standby commitments to enhance the liquidity of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, a fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
purchase an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by a fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety 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 a fund's
investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
rights to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease a fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of a fund's investments and its share price and yield.
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 a 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.
TENDER OPTION BONDS are created by coupling an intermediate-or long-term,
tax-exempt bond (generally held pursuant to a custodial arrangement) with a
tender agreement that gives the holder the option to tender the bond at its
face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate
and the rate (determined by a remarketing or similar agent) that would
cause the bond, coupled with the tender option, to trade at par on the date
of such determination. After payment of the tender option fee, a fund
effectively holds a demand obligation that bears interest at the prevailing
short-term tax-exempt rate. In selecting tender option bonds for a fund,
FMR will consider the creditworthiness of the issuer of the underlying
bond, the custodian, and the third party provider of the tender option. In
certain instances, a sponsor may terminate a tender option if, for example,
the issuer of the underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit a fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The funds consider variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs they
purchase. The IRS has not ruled whether the interest on Participating VRDOs
is tax-exempt, and, accordingly, the funds intend to purchase these
instruments based on opinions of bond counsel. The funds may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
WARRANTS are securities that give a 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
of 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.
ZERO COUPON BONDS do not make interest payments; instead, they
are sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change.
In calculating its dividends, a fund takes into account as income a portion
of the difference between a zero coupon bond's purchase price and its face
value.
The following paragraph restates fundamental policies previously disclosed
in the above descriptions of security types and investment practices.
FUNDAMENTAL POLICIES: It is the policy of Equity Growth to engage in
repurchase agreement transactions only with banks of the Federal Reserve
System and primary dealers in U.S. Government securities.
SPECIAL CONSIDERATIONS AFFECTING CANADA
Canada occupies the northern part of North America and is the
second-largest country in the world (3.97 million square miles in area)
extending from the Atlantic Ocean to the Pacific. The companies in which
the fund may invest may include those involved in the energy industry,
industrial materials (chemicals, base metals, timber, and paper), and
agricultural materials (grain cereals). The securities of companies in the
energy industry are subject to changes in value and dividend yield which
depend, to a large extent, on the price and supply of energy fuels. Rapid
price and supply fluctuations may be caused by events relating to
international politics, energy conservation, and the success of exploration
projects. Canada is one of the world's leading industrial countries, as
well as a major exporter of agricultural products. Canada is rich in
natural resources such as zinc, uranium, nickel, gold, silver, aluminum,
iron, and copper. Forest covers over 44% of its land area, making Canada a
leading world producer of newsprint. The economy of Canada is strongly
influenced by the activities of companies and industries involved in the
production and processing of natural resources. Canada is a major producer
of hydroelectricity, oil, and gas. The business activities of companies in
the energy field may include the production, generation, transmission,
marketing, control, or measurement of energy or energy fuels. Economic
prospects are changing due to recent government attempts to reduce
restrictions against foreign investment.
Canadian securities are not considered by FMR to have the same level of
risk as other nation's securities. Canadian and U.S. companies are
generally subject to similar auditing and accounting procedures, and
similar government supervision and regulation. Canadian markets are more
liquid than many other foreign markets and share similar characteristics
with U.S. markets. The political system is more stable than in some other
foreign countries, and the Canadian dollar is generally less volatile
relative to the U.S. dollar.
Many factors affect and could have an adverse impact on the financial
condition of Canada, including social, environmental, and economic
conditions; factors which are not within the control of Canada. In Canada,
the pace of economic recovery slowed markedly in 1995 owing to the
tightening of monetary conditions early in the year and the risk premiums
in interest rates that resulted from political and economic uncertainties,
as well as the slowdown in the United States. Following the referendum on
Quebec sovereignty in October 1995, confidence improved and interest rates
fell significantly, which should permit the pace of economic activity to
pick up during 1996. Fiscal imbalances have diminished considerably in
recent years but the federal and provincial governments will need to ensure
that further consolidation is achieved in 1996 and over the medium term.
Inflation has remained low, which provides some flexibility for further
easing of monetary policy if warranted by cyclical considerations and by
further progress on the fiscal front. Overall, conditions are good for
Canada's expansion to proceed at a healthy rate.
The U.S. - Canada Free Trade Agreement which became effective in January
1989, will be phased in over a period of 10 years. This agreement will
remove tariffs on U.S. technology and Canadian agricultural products in
addition to removing trade barriers affecting other important sectors of
each country's economy. Relations with the U.S. are likely to be further
strengthened by the implementation of the North American Free Trade
Agreement, which came into effect in January 1994.
The majority of new equity issues or initial public offerings in Canada are
through underwritten offerings. The funds may elect to participate in these
issues.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA
Latin America is a region rich in natural resources such as oil, copper,
tin, silver, iron ore, forestry, fishing, livestock, and agriculture. The
region has a large population (over 350 million) representing a large
domestic market. The region has been transitional over the last five years
from the stagnant 1980s which were characterized by poor economic policies,
higher international interest rates, and limited access to new foreign
capital.
High inflation and low economic growth have given way to stable manageable
inflation rates and higher economic growth. Changes in political
leadership, the implementation of market-oriented economic policies, such
as privatization, trade reform and monetary reform have been among the
recent steps taken to modernize the Latin American economies and to
regenerate growth in the region. Various trade agreements have also been
formed within the region such as the Andean Pact, Mercosur and the North
America Free Trade Agreement (NAFTA). The largest of these is NAFTA, which
was implemented on January 1, 1994.
Latin American equity markets can be extremely volatile and in the past
have shown little correlation with the U.S. market. Currencies are
typically weak, but most are now relatively free floating, and it is not
unusual for the currencies to undergo wide fluctuations in value over short
periods of time due to changes in the market.
Mexico's economy has been transformed significantly over the last 6-7
years. In the past few years the government has sold the telephone company,
the major steel companies, the banks and many others. The major state
ownership remaining is in the oil sector and the electricity sector. The
U.S. is Mexico's major trading partner, accounting for two-thirds of its
exports and imports. The government, in consultation with international
economic agencies, is implementing programs to stabilize the economy and
foster growth.
In the early 1980s Mexico experienced a foreign debt crisis. By 1987,
foreign debt had reached prohibitive levels, accounting for 90 to 95
percent of GDP, thus draining Mexico of all its resources. By the end of
1994, a large current account deficit, fueled in part by expansionary
policy, and the burden of its large national debt forced the Mexican
government to devalue the peso, triggering a severe crisis of confidence.
Both the crisis and the measures taken to stabilize the economy since, have
led to severely reduced domestic demand, which has been only partially
offset by positive trade-related activity. Following a difficult year that
saw real output contract by almost 7 percent, the recovery that has already
begun is expected gather strength during 1996. There are still risks
arising from fragility in the banking sector, and continuing fiscal
discipline will be needed to maintain market confidence.
Brazil entered the 1990s with declining real growth, runaway inflation, an
unserviceable foreign debt of $122 billion, and a lack of policy direction.
Over the past few years, Brazil was able to stabilize its domestic economy
through a relentless process of balancing the government budget, the
privatization of state enterprises, deregulation and reduction of red tape
and introducing greater competition in the domestic business environment.
Monthly inflation was brought down from 43 percent in the first half of
1994 to 1.5 percent in 1995. This reflects the success of the Real Plan,
which included the elimination of most forms of backward-looking
indexation, the introduction of a new currency, and tight credit policy,
which subsequently led to a nominal appreciation of the exchange rate. A
major long-run strength is Brazil's natural resources. Iron ore, bauxite,
tin, gold, and forestry products make up some of Brazil's basic natural
resource base, which includes some of the largest mineral reserves in the
world. In terms of population, Brazil is the fifth-largest in the world
with about 154+ million people and represents a huge domestic market.
Chile, like Brazil, is endowed with considerable mineral resources, in
particular copper. Economic reform has been ongoing in Chile for at least
15 years, but political democracy has only recently returned to Chile.
Privatization of the public sector beginning in the early 1980s has
bolstered the equity market and given Chile the most competitive and
successful economy in Latin America. A well organized pension system has
created a long-term domestic investor base. Chile tightened its monetary
policy late in 1995 amid signs of overheating and 1996 GDP growth is
expected to slow while inflation should moderate further.
Argentina is strong in wheat production and other foodstuffs and livestock
ranching. A well-educated and skilled population boasts one of the highest
literacy rates in the region. The country has been ravaged by decades of
extremely high inflation and political instability. Privatization is
ongoing and should reduce the amount of external debt outstanding. The
markets for labor, capital and goods and services have been deregulated.
Nearly all non-tariff barriers and export taxes have been eliminated, the
tariff structure simplified and tariffs sharply reduced. In the first
months of 1995 the government had to struggle to prevent a Mexican-style
collapse of the economy. A significant adjustment of the fiscal stance,
together with a restructuring of the banking system, particularly the
provincial banks, helped contain the spillover effects of the crisis in
Mexico. The government vowed to maintain a restrictive fiscal policy and
the peso convertibility to the U.S. dollar after the recent resignation of
Domingo Cavallo, the Economy Minister who masterminded the most successful
reform program in Argentina's post-world war II history and is seen as the
key to the country's economic stability.
Venezuela has substantial oil reserves. External debt is being
renegotiated, and the government is implementing economic reform in order
to reduce the size of the public sector. Internal gasoline prices, which
are one-third those of international prices, were increased in order to
reduce subsidies. However, economic conditions worsened in 1995, as the
government failed to reduce the fiscal deficit, and investment stagnated.
Prospects for an improvement in economic situation in 1996 depend on the
adoption of a credible exchange rate policy, the removal of controls, and
measures to strengthen the fiscal position and deal with the problems of
the banking sector.
EMERGING MARKETS: LATIN AMERICA
MARKET CAPITALIZATION IN U.S. DOLLARS
DECEMBER 1995
Billions:
Argentina $38
Brazil 148
Chile 73
Colombia 17
Mexico 91
Peru 12
Venezuela 4
Source: The LGT Guide to World Equity Markets, 1996
For national stock market performance, please see the section of
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,
religious, and racial disaffection.
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.
The emerging market economies of Asia are likely to remain particularly
buoyant, although growth is expected to moderate in several of them. This
should help to alleviate inflationary pressures and reduce current account
imbalances associated in part with large private capital inflows.
Nevertheless, actions already taken in Indonesia, Malaysia, and Thailand to
dampen domestic demand many need to be followed up by additional measures
of restraint.
Thailand has one of the fastest-growing economy in the region, with over 8%
average growth in recent years. The economy has until now been run on a
strictly centralist principle, with five-year targets for most product
sectors, but policies have now been relaxed to allow foreign companies into
the market. Most of the Thai population rely on agriculture, largely in a
subsistence capacity: rice, sugar, maize and vegetables are grown for the
home market, while palm oil, fishing and (until the recent ban) timber
extraction have been the main export crops. Industry is moderately
developed but revolves around primary commodity processing for the local
market. The major exception is the minerals sector, which contributes over
half of the country's wealth: tin, lead, iron, tungsten, antimony and
lignite are extracted for export. There is a small and growing tourist
industry, but the sector was adversely affected by political uncertainties
in recent years. In mid-1995, the ruling Democrat Party lost the support of
one of the four coalition partners, it resigned and was replaced in a full
election by the opposition Chart Thai Party. However, King Bhumibol
Adulyadej has been forthright in his condemnation of the new government,
sparkling fears of a constitutional challenge.
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 9.5% in 1995. Recent volatility of the political scene is
unlikely to deflect continued economic growth. 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,
crude oil alone contributes 80% of all foreign exchange revenues.
Indonesia's economy is growing very rapidly which envisaged a move away
from dependence on oil. However, the country remains generally very poor
and has only a limited potential domestic market for consumer goods.
Foreign investment regulations were relaxed in 1994 and 1995, in an effort
to stimulate growth.
Malaysia has one of the fastest-growing economies in the Asian-Pacific
region. Rapid industrialization is transforming the economy away from its
traditional agricultural base, and in the process it is creating major new
opportunities for providers of consumer goods and services. Malaysia has
become the world's top producer and exporter of semiconductor devices.
Meanwhile, the high import content of newly established fast-growing
manufacturing industries and Malaysian consumers' high marginal propensity
to import, has resulted in a high current-account deficit (10% of GDP),
which may have a negatively impact on equity performance.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its history. Singapore's economy has boomed since the 1960s, thanks to
the Government's policy of encouraging highly skilled and hence high
value-added manufacturing facilities. Per capita GDP is among the highest
in Asia. However, the country keeps a tight rein on imports and engages in
extensive regulation of the economy, in manufacturing in particular.
Although financial services now contribute almost as much to the economy as
manufacturing. Singapore holds a position as a major oil refining and
services center.
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. 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. Economic activity now
appears to be picking up in Japan after protracted sluggishness that has
left the economy with considerable margins of unused resources. The
supportive stance of both monetary and fiscal policies and the correction
of the yen's excessive appreciation in early 1995 provided good reasons for
expecting recovery to continue in 1996. Confidence in the financial system
has begun to improve with the announcement of a strategy for resolving the
financial problems of Japanese banks, steps to deal more effectively with
failed institutions, and plans to strengthen banking supervision.
Nevertheless, extricating financial institutions from their bad loans
problem could act as a drag on the pace of recovery. Fiscal policy is
appropriately aimed at providing continuing support in 1996 but budgetary
consolidation will need to resume when the recovery gathers enough momentum
to permit a withdrawal of stimulus.
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.
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. However, business investment remains weak. The
many setbacks since the 1970s have resulted primarily from the loss of
Australia's almost guaranteed export markets in Britain, after the latter's
accession to the EU, but also from the slump in world mineral prices and by
the government's failure to reduce public spending. Unemployment remains
uncompromisingly high, and there are few signs of a change at present. Much
of the most dominant activity in Australia is farming, especially of wheat,
and sheep rearing: together, the two contribute more than half of the
country's export revenues. Minerals provide the next most significant
source of foreign exchange, although the industry will remain vulnerable to
fluctuations in the state of the world minerals markets. Most recently, oil
and gas development has been proceeding at a particularly rapid pace.
Manufacturing has moved away from the processing of agricultural and
mineral raw materials: there is a wide range of often sophisticated
engineering activity, and Australia is a very large producer of motor
vehicles.
EMERGING MARKETS: ASIA
MARKET CAPITALIZATION IN U.S. DOLLARS
DECEMBER 1995
Billions:
India $183
Indonesia 66
Korea 182
Malaysia 223
Pakistan 10
Philippines 59
Sri Lanka 2
Taiwan 187
Thailand 143
Source: The LGT Guide to World Equity Markets, 1996
For national stock market performance, please see the section of
Performance beginning on page .
REAL GDP ANNUAL RATE OF GROWTH 1995
China 10.2%
Hong Kong 5.0
India 6.2
Indonesia 8.1
Japan 0.9
Korea 9.0
Malaysia 9.6
Philippines 4.8
Singapore 8.9
Taiwan 6.4
Thailand 8.6
Source: World Economic Outlook, May 1996
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, growth slowed more markedly than expected during 1995 in
the region, leading to further increases in unemployment in some countries
from already high levels and also to fears of a new economic downturn. The
most pronounced deterioration in cyclical conditions since early 1995 has
been in Germany, France, several other countries closely linked to the
deutsche mark, and Switzerland. In response, short-term interest rates have
been reduced significantly and several countries have taken various fiscal
and structural measures to revive confidence and stimulate job creation.
The timing and strength of the expected pickup in activity in these
countries is somewhat uncertain, but the conditions appear to be in place
for a quickening in the pace of economic growth during 1996. A
strengthening of activity in these countries is essential to put
unemployment securely on a downward path and to facilitate fiscal
consolidation in accordance with the agreed timetable for Economic and
Monetary Union (EMU). Conversely, a prolonged period of lackluster growth
could exacerbate doubts about the EMU timetable and might lead to tensions
in financial markets.
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. Poland, the Czech and Slovak Republics, and Slovenia, have
achieved some of the most impressive results. Disciplined financial
policies, structural reforms, trade liberalization, and rapid growth of
trade, especially with western Europe, are important factors contributing
to the rapid transformation that is taking place in these economies. Many
of the countries that are less advanced in the transition, including some
of the former Soviet republics, have made significant progress with
structural reform, including price liberalization, privatization, and the
dismantling of trade barriers. There has been progress toward macreconomic
stability, although the sustainability of recent reductions in inflation is
in doubt in some cases. Output appears to have bottomed out during 1995 in
Russia, and a convincing recovery should emerge during 1996 provided
policies stay on track. Economic prospects have also improved in Kazakstan,
the Kyrgyz Republic, Moldova, Armenia, Georgia, and Uzbekistan. Ukraine
made considerable progress with stabilization and systemic reform in 1995;
in the absence of policy slippage, the decline in output should bottom out
in 1996. In Belarus, Tajikistan, and Turkmenistan, where reform and
stabilization efforts have been inadequate thus far, the contraction of
output may well continue. Armed conflicts continue to delay the necessary
reforms in several other countries, but throughout the former Yugoslavia
prospects for recovery have now improved following the cessation of
hostilities in Bosnia and Herzegovina.
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. 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. Many of the transition countries have achieved
considerable progress with macroeconomic stabilization and reform, and
fruits of their efforts to transform their economies are increasingly
visible.
The European Union (EU) consists of 15 member states including Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, the United Kingdom, Austria, Finland and Sweden. In 1986,
the member states of the EU 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 EU 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 EU 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 (EMU) attempts to
provide its members with a stable monetary framework consistent with the
EU's broad economic goals. But until the EMU takes effect, which is
intended to occur before 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 EU 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. In the
long-term, economic unification of Europe could prove to be an engine for
domestic and international growth.
REAL GDP ANNUAL RATE OF GROWTH
1995
Denmark 2.9%
France 2.4
Germany 1.9
Italy 3.2
Netherlands 2.4
Spain 3.0
Switzerland 0.7
United Kingdom 2.4
Source: World Economic Outlook, May 1996
(Figures are quoted based on each country's domestic currency.)
For national stock market performance, please see the section of
Performance beginning on page .
SPECIAL CONSIDERATIONS AFFECTING AFRICA
Africa is a continent of roughly 50 countries with a total population of
approximately 720 million people. The primary industries include crude oil,
natural gas, manganese ore, phosphate, bauxite, copper, iron, diamond,
cotton, coffee, cocoa, timber, tobacco, sugar, tourism, and cattle.
Many of the countries are fraught with political instability. However,
there has been a trend over the past five years toward democratization.
Still, there remain many countries that do not have a stable political
process. Other countries have been enmeshed in civil wars and border
clashes.
Economically, the Northern Rim countries (including Morocco, Egypt, and
Algeria) and Nigeria, Zimbabwe, and South Africa are the wealthier
countries on the continent due to their strong ties with the European
nations. The market capitalization of these countries has been growing
recently as more international companies invest in Africa and as local
companies start to list on the exchanges. However, religious strife has
been a significant source of instability.
On the other end of the economic spectrum are countries, such as Burkina
Faso, Madagascar, and Malawwi, that are considered to be among the poorest
or least developed in the world. These countries are generally landlocked
or have poor natural resources. The economies of many African countries are
heavily dependent on international oil prices. Of all the African
industries, oil has been the most lucrative, accounting for 40% to 60% of
many countries' GDP. However, the general decline in oil prices has had an
adverse impact on many economies.
SPECIAL CONSIDERATIONS AFFECTING NEW YORK
The financial condition of New York State (the State), its public
authorities and public benefit corporations (the Authorities) and its local
governments, particularly The City of New York (the City), could affect the
market values and marketability of, and therefore the net asset value per
share and the interest income of New York Municipal Income Fund or result
in the default of existing obligations, including obligations which may be
held by the fund. The following section provides only a brief summary of
the complex factors affecting the financial situation in New York and is
based on information obtained from the State, certain of its Authorities,
the City and certain other localities, as publicly available on the date of
this SAI. The information contained in such publicly available documents
has not been independently verified. It should be noted that the
creditworthiness of obligations issued by local issuers may be unrelated to
the creditworthiness of the State, and that there is no obligation on the
part of the State to make payment on such local obligations in the event of
default in the absence of a specific guarantee or pledge provided by the
State.
The State and the City are facing serious financial difficulties and each
has a decline in their credit standings. S&P and Moody's have each assigned
ratings for the State's general obligation bonds that are among the three
lowest of those states with rated general obligation bonds. S&P and Moody's
have each assigned ratings for the City's general obligations that are
among the four lowest of those cities with rated general obligation bonds.
The ratings of certain related debt of other issuers for which the State
has an outstanding moral obligation, lease purchase, guarantee or other
contractual obligation are generally linked directly to the State's rating.
Should the financial condition of the State, its Authorities, or its local
governments deteriorate, their respective credit ratings could be further
reduced, and the market value and marketability of their outstanding notes
and bonds could be adversely affected, and their respective access to the
public credit markets jeopardized.
ECONOMIC FACTORS. New York is the third most populous state in the nation,
and has a relatively high level of personal wealth. However, the State
economy has grown more slowly than that of the nation as a whole, resulting
in the gradual erosion of its relative economic affluence (due to factors
such as relative costs for taxes, labor, and energy). The State's economy
is diverse, with a comparatively large share of the nation's financial,
insurance, transportation, communications, and services employment, and a
very small share of the nations' farming and mining activity. New York has
a declining proportion of its workforce engaged in manufacturing and
increasing proportion engaged in service industries. The State, therefore
is likely to be less affected than the nation as a whole during an economic
recession concentrated in construction and manufacturing sectors of the
economy, but is likely to be more affected during a recession concentrated
in the service-producing sector. The State's manufacturing and maritime
base have been seriously eroded, as illustrated by the decline of the steel
industry in the Buffalo area and of the apparel and textile industries in
the City. In addition, the City experienced substantial socio-economic
changes, as a large segment of its population and a significant share of
corporate headquarters and other businesses relocated (many out-of-state).
Both the State and the City experienced substantial revenue increases in
the mid-1980s attributable directly and indirectly to growth in new jobs,
rising profits, and capital appreciation derived from the finance sector of
the City's economy. The finance sector's growth was a catalyst for the New
York City metropolitan region's related business and professional services,
retail trade and residential and commercial real estate markets. The then
rising real estate market contributed to City revenues, as higher property
values and new construction added to collections from property taxes,
mortgage recording, and transfer taxes and sales taxes on building
materials. The boom on Wall Street more than compensated for the continued
erosion of the State's (and the City's) manufacturing and maritime base,
since average wages in finance and related business and professional
services were substantially higher (thereby providing a net increase of
higher incomes, taxed at even higher marginal rates).
During the calendar years 1984 through 1991, the State's rate of economic
expansion was somewhat slower than that of the nation as a whole. In the
1990-91 national recession, the economy of the Northeast region in general
and the State in particular was more heavily damaged than that of the rest
of the nation and has been slower to recover. Although the national economy
began to expand in 1991, the State economy remained in recession until
1993, when employment growth resumed. Employment growth has been hindered
during recent years by significant cutbacks in the computer and instrument
manufacturing, utility and defense industries. Personal income increased
substantially in 1992 and 1993 and the State economy entered the third year
of a slow recovery in 1995. Most of the growth occurred in the trade,
construction and service industries, with business, social services and
health sectors accounting for most of the service industry growth.
According to assumptions contained in the State financial plan for fiscal
year 1995-1996 issued on June 20, 1995 (the 1995-96 State Financial Plan),
employment is expected to grow slightly during 1995, although the rate of
increase is expected to be below the rate experienced in 1994 due to
cutbacks in federal spending and employment, as well as continued corporate
downsizing. The Mid-Year Update to the 1995-96 State Financial Plan issued
on October 25, 1995 (the Mid-Year Update) contains a marginally weaker
economic forecast than that contained in the initial 1995-96 State
Financial Plan, and predicts a significant slowing of State employment
growth during calendar year 1996, due to the forecasted slackening pace of
national economic growth, industry consolidating, and governmental
employment.
Notwithstanding the State budget for fiscal year 1995-96 which enacts
significant tax and program reductions, the State can expect to confront
structural deficits in future years. The 1995-96 State Financial Plan
includes actions that will have an effect on the budget outlook for fiscal
year 1996-97 and beyond. In part, the 1995-96 State Financial Plan reflects
actions which provide nonrecurring measures (sometimes referred to as
"one-shots") variously estimated to provide $900 million to $1.0 billion of
savings. Additionally, the three-year plan to reduce State personal income
taxes, as discussed below briefly, will decrease State tax receipts by an
estimated $1.7 billion in fiscal year 1996-97. Similarly, other actions
taken to reduce disbursements in the State's 1995-96 fiscal year, such as
reductions in the State workforce and Medicaid and welfare expenditures,
are expected to provide greater reductions in future fiscal years. The net
impact of these and other factors is expected to produce a potential
imbalance in receipts and disbursements for State fiscal year 1996-97 and
future fiscal years.
Further, there can be no assurance that the State economy will not
experience worse-than-predicted results in the 1995-96 fiscal year with
corresponding material and adverse effects on the State's projections of
receipts and disbursements. Although the Mid-Year Update (Third-quarter
update) projects a continued balance in the 1995-96 State Financial Plan,
downward revisions have been made to the estimates of both receipts and
disbursements. As the 1995-96 State Financial Plan and the updates thereto
are based upon forecasts of national and State economic activity, it should
be noted that many uncertainties exist in such forecasts, including federal
financial and monetary policies, the availability of credit and the
condition of the world economy. In addition, the economic and financial
condition of the State may be affected by various financial, social,
economic and political factors. These factors can be complex, may vary from
year to year and are frequently the results of actions taken not only by
the State and its agencies and instrumentalities, but also by other
entities, such as the federal government, that are not under the control of
the State.
The fiscal health of the State may also be impacted by the fiscal health of
the City. Although the City has had a balanced budget since 1981, estimates
of the City's future revenues and expenditures are subject to various
uncertainties. For example, the effects of the October 1987 stock market
crash and the 1990-92 national recession have had a disproportionately
adverse impact on the New York City metropolitan region, as private sector
job losses since 1989 have offset all the prior employment gains of the
1980s. Declines in both employment and earnings in the finance sector
contributed to declines in retail sales and real estate values. In
addition, a number of widely publicized bankruptcies among highly leveraged
retailing, brokerage and real estate development companies occurred. The
effects of the recession have extended to banking, insurance, business
services (such as law, accounting and advertising), publishing and
communications. Factors which may inhibit the City's economic recovery
include (i) credit restraints imposed by the weak financial condition of
several major money center banks located in the City; (ii) increases in
combined State and local tax burdens, if uncompetitive tax rates are
imposed; (iii) perceived declines in the quality of life attributable to
service reductions and the deterioration of the City's infrastructure; (iv)
additional employment losses in the City's banking sector or corporate
headquarters complex due to further corporate relocations or
restructurings; or (v) increased expenditures for public health assistance
and care. The City's future economic condition will also likely be affected
by its competitive position as a world financial center (compared to
London, Tokyo, Frankfurt, and competing regional U.S. centers). Investors
should note that the budget for the City's 1996 fiscal year addresses a
projected $2.7 billion budget gap. Most of the budget-gap closing
initiatives may be implemented only with the cooperation of certain City
officials, the City's municipal unions, or the State or Federal
governments. No assurance can be given that such initiatives will be taken.
While the State's economy is broader-based than that of the City,
particular industries are concentrated in and have a disproportionate
impact on certain areas, such as heavy industry in Buffalo, photographic
and optical equipment in Rochester, machinery and transportation equipment
in Syracuse and Utica-Rome, computers in Binghamton and in the Mid-Hudson
Valley, and electrical equipment in the Albany-Troy-Schenectady area.
Constraints on economic growth, taxpayer resistance to proposed substantial
increases in local tax rates, and reductions in State aid in regions apart
from the City have contributed to financial difficulties for several county
and other local governments.
THE STATE. As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and its regional
economies, actions of the federal government, and State actions affecting
the level of receipts and disbursements. Owing to these and other factors,
the State may, in future years, face substantial potential budget gaps
resulting from a significant disparity between tax revenues projected from
a lower recurring receipts base and the future costs of maintaining State
programs at current levels. The State has been experiencing and continues
to experience substantial financial difficulties, with General Fund (the
principal operating account) deficits incurred during the fiscal years
1989-1990 through 1991-1992. The State's accumulated General Fund deficit
(on a GAAP basis) grew 91% from FY1986-87 to FY1990-91, and reached a
then-record $6.265 billion (audited) by March 31, 1991. An accumulated
General Fund deficit at March 31, 1993 was restated to be $2.551 billion.
The State ended its 1993-94 fiscal year with a negative fund balance of
$1.637 billion. This represented an improvement over prior years, primarily
due to an improving national and State economy resulting in
higher-than-expected receipts from personal income tax and various business
taxes and the relative success of the New York Local Government Assistance
Corporation (LGAC). The General Fund showed an operating surplus of $914
million (on a GAAP basis). The State's 1994-95 fiscal year budget was
adopted on June 8, 1994, more than two months after the beginning of the
State's fiscal year. The State ended its FY 1994-95 reporting a General
Fund operating deficit of $1.426 billion, primarily due to changes in
accounting methodologies used by the State Comptroller and the use of
$1.026 billion of the FY 1993-94 cash surplus to fund operating expenses in
FY 1994-95. These factors were offset by net proceeds of $315 million of
bonds issued by LGAC. Actual receipts reported fell short of original
projections, primarily in the categories of business taxes. These
shortfalls were offset by better than expected performance in the remaining
taxes, principally the user taxes and fees. Total expenditures for FY
1994-95 increased $2.083 billion, or 6.7% over the prior fiscal year.
On June 7, 1995, the New York State legislature passed the final
legislation regarding the State's 1995-96 budget. Both the enacted budget
bills for 1995-96 and the 1995-96 State Financial Plan include reductions
in the actual level of spending from that which occurred in the 1994-95
fiscal year and project reductions in Medicaid and State Authority
operating costs. The 1995-96 budget also projects an approximate increase
of 3% in all governmental funds over the amounts received in fiscal year
1994-95 and includes the phase-in of a three-year reduction in the State's
personal income tax. The Governor released his proposed budget for FY
1996-97 on December 15, 1995 (the 1996-97 Executive Budget), 30 days in
advance of the constitutionally-mandated release date. The 1996-97
Executive Budget projects a $3.9 billion budget gap, which it proposes to
close largely by Medicaid cost containment measures (approximately $1.0
billion), welfare reform (approximately $240 million) and restructuring of
the state healthcare delivery system (approximately $470 million). The
phased reduction of the State's personal income tax is continued in the
1996-97 Executive Budget. There are risks and uncertainties concerning
whether or not certain spending and tax cuts will be upheld if challenged
in the courts. For example, the State Comptroller is challenging in court
the proposed use of certain pension reserves. If such suit is successful,
approximately $110 million would become unavailable as a source of
contribution to the balanced State budget. Finding an additional $110
million in reductions or from other sources may prove difficult.
Additionally, even if all spending and tax cuts contained in the State
budget are successfully implemented, resulting in a balanced budget for
fiscal year 1995-96, there can be no assurance that the State will not face
budget gaps in future years, resulting from a disparity between tax
revenues projected from a lower recurring-receipts base and the spending
required to maintain State programs at current levels. Furthermore, the
State is a party to numerous lawsuits in which an adverse decision could
require extraordinary expenditures. Certain major budgetary considerations
affecting the State are outlined below.
REVENUE BASE. The State's principal revenue sources are economically
sensitive, and include the personal income tax (53% of fiscal year 1994-95
General Fund receipts and estimated to be approximately 54% of fiscal year
1995-96 General Fund receipts), user taxes and fees (20% of fiscal year
1994-95 and nearly 21% of estimated 1995-96 General Fund receipts,
respectively). Uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax law also can have an adverse impact on
State tax receipts. One-fourth of the 4% State sales tax has been dedicated
to pay debt service of LGAC, and has correspondingly reduced General Fund
receipts. To the extent those moneys are not necessary for payment to LGAC,
they are transferred from the LGAC Tax fund to the General Fund and
reported as a transfer from other funds rather than as sales and use tax
receipts. During fiscal years 1991-92, 1992-93, 1993-94, and 1994-95 moneys
were so transferred. Capital gains are a significant component of income
tax collections. Auto sales and building materials are significant
components of retail sales tax collections. Tax rates are relatively high
and may impose political and economic constraints on the ability of the
State to further increase its taxes. In 1995, the State enacted a
tax-reduction program designed to reduce, by 20 percent over three years,
receipts from the personal income tax. The tax had remained unchanged since
1989 as a result of annual deferrals of tax reductions originally enacted
in 1987. The tax-reduction program is estimated to reduce receipts by $515
million in the 1995-96 fiscal year, $1.7 billion in the 1996-97 fiscal year
and produce further significant reductions in fiscal year 1997-98. In
addition to such reductions in overall tax rates, the tax-reduction program
also includes other modifications to the tax laws which will have the
effect of lowering the amount of tax revenues to be received by the State.
In the absence of countervailing economic growth or expenditure cuts, the
tax cuts could make the achievement of a balanced State budget more
difficult in future years.
A significant risk to the 1995-96 State Financial Plan arises from tax
legislation pending in the U.S. Congress. Changes to the federal tax
treatment of capital gains, if made, are likely to flow automatically to
the State personal income tax. Such changes, depending upon their precise
character and timing, as well as taxpayer response, could produce either
revenue gain or loss during the remainder of the State's 1995-96 fiscal
year.
STATE DEBT. The State has the heaviest debt burden of any state (with
nearly $5.2 billion of long-term general obligations, $4.7 billion of LGAC
debt and $18 billion of lease-purchase or other contractual debt
outstanding as of March 31, 1995), and debt service costs absorb a large
share of the State's budget. As of March 31, 1995 the State is also
obligated with respect to nearly $7.0 billion for statutory moral
obligations for nine of its Authorities and for guarantees of $358 million
of other Authority debt. Historically, the State has had one of the largest
seasonal financing requirements of any municipal issuer, and was required
each spring to borrow substantial sums from public credit markets to
finance its accumulated General Fund deficit and its scheduled payments of
aid to local governments and school districts. To help reduce such seasonal
financing needs, the State created LGAC as a financing vehicle to finance
the State's local assistance payments by issuing long-term debt, payable
over 30 years from a portion of the State sales tax, as discussed above.
The State budget and State financial plan for fiscal year 1995-96 each
proposes to utilize the remainder of authorized but yet unissued LGAC
bonds. As of June 1995, LGAC had issued bonds and notes to provide net
proceeds of $4.7 billion, thus completing the LGAC program. The impact of
LGAC's borrowing is that the State is able to meet its cash flow needs in
the first quarter of the 1995-96 fiscal year without relying on short-term
seasonal borrowings. Neither the 1995-96 State financial plan nor the
1994-95 State Financial Plan included a spring borrowing, the first time in
35 years that there was no short-term borrowing. Investors should note that
the enabling legislation for LGAC contains a covenant restricting the
amount of any future State spring borrowing, which may reduce the State's
fiscal flexibility in future years.
BUDGETARY FLEXIBILITY. A significant portion of the State's General Fund
budget is accounted for by contractually required expenses (such as pension
and debt service costs) and by federally mandated programs (such as AFDC
and Medicaid). In addition, State aid for school districts comprises a
major share of the budget, and total appropriations and distribution of
such aid is especially contentious politically. Furthermore, the State's
ability to respond to unanticipated developments in the future may have
been impaired since the State has utilized a substantial range of actions
of a non-recurring nature in recent years to finance its General fund
operations, including tapping excess monies in special funds, refinancing
outstanding debt to reduce reserve fund requirements and current (but not
long-term) debt service costs, recalculating pension fund contributions,
selling State assets, reimbursing past General Fund expenditures by the
issuance of authority debt and deferring payment for expenditures to future
fiscal years. The 1995-96 State Financial Plan contains actions of a
non-recurring nature including mergers of certain authorities payments from
the sale of certain State assets, and payments associated with the
resolution of certain court cases, totalling approximately $900 million to
$1 billion. The 1996-97 Executive Budget, however, contains actions of a
non-recurring nature only to the extent of approximately $123 million.
LABOR COSTS. The State government workforce is mostly unionized, subject to
the Taylor Law which authorizes collective bargaining and prohibits (but
has not historically prevented) strikes and work slowdowns. Costs for
employee health benefits have increased substantially, and can be expected
to further increase. The State has a substantial unfunded liability for
future pension benefits, and has utilized changes in its pension fund
investment return assumptions to reduce current contribution requirements.
If such investment earnings assumptions are not sustained by actual
results, additional State contributions will be required in future years to
meet the State's contractual obligations. The State's change in actuarial
method from the aggregate cost method to a modified projected unit credit
in the 1990-91 fiscal year created a substantial surplus that was amortized
and applied to offset the State's contribution through the 1993-94 fiscal
year. This change in actuarial method was ruled unconstitutional by the
State's highest court and the State returned to the aggregate cost method
in fiscal year 1994-95 using a four-year phase-in. Employer contributions,
including the State's, are expected to increase over the next five to ten
years.
PUBLIC ASSISTANCE. The State has the second largest number of persons
receiving public assistance (AFDC and Home Relief) of any state. AFDC costs
are shared among the federal government, the State and its counties
(including the City) by statutory formula. Caseloads tend to rise
significantly during economic downturns, but have fallen only in the later
stages of past economic recoveries.
MEDICAID. The State participates in the federal Medicaid program under a
state plan approved by the Health Care Financing Administration. The
federal government provides a substantial portion of eligible program
costs, with the remainder shared by the State and its counties (including
the City). Basic program eligibility and benefits are determined by federal
guidelines, but the State provides a number of optional benefits and
expanded eligibility. Program costs have increased substantially in recent
years, and account for a rising share of the State budget. Federal law
requires the State adopt reimbursement rates for hospitals and nursing
homes that are reasonable and adequate to meet the costs that must be
incurred by efficiently and economically operated facilities in providing
patient care, a standard that has led to past litigation by hospitals and
nursing homes seeking higher reimbursement from the State. The budget
adopted for fiscal year 1995-96, and in particular the 1996-97 Executive
Budget, each includes reductions in spending for Medicare. Cutbacks in
State spending for Medicaid may adversely affect the financial condition of
hospitals and health care institutions that are the obligors of bonds that
may be held by the fund.
THE STATE AUTHORITIES. The State's Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The New York
State Public Authorities Control Board approves the issuance of debt and
major contracts by ten of the Authorities. As of September 30, 1994, the
date of the latest available data, there were 18 Authorities that had
outstanding debt of $100 million or more, the aggregate debt of which
(including refunding bonds and moral obligation, lease-purchase,
contractual obligation, or State-guaranteed debt) then totaled
approximately $70.3 billion. As of March 31, 1995, aggregate public
authority debt outstanding as State-supported was approximately $28 billion
and State-related debt was approximately $36 billion. In recent years the
State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain Authorities for operating and other
expenses and, (from 1976 to 1987) in fulfillment of its commitments on
moral obligation indebtedness or otherwise, for debt service. The State
budgeted operating assistance of approximately $1.3 billion for the
Metropolitan Transportation Authority (MTA) for fiscal year 1994-1995 and
estimates total State assistance in fiscal year 1995-96 to be approximately
$1.1 billion. This assistance is expected to continue to be required (and
may increase) in future years. Failure by the State to appropriate
necessary amounts or to take other action to permit the Authorities to meet
their obligations could adversely affect the ability of the State and the
Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes.
The MTA, whose credit standing was recently reduced, oversees the operation
of the City's subway and bus lines by its affiliates, the New York City
Transit Authority and the Manhattan and Bronx Surface Transit Operating
Authority (collectively, the TA). MTA subsidiaries operate certain commuter
rail and bus lines in the New York metropolitan area. An affiliated agency,
the Triborough Bridge and Tunnel Authority (TBTA), operates certain
intrastate toll bridges and tunnels. To maintain its facilities and
equipment, which deteriorated significantly in the late 1970s due to
deferred maintenance, the MTA prepared a five-year capital program subject
to approval by the MTA Capital Program Review Board. In April 1993, the
State legislature authorized the funding of a portion of a five-year $9.56
billion capital plan for the MTA for 1992 through 1996. MTA's five-year
capital program for 1992-96 was approved by the State capital program
review board in December 1993. There can be no assurance that all
governmental actions for the 1992-96 capital program will be taken, that
funding sources currently identified will not be decreased or eliminated,
or that the capital program will not be delayed or reduced. If the capital
program is delayed or reduced, ridership and fare revenues may decline,
which could impair the MTA's ability to meet its operating expenses without
additional State assistance. In addition, because fares are not sufficient
to finance its mass transit operations, the MTA has depended and will
continue to depend for operating support upon a system of State, local
government and TBTA support, and to the extent available, Federal
assistance (including loans, grants and operating subsidies). There can be
no assurance that any such assistance will continue at any particular level
or in any fixed relationship to the operating costs and capital needs of
the MTA.
THE CITY. The City has required, and continues to require, significant
financial assistance from the State. The City depends on State assistance
both to enable the City to balance its budget and to meet its cash
requirements. In the early 1970s, the City incurred substantial operating
deficits, and its financial controls, accounting practices, and disclosure
policies were widely criticized. In 1975, the City encountered severe
financial difficulties and lost access to the public credit markets. The
State Legislature responded in 1975 by creating the Municipal Assistance
Corporation For The City of New York (MAC) to provide financing assistance
for the City and the Financial Control Board to exercise certain oversight
and review functions with respect to the City's finances. The Financial
Control Board's powers over the City were suspended in June 1986, but would
be reinstated (under current law) if the City experiences certain adverse
financial circumstances. At the time of the fiscal crisis, the State
provided substantial financial assistance to the City, the federal
government provided the City with direct seasonal loans and guarantees on
the City's long-term debt, and the City's labor unions accepted deferrals
of wage increases and approved purchases of City bonds by the pension
funds. No assurance can be given that similar assistance would again be
made available if needed, particularly given the current budgetary
constraints faced by both the Federal and State governments.
The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas including the provision of
social services such as day care, foster care, health care, family
planning, services for the elderly and special employment services for
needy individuals and families who qualify for such assistance. State law
requires the City to allocate a large portion of its total budget to Board
of Education operations, and mandates the City to assume the local share of
public assistance and Medicaid costs. While the City has had GAAP operating
surpluses, in recent fiscal years the City has experienced and continues to
experience ongoing financial difficulties, primarily related to the impact
of the recent recession on the local economy (reducing revenues from most
major taxes and increasing public assistance and Medicaid caseloads),
rising health care costs for City employees and for Medicaid, and rising
inflation and interest rates. In response, the City implemented gap-closing
programs in recent fiscal years, which initially relied primarily on
actions of a non-recurring nature, but included substantial property tax
rate increases and a personal income tax surcharge imposed in fiscal year
1991 and selected service cutbacks. Reductions in State aid, larger than
budgeted labor settlements and increased police expenditures added to the
adverse budgetary impact of the local recession, confronting the City with
a potential $3.3 billion imbalance during fiscal year 1992 budget
negotiations. This initial budget gap was closed by adoption of a budget
providing for various tax increases and significant service reductions. Aid
to nonprofit cultural institutions in the City was significantly reduced
(as was State aid to such institutions), including certain institutions
that are obligors of bonds that may be held by the fund. The City's budget
for fiscal year 1994 identified measures to close a $300 million budget
gap, which was the result of shortfalls in Federal and State aid from
previously projected levels. The City achieved balanced operating results
as reported in accordance with GAAP for the 1994 fiscal year. For fiscal
year 1995, the City adopted a budget which halted the trend in recent years
of substantial increases in City-funded spending from one year to the next
and the City budget adopted for fiscal year 1996 reduces City-funded
spending for the second consecutive year.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and includes the City's
capital, revenue and expense projections and outlines proposed budget
gap-closing programs for those years with projected budget gaps. The mayor
is responsible for preparing the City's four-year financial plan, including
the City's current financial plan for the 1996 through 1999 fiscal years
(the 1996-1999 Financial Plan). The City's projections set forth in the
1996-1999 Financial Plan are based on various assumptions and contingencies
which are uncertain and which may not materialize. Changes in major
assumptions could significantly affect the City's ability to balance its
budget and to meet its annual cash flow and financing requirements. Such
assumptions and contingencies include the timing and pace of a regional and
local economic recovery, increases in interest rates, the impact on real
estate tax revenues of the real estate market, wage increases for city
employees consistent with those assumed in the 1996-99 Financial Plan,
employment growth, the ability to implement proposed reductions in City
personnel and other cost reduction initiatives which may require in certain
cases the cooperation of the City's municipal unions, the ability of the
New York City Health and Hospitals Corporation and the Board of Education
to take actions to offset reduced revenues, the ability to complete revenue
generating transactions, provision of State and Federal aid and mandate
relief, and the impact on City revenues of proposals for Federal and State
welfare reform. No assurance can be given that the assumptions used by the
City in the 1996-99 Financial Plan will be realized. Furthermore, actions
taken in recent fiscal years to avert deficits may have reduced the City's
flexibility in responding to future budgetary imbalances, and have deferred
certain expenditures to later fiscal years.
The City submitted on July 21, 1995 a fourth quarter modification to the
City's financial plan for the 1995 fiscal year which projects a balanced
budget in accordance with GAAP for the City's 1995 fiscal year. On July 11,
1995, the City submitted the 1996-1999 City Financial Plan, which is based
on the City's expense and capital budgets of the City's 1996 fiscal year
adopted on June 14, 1995 (the 1996 City Budget). The 1996 City Budget sets
forth proposed actions by the City for the 1996 fiscal year to close a
substantial projected budget gap (approximately $3.1 billion) resulting
from lower than projected tax receipts and other revenues and greater than
projected expenditures. Proposed actions in the 1996-1999 Financial Plan
for the City's 1996 fiscal year include a reduction of approximately $400
million primarily affecting public assistance and Medicaid payments by the
City, expenditure reductions in agencies totalling approximately $1.2
billion and transitional labor savings of approximately $600 million. These
and other proposed actions were contained in the 1996-1999 Financial Plan
as well as the 1996 City Budget. The City Budget is subject to the ability
of the City to implement the proposed reductions in expenditures, personal
services and personnel, which are substantial and may be difficult to
implement. For example, one of the key items contained in the 1996 City
Budget is the sale of the City's water system for approximately $2.3
billion. This plan has been hotly contested since it was announced, and is
currently the focus of several lawsuits. In November, the Mayor sued the
City Comptroller to compel his signature on bonds needed to accomplish the
sale of the water system. The Comptroller had blocked the bond sale,
stating that the sale of City water assets would be illegal and "an
improvident fiscal gimmick." In December, a coalition of civic, housing and
environmental groups from New York City and Westchester County (the
Coalition) filed suit to block the Mayor's plan to sell the water system
and announced an intention to join in the Comptroller's battle to block the
bond sale. In addition, certain proposals may be offset by various State
and Federal legislation which could mandate levels of City funding
inconsistent with the 1996 City Budget and the 1996-1999 Financial Plan. In
addition, the 1996-1999 Financial Plan anticipates the receipt of
substantial amounts of Federal aid. Certain proposed State and Federal
actions are subject to approvals from the Legislature, the Governor and the
President, as applicable. Both Federal and State actions are uncertain;
certain legislative proposals contemplate significant reductions in Federal
spending, including proposed Federal welfare reform which could result in
caps on, or block grants of, Federal programs. Further, no assurance can be
given that either such actions will in fact be taken or that the projected
savings will result even if such actions are taken.
The City derives its revenues from a variety of local taxes, user charges,
miscellaneous revenues and federal and State unrestricted and categorical
grants. The City projects that local revenues will provide approximately
68.0% of total revenues in fiscal year 1996 while federal aid, including
categorical grants, will provide 11.7% in fiscal year 1996 and State aid,
including unrestricted aid and categorical grants, will provide 20.3% in
fiscal year 1996. As a proportion of total revenues, State aid has remained
relatively constant over the period from 1980 to 1990, while federal aid
was sharply reduced (having provided nearly 20% of total fiscal year 1980
revenues). The largest source of the City's revenues is the real estate tax
(approximately 22% of total revenues projected for fiscal year 1996), at
rates levied by the City council (subject to certain State constitutional
limits). State legislation requires that increases in assessments of
certain classes of real property be phased-in over a five-year period;
thus, property owners may receive higher assessments when property values
are declining. However, in the event of a reduction in total assessments,
higher tax rates would be required to maintain the same amount of tax
revenue. The City derives the remainder of its tax revenues from a variety
of other economically sensitive local taxes (subject to authorization by
the legislature), including: a local sales and compensating use tax
(primarily dedicated to MAC debt service) imposed in addition to the
State's retail sales tax; the personal income tax on City residents and the
earnings tax on non-residents; a general corporation tax; and a financial
corporation tax. High tax burdens in the city impose political and economic
constraints on the ability of the City to increase local tax rates. The
City's four-year financial plans have been the subject of extensive public
comment and criticism, principally questioning the reasonableness of
assumptions that the City will have the capacity to generate sufficient
revenues in the future to provide the level of services contained in such
City financial plans. On July 10, 1995, S&P lowered the City's credit
rating from A- to BBB+, among the lowest ratings of any major city in the
country. The rating agency cited specifically the City Budget's reliance on
"one-shot" measures to balance the budget for fiscal year 1995-96 without
rectifying the underlying structural problems, its continued optimistic
projections of State and Federal aid, and continued high debt levels. S&P
also mentioned the feeble local economy and the City Budget's over-reliance
on the financial services sector which historically has been volatile.
The City is the largest municipal debt issuer in the nation, and has more
than doubled its debt load since the end of fiscal year 1988, in large
measure to rehabilitate its extensive, aging physical plant. The City's
seasonal borrowing needs increased significantly during fiscal years 1990
and 1991, largely due to delayed State aid payments, and totalled $2.25
billion in fiscal year 1992, $1.4 billion in fiscal year 1993, $1.75
billion in fiscal year 1994 and $2.2 billion in fiscal year 1995. The
City's current capital financing program reflects major reductions
(approximately $2.13 billion) in the size of the capital program to be
implemented cumulatively through fiscal year 1999 which is intended to
reduce future debt service requirements. Such reductions may adversely
affect the condition of the City's aging and deteriorating infrastructure
and physical assets, such as sewers, streets, bridges and tunnels, and mass
transit facilities. Further, the City's capital financing program currently
contemplates receipt of proceeds of approximately $1 billion resulting from
the sale of the City's water and sewer system to the Water Board, and
proposes to utilize a substantial portion of such proceeds for capital
project improvements. It is not certain that such proceeds will become
available for capital improvements, because, as discussed above, both the
City Comptroller and the Coalition have opposed such proposed transfer of
the water and sewer system.
In November 1993, the voters approved a proposed charter whereby Staten
Island would secede from the City. Staten Island is one of five
counties/boroughs, comprising 4% of the City's population and 19% of its
land area. State law provides a complex mechanism for such secession. The
State Legislature is also considering establishment of a similar secession
mechanism for Queens.
OTHER LOCALITIES. Certain localities in addition to the City could have
financial problems which, if significant, could lead to requests for
additional State assistance during the State's 1995-96 fiscal year and
thereafter. Fiscal difficulties experienced by the City of Yonkers, for
example, could result in State actions to allocate State resources in
amounts that cannot yet be determined. In the recent past, the State
provided substantial financial assistance to its political subdivisions,
primarily for aid to elementary, secondary and higher education, Medicaid
income maintenance, and local transportation programs. The legislature
enacted substantial reductions from previously budgeted levels of State aid
since December 1990. To the extent the State is constrained by its
financial condition, State assistance to localities may be further reduced,
compounding the serious fiscal constraints already experienced by many
local governments. Localities also face anticipated and potential problems
resulting from pending litigation (including challenges to local property
tax assessments), judicial decisions and socio-economic trends. The
Legislature enacted substantial reductions from previously budgeted levels
of State aid since December 1990.
SPECIAL CONSIDERATIONS AFFECTING CALIFORNIA
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives, as
discussed below, could adversely affect the market values and marketability
of, or result in default of, existing obligations, including obligations
that may be held by the fund. Obligations of the state or local governments
may also be affected by budgetary pressures affecting the State of
California (the State) and economic conditions in the State. Interest
income to the fund could also be adversely affected. The following
discussion highlights only some of the more significant financial trends
and problems, and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State, its
agencies, or instrumentalities, as available as of the date of this SAI.
FMR has not independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
LIMITATION ON TAXES. Certain obligations held by the fund may be
obligations of issuers that rely in whole or in part, directly or
indirectly, on AD VALOREM property taxes as a source of revenue. The taxing
powers of local governments and districts are limited by Article XIIIA of
the California Constitution, enacted by the voters in 1978 and commonly
known as "Proposition 13." Briefly, Proposition 13 limits to 1% of full
cash value the rate of AD VALOREM property taxes on real property and
generally restricts the increase in taxes upon reassessment of property to
2% per year, except upon new construction or change of ownership (subject
to a number of exemptions). Taxing entities may, however, raise AD VALOREM
taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% AD VALOREM tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as
of March 1, 1975 if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits were filed challenging the acquisition-based
assessment system of Proposition 13, but on June 18, 1992, the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through AD
VALOREM property taxes above the 1% limit; it also requires voters of any
government unit to give 2/3 approval to levy any "special tax." However,
court decisions allowed non-voter-approved levies of "general taxes" which
were not dedicated to a specific use.
A 1986 initiative statute, called "Proposition 62," imposed additional
limits on local governments, by requiring either majority or 2/3 voter
approval for any increases in "general taxes" or "special taxes,"
respectively (other than property taxes, which are unchangeable). Court
decisions had struck down most of Proposition 62 and many local
governments, especially cities, had enacted or raised local "general taxes"
without voter approval. In September 1995, the California Supreme Court
overruled the prior cases, and upheld the constitutionality of Proposition
62. Many aspects of this decision (such as its impact on charter (home
rule) cities, and whether it will have retroactive effect) remain unclear,
but its future effect will be to further limit the fiscal flexibility of
many local governments.
APPROPRIATIONS LIMITS. The State and its local governments are subject to
an annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations
limit imposed. "Appropriations subject to limitation" are authorizations to
spend "proceeds of taxes," which consist of tax revenues and certain other
funds, including proceeds from regulatory licenses, user charges, or other
fees to the extent that such proceeds exceed the cost of providing the
product or service; but " proceeds of taxes" for local governments exclude
most State subventions. No limit is imposed on appropriations of funds
which are not "proceeds of taxes," such as reasonable user charges or fees
and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are: (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters; (2)
appropriations arising from certain emergencies declared by the Governor;
(3) appropriations for certain capital outlay projects; and (4)
appropriations by the State of post-1989 increases in gasoline taxes and
vehicle weight fees.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized by Proposition 111 to follow more closely
growth in the State's economy. For the 1990-91 fiscal year, each unit of
government has recalculated its appropriations limit by taking the actual
1986-87 limit and applying the Proposition 111 annual adjustments forward
to 1990-91. This was expected to raise the limit in most cases.
Under Proposition 111, "excess" revenues are measured over a two-year
cycle. With respect to local governments, excess revenues must be returned
by a revision of tax rates or fee schedules within the two subsequent
fiscal years. The appropriations limit for a local government may be
overridden by referendum under certain conditions for up to four years at a
time. With respect to the State, 50% of any excess revenues is to be
distributed to K-12 school and community college districts (collectively,
K-14 districts) and the other 50% is to be refunded to taxpayers.
In the years immediately following enactment, very few California
governmental entities operated near their appropriations limit. In the
mid-to-late 1980's, many entities were at or approaching their limit, and
several successfully obtained voter approval for four-year waivers of the
limit. Since Proposition 111, the appropriations limit has again ceased to
be a practical limit on California governments, but this condition may
change in the future. During FY 1986-87, State receipts from proceeds of
taxes exceeded its appropriations limit by $1.138 billion, which was
returned to taxpayers. Since that time, appropriations subject to
limitation were under the State limit. The 1996-97 Governor's Budget
proposal estimates State appropriations will be more than $6.4 billion
under the limit for FY 1995-96 and over $9.2 billion under the limit for FY
1996-97.
OBLIGATIONS OF THE STATE OF CALIFORNIA
As of December 31, 1995, the State had approximately $18.3 billion of
general obligation bonds outstanding, and $2.9 billion remained authorized
but unissued. In addition, at June 30, 1995, the State had lease-purchase
obligations, payable from the State's General Fund, of approximately $5.6
billion. State voters will have $5.0 billion of new bond authorizations on
the March 26, 1996 ballot, and additional bonds may be placed on the
November 5, 1996 ballot. Of the State's outstanding general obligation
debt, approximately 21% is presently self-liquidating (for which program
revenues are anticipated to be sufficient to reimburse the General Fund for
debt service payments). In FY 1994-95, debt service on general obligation
bonds and lease-purchase debt was approximately 5.3% of General Fund
revenues. The State has paid the principal of and interest on its general
obligation bonds, lease-purchase debt, and short-term obligations when due.
ECONOMY
The State's economy is the largest among the 50 states and one of the
largest in the world. The State's population grew by 27% in the 1980s and,
at over 32 million, it now represents over 12% of the total U.S.
population. Total personal income in the State, at an estimated $703
billion in 1994, accounts for more than 12% of all personal income in the
nation. Total employment in 1994 was over 14 million, the majority of which
is in the service, trade, and manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected, particularly in Southern California. Job losses
were the worst of any post-war recession. Employment levels stabilized by
late 1993 and steady growth occurred since the start of 1994; pre-recession
job levels are expected to be reached in 1996. Unemployment, while higher
than the national average, came down significantly from the January 1994
peak of 10%. Economic indicators show a steady recovery underway in
California since the start of 1994, although the residential housing sector
has been weaker than in previous recoveries. Any delay or reversal of the
economic recovery may cause a recurrence of revenue shortfalls for the
State.
RECENT STATE FINANCIAL RESULTS
The principal sources of State General Fund revenues in 1994-95 were the
California personal income tax (43% of total revenues), the sales tax
(34%), bank and corporation taxes (13%), and the gross premium tax on
insurance (3%). The State maintains a Special Fund for Economic
Uncertainties (the SFEU), derived from General Fund revenues, as a reserve
to meet cash needs of the General Fund, but which is required to be
replenished as soon as sufficient revenues are available. Year-end balances
in the SFEU are included for financial reporting purposes in the General
Fund balance. In recent years (but not in the past three years, as the
recession has cut revenues), the State has budgeted to maintain the SFEU at
around 3% of General Fund expenditures.
Throughout the 1980s, State spending increased rapidly as the State
population and economy also grew rapidly, including many assistance
programs to local governments, which were constrained by Proposition 13 and
other laws. The largest State program is assistance to local public school
districts. In 1988, an initiative (Proposition 98) was enacted which
(subject to suspension by a 2/3 vote of the Legislature and the Governor)
guarantees local school districts and community college districts a minimum
share of State General Fund revenues (currently about 35%).
Since the start of FY1990-91, the State faced adverse economic, fiscal, and
budget conditions. The economic recession seriously affected State tax
revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget
with the largest programs supported by the General Fund (education, health,
welfare and corrections) growing at rates significantly higher than the
growth rates for the principal revenue sources of the General Fund. These
structural concerns will continue in future years; in particular, it is
anticipated that there will be a need to increase capital and operating
costs of the correctional system in response to a "Three Strikes" law
enacted in 1994 which mandates life imprisonment for certain felony
offenders.
RECENT BUDGETS. As a result of these factors, among others, from the late
1980s until 1992-93 the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years,
and the State accumulated and sustained a budget deficit in the SFEU
approaching $2.8 billion at its peak at June 30, 1993. Starting in FY
1990-91 and for each year thereafter, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature and
Governor eventually agreed on a number of different steps to produce Budget
Acts in the years 1991-92 to 1994-95, including:
(medium solid bullet) significant cuts in health and welfare program
expenditures;
(medium solid bullet) transfers of program responsibilities and some
funding sources from the State to local governments, coupled with some
reduction in mandates on local government;
(medium solid bullet) transfer of about $3.6 billion in annual local
property tax revenues from cities, counties, redevelopment agencies and
some other districts to local school districts, thereby reducing state
funding for schools;
(medium solid bullet) reduction in growth of support for higher education
programs, coupled with increases in student fees;
(medium solid bullet) revenue increases (particularly in the FY 1991-92
budget), most of which were for a short duration;
(medium solid bullet) increased reliance on aid from the federal government
to offset the costs of incarcerating, educating and providing health and
welfare services to undocumented aliens (although these efforts have
produced much less federal aid than the State Administration had
requested); and
(medium solid bullet) various one-time adjustment and accounting changes.
Despite these budget actions, the effects of the recession led to large
unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of FY 1993-94, the accumulated deficit was so large
(almost $2.8 billion) that it was impractical to budget to retire it in one
year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit past the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, to carry the final
retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures and
the turnaround of the economy by late 1993 finally led to the restoration
of positive financial results. While General Fund revenues and expenditures
were essentially equal in FY 1992-93 (following two years of excess
expenditures over revenues), the General Fund had positive operating
results in FY 1993-94 and FY 1994-95, which have reduced the accumulated
budget deficit to around $600 million as of June 30, 1995. The 1996-97
Governor's Budget projects complete elimination of the deficit by June 30,
1996.
A consequence of the accumulated budget deficits in the early 1990s,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the
annual budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and the
Governor failed to adopt a budget for FY 1992-93 by July 1, 1992, which
would have allowed the State to carry out its normal annual cash flow
borrowing to replenish its cash reserves, the State Controller was forced
to issue approximately $3.8 billion of registered warrants (IOUs) over a
2-month period to pay a variety of obligations representing prior years'
(or continuing) appropriations and mandates from court orders. Available
funds were used to make constitutionally-mandated payments, such as debt
service on bonds and warrants.
The State's cash condition became so serious in late spring of 1992 that
the State Controller was required to issue revenue anticipation warrants
maturing in the following fiscal year in order to pay the State's
continuing obligations. The State was forced to rely increasingly on
external debt markets to meet its cash needs, as a succession of notes and
warrants (both forms of short-term cash flow financing) often needed to pay
previously-maturing notes or warrants, were issued in the period from June
1992 to July 1994. These borrowings were used also in part to spread out
the repayment of the accumulated budget deficit over the end of the fiscal
year.
The State issued $7.0 billion of short-term debt in July 1994 to meet its
cash flow needs and to finance the deferral of part of its accumulated
deficit to FY 1995-96. In order to assure repayment of $4.0 billion of this
borrowing which matures on April 25, 1996, the State enacted legislation
(the Trigger Law) which would lead to automatic, across-the-board budget
cuts in General Fund expenditures if cash flow projections made at certain
times deteriorated from estimates made in July 1994 when the borrowings
were made. The State's cash position remained favorable enough during FY
1994-95 that the State Controller determined that no automatic budget cuts
were needed in that year.
CURRENT BUDGET. For the first time in four years, the State entered FY
1995-96 with strengthening revenues based on an improving economy. The
major feature of the Governor's proposed Budget, a 15% phased cut in
personal income and business taxes, was rejected by the Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5% increase from the
prior years. Expenditures were budgeted at $43.4 billion, a 4% increase.
The Department of Finance projected that, after repaying the last of the
carryover budget deficit, there would be a positive balance of less than
$30 million in the SFEU at June 30, 1996.
The Department of Finance projected cash flow borrowings in FY 1995-96
would be the smallest in many years, comprising about $2 billion of notes
to be issued in April 1996, and maturing by June 30, 1996. With full
payment of $4 billion of revenue anticipation warrants on April 25, 1996,
the Department saw no further need for borrowing over the end of the fiscal
year. The Department projected that available internal cash resources to
pay State obligations would be about $1.9 billion at June 30, 1996. On
October 15, 1995, the State Controller, in the last step in the Trigger Law
process, reported that projected cash resources in the General Fund during
FY 1995-96 would be large enough to again avoid the need for any automatic
budget cuts. However, the Controller estimated that the State's cash
position on June 30, 1996 would be about $500 million less than estimated
by the Department of Finance.
The principal features of the 1995-96 Budget Act, in addition to those
noted above, were additional cuts in health and welfare expenditures (some
of which are subject to approvals or waivers by the federal government);
assumed further federal aid for illegal immigrant costs; and an increase in
per-pupil funding for public schools and community colleges, the first such
significant increase in four years.
The Governor's Proposed Budget for FY 1996-97 (the Governor's Budget),
released on January 10, 1996, updated financial projections for the current
year. With the improved economic conditions, the Department of Finance
projects $45.0 billion of General Fund revenues, and expenditures are
projected to increase to $44.2 billion for FY 1995-96. The net results are
projected to leave a budget reserve in the SFEU of about $40 million at
June 30, 1996, thus finally repaying the accumulated deficits of the
recession years.
The Governor's Budget proposes General Fund spending in 1996-97 of $45.2
billion, with revenues of $45.6 billion, leaving a budget reserve in the
SFEU of about $400 million. The Governor has again proposed a three-year
phased 15% reduction of personal income and corporate tax rates. The
Governor"s Budget also assumes implementation of certain
previously-approved cuts in health and welfare costs, adoption of further
cuts in welfare payments, and receipt of new federal aid for illegal
immigrant costs. The Governor's Budget proposes increased expenditures for
K-12 school aid, higher education, and corrections. The Governor's Budget
projects annual cash flow borrowing of about $3.2 billion.
The State's financial difficulties for the past budget years and other
factors noted above will result in continued pressure upon almost all local
governments, especially those which depend on State aid, such as school
districts and counties. While recent budgets included both permanent tax
increases and actions to reduce costs of state government over the longer
term, the Governor and other analysts have noted that structural imbalances
still exist, and there can be no assurance that the State will not face
budget gaps in the future.
State general obligation bonds are currently rated "A1" by Moody's, "A" by
Fitch Investors Service, Inc., and "A" by S&P. There can be no assurance
that such ratings will be maintained in the future. All three of these
ratings were reduced from "AAA" levels since late 1991.
OBLIGATIONS OF OTHER CALIFORNIA ISSUERS
STATE ASSISTANCE. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the State's Legislature enacted measures to provide for the redistribution
of the State's General Fund surplus to local agencies; the reallocation of
certain State revenues to local agencies; and the assumption of certain
governmental functions by the State to assist municipal issuers to raise
revenues. Total local assistance from the State's General Fund totaled
approximately $29.1 billion in FY 1993-94 (about 70% of General Fund
expenditures) and has been budgeted at $30.5 billion for FY 1994-95,
including the effect of implementing reductions in certain aid programs. To
reduce State General Fund support for school districts, the 1992-93 and
1993-94 Budget Acts caused local governments to transfer $3.8 billion of
property tax revenues to school districts, representing reversal of the
post-Proposition 13 "bailout" aid.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other considerations, the absolute level, or the rate of growth, of State
assistance to local governments may continue to be reduced. Any such
reductions in State aid could compound the serious fiscal constraints
already experienced by many local governments, particularly counties. At
least one rural county (Butte) publicly announced that it might enter
bankruptcy proceedings in August 1990, although such plans were put off
after the Governor approved legislation to provide additional funds for the
county. Other counties have also indicated that their budgetary condition
is extremely grave. At the start of FY 1995-96, Los Angeles County (L.A.
County), the largest county in the State, faced a nominal $1.2 billion gap
in its $12 billion budget, half of which was in the L.A. County health care
system. The gaps were closed only with significant cuts in services and
personnel, particularly in the health care system, federal aid, and
transfer of some funds from other local governments to the L.A. County
pursuant to special legislation. L.A. County's debt was downgraded by
Moody's and S&P in the summer of 1995. A school district (Richmond Unified)
filed for protection under bankruptcy laws several years ago, but the
petition was later dismissed; other school districts have indicated
financial stress, although none has threatened bankruptcy.
ORANGE COUNTY. On December 6, 1994, Orange County, California (Orange
County), together with its pooled investment funds (the Pools) filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports
that the Pools had suffered significant market losses in their investments,
causing a liquidity crisis for the Pools and Orange County. More than 200
other public entities, most but not all located in Orange County, were also
depositors in the Pools. Orange County estimated the Pools' losses at
approximately $1.7 billion, or 22% of its initial deposits of approximately
$7.5 billion. Many of the entities which kept money in the Pools (Pool
participants), including Orange County, faced cash flow difficulties,
suffered ratings adjustments, and implemented cuts in personnel and
programs. Some obligations of Orange County and certain other Pool
participants had technical defaults, or were rescheduled. The Bankruptcy
Court has approved a settlement agreement between Orange County and most of
the other Pool participants which provided about 80% (90% in the case of
school districts) return of cash invested, with the balance to be repaid
over time, including from potential recoveries in lawsuits. Orange County
has implemented a financial recovery plan which includes significant
personnel cuts, and refinancing of current debts using new funds
transferred to Orange County from certain other local governments pursuant
to special legislation adopted in late 1995.
The State has no obligation with respect to any obligations or securities
of Orange County or any of the other Pool participants. However, the State
may be obligated to intervene to ensure that school districts have
sufficient funds to operate, or to maintain certain Orange
County-administered State programs. As of January 1, 1996, no school
districts which were Pool participants had become insolvent.
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
Mello-Roos bonds may be adversely affected by a general decline in real
estate values or a slowdown in real estate sales activity. In many cases,
such bonds are secured by land which is undeveloped at the time of issuance
but anticipated to be developed within a few years after issuance. In the
event of such reduction or slowdown, such development may not occur or may
be delayed, thereby increasing the risk of a default on the bonds. Because
the special assessments or taxes securing these bonds are not the personal
liability of the owners of the property assessed, the lien on the property
is the only security for the bonds. Moreover, in most cases the issuer of
these bonds is not required to make payments on the bonds in the event of
delinquency in the payment of assessments or taxes, except from amounts, if
any, in a reserve fund established for the bonds.
CALIFORNIA LONG-TERM LEASE OBLIGATIONS. Certain State long-term lease
obligations, though typically payable from the General Fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be
no remedies available to the holders of the certificates evidencing the
lease obligation in the event abatement occurs. The most common causes of
abatement are failure to complete construction of the facility before the
end of the period during which lease payments have been capitalized and
uninsured casualty losses to the facility (e.g., due to earthquake). In the
event abatement occurs with respect to a lease obligation, lease payments
may be interrupted (if all available insurance proceeds and reserves are
exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (District) entered
into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover
operating deficits. Following a fiscal crisis in which the District's
finances were taken over by a State receiver (including a brief period
under bankruptcy court protection), the District failed to make rental
payments on this lease, resulting in a lawsuit by the Trustee for the
Certificate of Participation holders. One of the defenses raised in answer
to this lawsuit was the invalidity of the original lease transaction. The
trial court upheld the validity of the District's lease, and the case has
been settled. However, any future judgment in a similar case against the
position taken by the Trustee may have implications for lease transactions
of a similar nature by other State entities.
OTHER CONSIDERATIONS. The repayment of Industrial Development Securities
secured by real property may be affected by State laws limiting foreclosure
rights of creditors. Health Care and Hospital Securities may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on AD VALOREM property taxes may particularly affect "tax
allocation" bonds issued by State redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (for example, because
of a major natural disaster such as an earthquake), the tax increment
revenue may be insufficient to make principal and interest payments on
these bonds. Both Moody's and S&P suspended ratings on State tax allocation
bonds after the enactment of Articles XIIIA and XIIIB, and only resumed
such ratings on a selective basis.
Proposition 87, approved by State voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are
the issuers of Tax Allocation Securities) no longer receive an increase in
tax increment when taxes on property in the project area are increased to
repay voter-approved bonded indebtedness.
Substantially all of the State is within an active geologic region subject
to major seismic activity. Any California municipal obligation held by the
fund could be affected by an interruption of revenues because of damaged
facilities or, consequently, income tax deductions for casualty losses or
property tax assessment reductions. Compensatory financial assistance could
be constrained by the inability of (i) an issuer to have obtained
earthquake insurance coverage at reasonable rates; (ii) an insurer to
perform on its contracts of insurance in the event of widespread losses; or
(iii) the federal or State government to appropriate sufficient funds
within their respective budget limitations.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution (described briefly above), the ambiguities and possible
inconsistencies in their terms, and the impossibility of predicting future
appropriations or changes in population and the cost of living, and the
probability of continuing legal challenges, it is not currently possible to
determine fully the impact of Article XIIIA or Article XIIIB, or the
outcome of any pending litigation with respect to those provisions on State
obligations held by the fund or on the ability of the State or local
governments to pay debt service on such obligations. Legislation has been
or may be introduced (either in the State Legislature or by initiative)
which would modify existing taxes or other revenue-raising measures or
which either would further limit or, alternatively, would increase the
abilities of State and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which
any such legislation will be enacted, or if enacted, how it would affect
California municipal obligations. It is also not presently possible to
predict the extent of future allocations of State revenues to local
governments or the abilities of State or local governments to pay the
interest on, or repay the principal of, such California municipal
obligations in light of future fiscal circumstances.
SPECIAL CONSIDERATIONS AFFECTING PUERTO RICO
The following highlights some of the more significant financial trends and
problems affecting the Commonwealth of Puerto Rico (the Commonwealth or
Puerto Rico) and is based on information drawn from official statements and
prospectuses relating to the securities offerings of Puerto Rico, its
agencies and instrumentalities, available as of the date of this SAI. FMR
has not independently verified any of the information contained in such
official statements, prospectuses, and other publicly available documents,
but it is not aware of any fact which would render such information
materially inaccurate.
The economy of Puerto Rico is closely integrated with that of the United
States. In fiscal 1994, trade with the United States accounted for
approximately 87% of Puerto Rico's exports and approximately 67% of its
imports. In this regard, Puerto Rico experienced a $4.3 billion positive
adjusted merchandise trade balance in fiscal 1994.
Since fiscal 1985, personal income, both aggregate and per capita, have
increased consistently each fiscal year. In fiscal 1994, aggregate personal
income was $25.7 billion and personal income per capita was $7,047. Gross
domestic product in fiscal year 1991, 1992, 1993, 1994, and 1995 was $22.8
billion, $23.7 billion, $25.2 billion, $26.6 billion, and $28.3 billion,
respectively. For fiscal 1996, an increase in gross product of 2.7% over
fiscal 1995 is forecasted. However, actual growth in the Puerto Rico
economy will depend on several factors, including the state of the U.S.
economy, the exchange rate for the U.S. dollar, increases in exports and
visitors to the Commonwealth, the price stability of oil imports, the level
of federal transfers, and the cost of borrowing. Due to uncertainties with
respect to these factors, there is no assurance that the economy of Puerto
Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five year period
from fiscal 1990 through fiscal 1994. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession in 1991. This was primarily because of low oil
prices, low interest rates, and Puerto Rico's strong manufacturing base,
which has a large component of non-cyclical industries. Other factors in
the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, the level of federal transfers, and the relatively low
cost of borrowing funds during that period.
Puerto Rico has made marked improvements in fighting unemployment.
Nonetheless, although unemployment is at relatively low historical levels
for the Commonwealth, it remains above the U.S. average. The unemployment
rate declined from 16.0% to 13.8% from fiscal 1994 to fiscal 1995. As of
October 1995, the unemployment rate stood at 15.0%. Despite this relative
downturn, there is a possibility that the unemployment rate will increase
if there are changes in factors that directly impact the economy of Puerto
Rico.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy and accounted for $16.3 billion or 41.5% of gross
domestic product in fiscal 1994. However, manufacturing has experienced a
basic change over the years as a result of the influx of higher wage, high
technology industries such as pharmaceuticals, electronics, computers,
microprocessors, scientific instruments, and high technology machinery. The
service sector, which includes wholesale and retail trade, finance and real
estate, ranks second in its contribution to gross domestic product and is
the economic sector that employs the greatest number of people. In fiscal
1994, the service sector generated $15 billion in gross domestic product
and employed over 478,000 people. The government sector of the Commonwealth
also plays an important role in the economy of the island. In fiscal 1994,
the government accounted for $4.1 billion of Puerto Rico's gross domestic
product and provided 22.2% of total employment. Tourism also contributed
significantly to the island economy and total visitor expenditures amounted
to $1.8 billion in fiscal 1995.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
(Section 936), and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application a credit (the Section 936 credit) against their
U.S. corporate income tax on the portion of the tax attributable to (i)
income derived from the active conduct of a trade or business in Puerto
Rico (active business income) or from the sale or exchange of substantially
all of the assets used in the active conduct of such trade or business and
(ii) qualified possession source investment income. The Industrial
Incentives Program, through the 1987 Industrial Incentives Act, grants
corporations engaged in certain qualified activities a fixed 90% exemption
from Commonwealth income and property taxes and a 60% exemption from
municipal license taxes.
Pursuant to amendments to the Internal Revenue Code (the Code) for taxable
years commencing after 1993, two alternative limitations apply to the
Section 936 credit against active business income and sale of assets
income, as previously described. The first option limits the credit against
such income to 40% of the credit allowable previous to the amendments of
1993, with a five-year phase-in period starting at 60% of the current
allowable credit (the Percentage Limitation). The second option limits the
allowable credit to the sum of (i) 60% of qualified compensation paid to
employees (as defined in the Code), (ii) a specified percentage of
depreciation deductions, and (iii) a portion of the Puerto Rico income
taxes paid by the Section 936 corporation, up to a 9% effective tax rate
(the Economic Activity Limitation).
On November 17, 1995, the U.S. Congress adopted, as part of its larger
federal income tax legislative package, a ten-year phase-out of the current
Section 936 credit for companies that are existing credit claimants and the
elimination of the credit for companies establishing new operations in
Puerto Rico and for existing companies that add a substantial new line of
business. The Section 936 credit based on the Economic Activity Limitation
will continue as under current law without change until tax years beginning
in 2002, during which years a corporation's possession business income will
be subject to a cap based on its possession income for an average adjusted
base period. The credit based on the Percentage Limitation will continue as
under current law until tax years beginning in 1998. In that year and
thereafter, the credit based on the Percentage Limitation will be 40%, but
the possession business income will be subject to a cap based on a
corporation's possession income for an average adjusted base period. The
Section 936 credit is eliminated entirely for taxable years beginning in
2006. However, the credit granted to qualified possession source investment
income is eliminated for taxable years beginning after December 31, 1995.
President Clinton vetoed the legislation submitted by the U.S. Congress on
December 7, 1995. The Administration has proposed a modification to the
Section 936 credit that would phase out the credit based on the Percentage
Limitation over a five year period beginning in 1997, retain the credit
based upon the Economic Activity Limitation under current law, allow a
five-year carry forward of excess Section 936 credit based upon the
Economic Activity Limitation, and retain the Section 936 credit granted to
qualified possession source investment income under current law.
The Governor of Puerto Rico has proposed to the U.S. Congress a
modification of the total elimination of the Section 936 credit by offering
qualifying companies the option of the existing Section 936 credit, as
amended by the U.S. House of Representatives proposal, or a new incentive
program, to be available throughout the United States, including Puerto
Rico. The proposal would provide such companies a credit based on
qualifying wages paid, other wage-related expenses such as fringe benefits,
depreciation expenses for certain tangible assets, research and development
expenses, and passive investment income from qualifying investments in the
subject jurisdiction, so long as the company's employees are in an
"economically developing" jurisdiction in which prevailing per capita
income is substantially below the national average, among other things. The
credit granted to qualifying companies would continue in effect until the
jurisdiction shows, among other things, substantial economic improvement in
terms of the specified economic parameters. The Governor's proposal is not
currently included in either the legislation adopted by the U.S. Congress
on November 17, 1995 or in the Administration's proposal. It is not
possible at this time to determine the final legislative changes that may
be made to Section 936 or the effect that this will have on the long-term
outlook for the economy of Puerto Rico.
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 Contracts"), 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, for equity funds, 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 funds 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
(for equity funds), and is based upon the quality of research and execution
services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds 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 funds. 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 a
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to 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 funds 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 into an unlimited liability company and
assumed the name FBS.
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 a fund toward payment of that 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.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds 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 the fund.
For Mortgage Securities, the investment activities described herein are
likely to result in the fund engaging in a considerable amount of trading
of securities held for less than one year. Accordingly, it can be expected
that the fund will have a higher turnover rate, and thus a higher incidence
of short-term capital gains taxable as ordinary income, than might be
expected from investment companies that invest substantially all of their
funds on a long-term basis.
For the fiscal periods ended 1995 and 1996, respectively, each fund's
portfolio turnover rates are shown in the chart below. 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. An increased turnover rate may be due to a
greater volume of shareholder purchase or redemption orders, short-term
interest rate volatility and other special market conditions.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FUND FISCAL PERIOD ENDED 1995 1996
TechnoQuant Growth November 30 n/a 200%*
Overseas October 31 47% %
Mid Cap November 30 n/a %**
Equity Growth November 30 97% %
Growth Opportunities October 31 39% %
Strategic Opportunities December 31+ 142% %
Large Cap November 30 n/a %**
Growth & Income November 30 n/a 200%*
Equity Income November 30 80% %
Balanced October 31 297% %
Emerging Markets Income December 31 305% %
High Yield October 31 112% %
Strategic Income December 31 193% %
Government Investment October 31 261% %
Intermediate Bond November 30 189% %
Mortgage Securities July 31 329% %
Short Fixed-Income October 31 179% %
High Income Municipal October 31 37% %
Municipal Bond December 31 72% %
Intermediate Municipal Income November 30 53% %
Short-Intermediate Municipal Income November 30 80% %
New York Municipal Income October 31 %** %
California Municipal Income October 31 n/a %**
</TABLE>
* Estimated 1997 turnover rate
** Annualized
+ As of November 9, 1994, the fiscal year end for Strategic Opportunities
changed from September 30 to December 31.
The following tables show the brokerage commissions paid by Overseas,
Equity Growth, Growth Opportunities, Strategic Opportunities, Equity
Income, Balanced, Emerging Markets Income, High Yield, and Strategic
Income. The first table shows the total amount of brokerage commissions
paid by each fund and the total amount of brokerage commissions paid to
FBSI and FBS (fo rmerly FBSL) for the past three fiscal years. The
second table shows the percentage of aggregate brokerage commis sions
paid to and the percentage of the aggregate dollar amount of transactions
for which the fund paid brokerage commissions effected through FBSI and FBS
for the fiscal year ended 1996. The third table shows amount of brokerage
commissions paid to firms providing research and the approximate dollar
amount of the transactions on which broke rage commissions were paid for
the fiscal year ended 1996. Each of these funds pays both commissions and
spreads in connection with the placement of portfolio transactions; FBSI
and FBS are paid on a commission basis. The difference between the
percentage of brokerage commissions paid to and the percentage of the
dollar amount of transactions effected through FBSI is a result of the low
commission rates charged by FBSI. The other funds paid no brokerage
commissions for the fiscal years ended 1994 through 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL PERIOD TOTAL TO FBSI TO FBS
ENDED AMOUNT PAID
OVERSEAS October 31
1996 $ $ $
1995 $ 1,420,464 $ 5,926 $ 142,450
1994 1,601,660 685 0
MID CAP November 30
1996
EQUITY GROWTH November 30
1996
1995 2,185,589 862,434 2,034
1994 2,086,370 729,903 0
GROWTH OPPORTUNITIES October 31
1996
1995 6,189,975 1,793,388 9,682
1994 3,589,080 1,368,574 0
STRATEGIC OPPORTUNITIES December 31
1996
1995 1,138,485 217,580 0
10/1/94-12/31/94 403,617 70,465 96
10/1/93-9/30/94 1,166,854 151,233 0
LARGE CAP November 30
1996
EQUITY INCOME November 30
1996
1995 1,410,440 549,549 7,528
1994 827,499 290,182 0
BALANCED October 31
1996
1995 8,952,888 2,249,157 122,777
1994 7,338,038 1,104,577 0
EMERGING MARKETS INCOME December 31
1996
1995 11,820 0 0
1994 0 0 0
HIGH YIELD October 31
1996
1995 123,145 3,958 0
1994 0 0 0
STRATEGIC INCOME December 31
1996
1995 152 0 0
1994 0 0 0
GOVERNMENT INVESTMENT October 31
1996
INTERMEDIATE BOND November 30
1996
MORTGAGE SECURITIES July 31
1996
SHORT FIXED-INCOME October 31
1996
HIGH INCOME MUNICIPAL October 31
1996
MUNICIPAL BOND December 31
1996
INTERMEDIATE MUNICIPAL INCOME November 30
1996
SHORT-INTERMEDIATE MUNICIPAL INCOME November 30
1996
NEW YORK MUNICIPAL INCOME October 31
1996
CALIFORNIA MUNICIPAL INCOME October 31
1996
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL PERIOD % OF % OF % OF % OF
ENDED 1996 COMMISSIONS TRANSACTIONS COMMISSIONS TRANSACTIONS
PAID TO FBSI EFFECTED THROUGH PAID TO FBS EFFECTED THROUGH
FBSI FBS
OVERSEAS October 31 % % % %
MID CAP November 30 % % % %
EQUITY GROWTH November 30 % % % %
GROWTH OPPORTUNITIES October 31 % % % %
STRATEGIC OPPORTUNITIES December 31 % % % %
LARGE CAP November 30 % % % %
EQUITY INCOME November 30 % % % %
BALANCED October 31 % % % %
EMERGING MARKETS INCOME December 31 % % % %
HIGH YIELD October 31 % % % %
STRATEGIC INCOME December 31 % % % %
GOVERNMENT INVESTMENT October 31 % % % %
INTERMEDIATE BOND November 30 % % % %
MORTGAGE SECURITIES July 31 % % % %
SHORT FIXED-INCOME October 31 % % % %
HIGH INCOME MUNICIPAL October 31 % % % %
MUNICIPAL BOND December 31 % % % %
INTERMEDIATE MUNICIPAL November 30 % % % %
INCOME
SHORT-INTERMEDIATE November 30 % % % %
MUNICIPAL INCOME
FISCAL PERIOD % OF % OF % OF % OF
ENDED 1996 COMMISSIONS TRANSACTIONS COMMISSIONS TRANSACTIONS
PAID TO FBSI EFFECTED THROUGH PAID TO FBS EFFECTED THROUGH
FBSI FBS
NEW YORK MUNICIPAL October 31 % % % %
INCOME
CALIFORNIA MUNICIPAL October 31 % % % %
INCOME
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL PERIOD AMOUNT PAID TO FIRMS TOTAL AMOUNT OF
ENDED 1996 PROVIDING RESEARCH* TRANSACTIONS ON WHICH
COMMISSIONS WERE PAID
OVERSEAS October 31 $ $
MID CAP November 30
EQUITY GROWTH November 30
GROWTH OPPORTUNITIES October 31
STRATEGIC OPPORTUNITIES December 31
LARGE CAP November 30
EQUITY INCOME November 30
BALANCED October 31
EMERGING MARKETS INCOME December 31
HIGH YIELD October 31
STRATEGIC INCOME December 31
GOVERNMENT INVESTMENT October 31
INTERMEDIATE BOND November 30
MORTGAGE SECURITIES July 31
SHORT FIXED-INCOME October 31
HIGH INCOME MUNICIPAL October 31
MUNICIPAL BOND December 31
INTERMEDIATE MUNICIPAL INCOME November 30
SHORT-INTERMEDIATE MUNICIPAL INCOME November 30
NEW YORK MUNICIPAL INCOME October 31
CALIFORNIA MUNICIPAL INCOME October 31
</TABLE>
* The provision of research services was not necessarily a factor in the
placement of all this business with such firms.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION
FSC normally determines each class's net asset value per share (NAV) as
of the close of the New York Stock Exchange (NYSE) (normally 4:00 p.m.
Eastern time). The valuation of portfolio securities is determined as of
this time for the purpose of computing each class's NAV and, where
applicable, offering price.
GROWTH AND GROWTH & INCOME FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for which
the primary market is the United States are valued at last sale price or,
if no sale has occurred, at the closing bid price. Most equity securities
for which the primary market is outside the United States are valued using
the official closing price or the last sale price in the principal market
in which they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price normally is used.
Fixed-income securities and other assets for which market quotations are
readily available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal market is
an exchange) in the principal market in which they normally are traded, as
furnished by recognized dealers in such securities or assets. Fixed-income
securities and convertible securities may also be valued on the basis of
information furnished by a pricing service that uses a valuation matrix
which incorporates both dealer-supplied valuations and electronic data
processing techniques. Use of pricing services has been approved by the
Board of Trustees. A number of pricing services are available, and the
funds may use various pricing services or discontinue the use of any
pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which market quotations are not readily available are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. In addition, securities and other assets for
which there is no readily available market value may be valued in good
faith by a committee appointed by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities owned
by a fund if, in the opinion of a committee appointed by the Board of
Trustees, some other method would more accurately reflect the fair market
value of such securities.
TAXABLE INCOME FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities and other
assets for which market quotations are readily available may be valued at
market values determined by such securities' most recent bid prices (sales
prices if the principal market is an exchange) in the principal market in
which they normally are traded, as furnished by recognized dealers in such
securities or assets.
Fixed-income securities and convertible securities may also be valued on
the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Use of pricing services has been
approved by the Board of Trustees. A number of pricing services are
available, and the funds may use various pricing services or discontinue
the use of any pricing service.
Most equity securities for which the primary market is the United States
are valued at last sale price or, if no sale has occurred, at the closing
bid price. Most equity securities for which the primary market is outside
the United States are valued using the official closing price or the last
sale price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated quote
or last bid price normally is used.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars. Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less for
which market quotations are not readily available are valued either at
amortized cost or at original cost plus accrued interest, both of which
approximate current value. In addition, securities and other assets for
which there is no readily available market value may be valued in good
faith by a committee appointed by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities owned
by a fund if, in the opinion of a committee appointed by the Board of
Trustees, some other method would more accurately reflect the fair market
value of such securities.
MUNICIPAL FUNDS
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities may also be
valued on the basis of information furnished by a pricing service that uses
a valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Use of pricing services has been
approved by the Board of Trustees. A number of pricing services are
available, and the funds may use various pricing services or discontinue
the use of any pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Securities and other assets for which there is no readily available market
value 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 a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
PERFORMANCE
Each class of shares may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. Share price, yield, and total return
fluctuate in response to market conditions and other factors, and the value
of shares when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for a class are computed by dividing the class's
pro rata share of the applicable interest and dividend income, if any, for
a given 30-day or one-month period, net of expenses, by the average number
of shares of that class entitled to receive distributions during the
period, dividing this figure by the class's net asset value (NAV) or
offering price, as appropriate, at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at
a discount by adding a portion of the discount to daily income. For a
fund's investments denominated in foreign currencies, income and expenses
are calculated first in their respective currencies, and are then converted
to U.S. dollars, either when they are actually converted or at the end of
the 30-day or one month period, whichever is earlier. Capital gains and
losses generally are excluded from the calculation as are gains and losses
from currency exchange rate fluctuations. Income is adjusted to reflect
gains and losses from principal repayments received by a fund with respect
to mortgage-related securities and other asset-backed securities. Other
capital gains and losses generally are excluded from the calculation.
Income calculated for the purposes of calculating a class's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
In calculating a class's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing a class's yield.
Yield information may be useful in reviewing a class's performance and in
providing a basis for comparison with other investment alternatives.
However, each class's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates, a
class's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the class's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the class's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
A class's tax-equivalent yield is the rate an investor would have to
earn from a fully taxable investment before taxes to equal the class's
tax-free yield. Tax-equivalent yields are calculated by dividing a class's
yield by the result of one minus a stated federal or combined federal
and, if applicable, state income tax rate. If only a portion of a class's
yield is tax-exempt, only that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and, where appli cable, state income tax
laws for 1997. The second table shows the approximate yield a taxable
security must provide at various income brackets to produce after-tax
yields equivalent to those of hypothetical tax-exempt obligations yielding
from 2.00% to 8.00%. Of course, no assurance can be given that a class will
achieve any specific tax-exempt yield. While the munici pal funds invest
principally in obligations whose interest is exempt from federal or from
federal and state income tax, other income received by the funds may be
taxable. The tables do not take into account local taxes, if any, payable
on fund distributions.
EXPECTED 1997 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If individual tax-exempt
yield is:
2.00 3.00 4.00 5.00 6.00 7.00 8.00
% % % % % % %
Taxable Income* Federal
Income
Tax
Single Return Joint Return Bracket** Then taxable equivalent
yield is:
$ 0 - $ 24,000 $ 0 - $ 40,100 15.0% % % % % % % %
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28.0% % % % % % % %
$ 58,151 - $ 121,300 $ 96,901 - $ 147,700 31.0% % % % % % % %
$ 121,301 - $ 263,750 $ 147,701 - $ 263,750 36.0% % % % % % % %
$ 236,751 - + $ 263,751 - + 39.6% % % % % % % %
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A federally tax-exempt fund may invest a portion of its assets in
obligations that are subject to federal income tax. When a fund invests
in these obligations, its tax-equivalent yields will be lower. In the table
above, tax-equivalent yields are calculated assuming investments are
100% federally tax-free.
NEW YORK MUNICIPAL INCOME ONLY
Use the first table to find your approximate effective tax bracket as a
New York State resident with triple taxe s (federal, state, and New York
City) or double taxes (federal and state) for 1997.
1997 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Taxable Income* Marginal Tax Rate
Single Return Joint Return Margina New New Combined Combined
l York York New York New York
Federal State City State and State, City
Income Federal and Federal
Tax Effective Tax
Bracket Tax Bracket**
Bracket**
$ 0 - $ 24,000 $ 0 - $ 40,100 15.0 % % % %
$ 24,001 - $ 25,000 $ 40,101 - $ 45,000 28.0 % % % %
$ 25,001 - $ 58,150 $ 45,001 - $ 96,900 28.0 % % % %
$ 58,151 - $ 60,000 $ 96,901 - $ 108,000 31.0 % % % %
$ 60,001 - $ 121,300 $ 108,001 - $ 147,700 31.0 % % % %
$ 121,301 - $ 263,750 $ 147,701 - $ 263,750 36.0 % % % %
$ 263,751 - + $ 263,751 - + 36.6 % % % %
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the appropriate table
below to determine the tax-equivalent yield for a given tax-free yield.
NEW YORK CITY RESIDENTS - TRIPLE TAXES - 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal, state, and New York City personal income tax rate in 1997 is:
15.00% 36.29% 36.30% 38.95% 38.99% 43.41% 46.60%
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
2% % % % % % % %
3% % % % % % % %
4% % % % % % % %
5% % % % % % % %
6% % % % % % % %
7% % % % % % % %
8% % % % % % % %
9% % % % % % % %
10% % % % % % % %
11% % % % % % % %
</TABLE>
NEW YORK STATE RESIDENTS (OUTSIDE NYC) - DOUBLE TAXES - 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal and state personal income tax rate in 1997 is:
15.00% 33.13% 33.13% 35.92% 35.92% 40.56% 43.90%
To match these Your taxable investment would have to earn the following yield:
tax-free yields:
2% % % % % % % %
3% % % % % % % %
4% % % % % % % %
5% % % % % % % %
6% % % % % % % %
7% % % % % % % %
8% % % % % % % %
9% % % % % % % %
10% % % % % % % %
11% % % % % % % %
</TABLE>
The fund may invest a portion of its assets in obligations that are subject
to city, state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
the tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
CALIFORNIA MUNICIPAL INCOME ONLY
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1997.
1997 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Taxable Income* Federal Income State Combined
California and
Federal Effective
Single Return Joint Return Tax Bracket Marginal Rate Tax Bracket**
$ 0 - $ 4,831 $ 0 - $ 9,662 15.0% 1.0% %
$ 4,832 - $ 11,449 $ 9,663 - $ 22,898 15.0% 2.0% %
$ 11,450 - $ 18,068 $ 22,899 - $ 36,136 15.0% 4.0% %
$ 18,069 - $ 24,000 $ 36,137 - $ 40,100 15.0% 6.0% %
$ 24,001 - $ 25,083 $ 40,101 - $ 50,166 28.0% 6.0% %
$ 25,084 - $ 31,700 $ 50,167 - $ 63,400 28.0% 8.0% %
$ 31,701 - $ 58,150 $ 63,401 - $ 96,900 28.0% 9.3% %
$ 58,151 - $ 109,936 $ 96,901 - $ 147,700 31.0% 9.3% %
$ 109,937 - $ 121,300 31.0% 10.0% %
$ 147,701 - $ 219,872 36.0% 9.3% %
$ 121,301 - $ 219,872 $ 219,873 - $ 263,750 36.0% 10.0% %
$ 219,873 - $ 263,750 36.0% 11.0% %
$263,751 - $ 439,744 39.6% 10.0% %
$263,751 - + $ 439,745 - + 39.6% 11.0% %
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If your effective combined federal and state personal tax rate in 1997 is:
15.85% 16.70% 18.40% 20.10% 32.32% 33.76% 34.70% 37.42% 37.90% 41.95% 42.40% 43.04% 45.64% 46.24%
To match Your taxable investment would have to earn the following yield:
these
tax-free
yields:
2% 2.38% 2.40% 2.45% 2.50% 2.96 3.02 3.06 3.20 3.22 3.45 3.47 3.51 3.68 3.72
% % % % % % % % % %
3% 3.57% 3.60% 3.68% 3.75% 4.43 4.53 4.59 4.79 4.83 5.17 5.21 5.27 5.52 5.58
% % % % % % % % % %
4% 4.75% 4.80% 4.90% 5.01% 5.91 6.04 6.13 6.39 6.44 6.89 6.94 7.02 7.36 7.44
% % % % % % % % % %
5% 5.94% 6.00% 6.13% 6.26% 7.39 7.55 7.66 7.99 8.05 8.61 8.68 8.78 9.20 9.30
% % % % % % % % % %
6% 7.13% 7.20% 7.35% 7.51% 8.87 9.06 9.19 9.59 9.66 10.34 10.42 10.53 11.04 11.16
% % % % % % % % % %
7% 8.32% 8.40% 8.58% 8.76% 10.34 10.57 10.72 11.19 11.27 12.06 12.15 12.29 12.88 13.02
% % % % % % % % % %
8% 9.51% 9.60% 9.80% 10.01% 11.82 12.08 12.25 12.78 12.88 13.78 13.89 14.04 14.72 14.88
% % % % % % % % % %
9% 10.70% 10.80% 11.03% 11.26% 13.30 13.59 13.78 14.38 14.49 15.50 15.63 15.80 16.56 16.74
% % % % % % % % % %
10% 11.88% 12.00% 12.25% 12.52% 14.78 15.10 15.31 15.98 16.10 17.23 17.36 17.56 18.40 18.60
% % % % % % % % % %
11% 13.07% 13.21% 13.48% 13.77% 16.25 16.61 16.85 17.58 17.71 18.95 19.10 19.31 20.24 20.46
% % % % % % % % % %
</TABLE>
The California income tax rates are those in effect for 1995, which will be
the same in 1996 except that California law requires that the brackets be
adjusted annually for inflation using 100% of the California Consumer Price
Index through June of the tax year. As of the date of this SAI, the
California Franchise Tax Board had not published the 1996
inflation-adjusted tax brackets.
The fund may invest a portion of its assets in obligations that are subject
to state or federal income taxes. When the fund invests in these
obligations, its tax-equivalent yields will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising
reflect all aspects of a class's return, including the effect of
reinvesting dividends and capital gain distributions, and any change in a
class's NAV over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a class over a stated period, and then calculating
the annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual total return of 7.18%, which is the steady annual
rate of return that would equal 100% growth on a compounded basis in ten
years. Average annual total returns covering periods of less than one year
are calculated by determining a class's total return for the period,
extending that return for a full year (assuming that return remains
constant over the year), and quoting the result as an annual return. While
average annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a class's performance is not
constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the class.
In addition to average annual total returns, a class may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking a
class's maximum sales charge into account. Excluding a class's sales charge
from a total return calculation produces a higher total return figure.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a class's NAVs, adjusted
NAVs, and benchmark indices may be used to exhibit performance. An adjusted
NAV includes any distributions paid and reflects all elements of its
return. Unless otherwise indicated, a class's adjusted NAVs are not
adjusted for sales charges, if any.
MOVING AVERAGES. A growth or growth and income 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 a NAV has
crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown below:*
FUND AS OF 13-WEEK 39-WEEK
Overseas - Class A 10/25/96
Overseas - Class T 10/25/96
Overseas - Class B 10/25/96
Overseas - Institutional 10/25/96
Mid Cap - Class A 11/29/96
Mid Cap - Class T 11/29/96
Mid Cap - Class B 11/29/96
Mid Cap - Institutional 11/29/96
Equity Growth - Class A 11/29/96
Equity Growth - Class T 11/29/96
Equity Growth - Institutional 11/29/96
Growth Opportunities - Class A 10/25/96
Growth Opportunities - Class T 10/25/96
Growth Opportunities - Institutional 10/25/96
Strategic Opportunities - Class A 12/27/96
Strategic Opportunities - Class T 12/27/96
Strategic Opportunities - Class B 12/27/96
Strategic Opportunities - Institutional 12/27/96
Strategic Opportunities - Initial 12/27/96
Large Cap - Class A 11/29/96
Large Cap - Class T 11/29/96
Large Cap - Class B 11/29/96
Large Cap - Institutional 11/29/96
Equity Income - Class A 11/29/96
Equity Income - Class T 11/29/96
Equity Income - Class B 11/29/96
Equity Income - Institutional 11/29/96
Balanced - Class A 10/25/96
Balanced - Class T 10/25/96
Balanced - Institutional 10/25/96
High Yield - Class A 10/25/96
High Yield - Class T 10/25/96
High Yield - Class B 10/25/96
High Yield - Institutional 10/25/96
Emerging Markets Income - Class A 12/27/96
Emerging Markets Income - Class T 12/27/96
Emerging Markets Income - Class B 12/27/96
Emerging Markets Income - Institutional 12/27/96
Strategic Income - Class A 12/27/96
Strategic Income - Class T 12/27/96
Strategic Income - Class B 12/27/96
Strategic Income - Institutional 12/27/96
* Moving averages are shown for those classes that had commenced operations
prior to January 1, 1997.
The following tables and charts show performance for each class of
shares of each fund. Class A shares have a maximum front-end sales charge
of 5.25% for TechnoQuant Growth, Overseas, Mid Cap, Equity Growth, Growth
Opportunities, Strategic Opportunities, Large Cap, Growth & Income, Equity
Income, and Balanced (the Equity Funds); 4.25% for Emerging Markets Income,
High Yield, Strategic Income, Mortgage Securities, Government Investment,
High Income Municipal, Municipal Bond, New York Municipal Income, and
California Municipal Income (the Bond Funds); 3.25% for Intermediate Bond
and Intermediate Municipal Income (the Intermediate-Term Bond Funds); and
1.50% for Short Fixed-Income and Short-Intermediate Municipal Income (the
Short-Term Bond Funds). Class A shares are also subject to a 12b-1 fee of
0.25% (Equity Funds), and 0.15% (Bond Funds, Intermediate-Term Bond Funds,
and Short-Term Bond Funds). Class T shares have a maximum front-end sales
charge of 3.50% for the Equity Funds, 3.50% for the Bond Funds, 2.75% for
the Intermediate-Term Bond Funds, and 1.50% for the Short-Term Bond Funds.
Class T shares are also subject to a 12b-1 fee of 0.50% (the Equity Funds),
0.25% (the Bond Funds and the Intermediate-Term Bond Funds), and 0.15% (the
Short-Term Bond Funds). Class B shares have contingent deferred sales
charges (CDSC) upon redemption: maximum CDSC is 5.00% for all funds that
offer Class B except the Intermediate-Term Bond Funds, which have a maximum
CDSC of 3.00%. Class B shares are also subject to a 12b-1 fee of 0.75% (the
Equity Funds) or 0.65% (the Bonds Funds and the Intermediate-Term Bond
Funds), as well as a 0.25% shareholder services fee. Institutional Class
shares do not have a sales charge or a 12b-1 fee. Initial Class shares of
Strategic Opportunities have a front-end sales charge of 3.50% and no 12b-1
fee. Initial Class shares of Mortgage Securities and Municipal Bond do not
have a sales charge or a 12b-1 fee.
HISTORICAL BOND FUND RESULTS. The following tables show yields,
tax-equivalent yields (for municipal funds), and total returns for each
class of each bond fund for the fiscal year ended July 31, October 31,
November 30, or December 31, 1996 as indicated below. The tax-equivalent
yield is based on a 36% federal income tax rate. Note that each municipal
fund may invest in securities whose income is subject to the federal
alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal Yield2 Tax One Five Ten One Five Ten
Year Equiva Year Years Years/ Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
Emerging 12/31 % N/A % N/A % % N/A %
Markets
Income -
Class A
Emerging % N/A % N/A % % N/A %
Markets
Income -
Class T
Emerging % N/A % N/A % % N/A %
Markets
Income -
Class B
Emerging % N/A % N/A % % N/A %
Markets
Income -
Institutional
High Yield 10/31 N/A N/A % % % % % %
- - Class A
High Yield % N/A % % % % % %
- - Class T
High Yield % N/A % % % % % %
- - Class B
High Yield % N/A % % % % % %
- -
Institutional
Strategic 12/31 N/A N/A % N/A % % N/A %
Income -
Class A
Strategic % N/A % N/A % % N/A %
Income -
Class T
Strategic % N/A % N/A % % N/A %
Income -
Class B
Strategic N/A N/A % N/A % % N/A %
Income -
Institutional
Strategic N/A N/A % N/A % % N/A %
Income -
Initial
Mortgage 7/31 % % % % % % % %
Securities -
Class A
Mortgage % % % % % % % %
Securities -
Class T
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal Yield2 Tax One Five Ten One Five Ten
Year Equiva Year Years Years/ Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
Mortgage 7/31 % % % % % % % %
Securities -
Class B
Mortgage % % % % % % % %
Securities -
Institutional
Mortgage % % % % % % % %
Securities -
Initial
Governmen 10/31 % % % % % % % %
t
Investment
- - Class A
Governmen % % % % % % % %
t
Investment
- - Class T
Governmen % % % % % % % %
t
Investment
- - Class B
Governmen % % % % % % % %
t
Investment
- -
Institutional
Intermediat 11/30 % % % % % % % %
e Bond -
Class A
Intermediat % % % % % % % %
e Bond -
Class T
Intermediat % % % % % % % %
e Bond -
Class B
Intermediat % % % % % % % %
e Bond -
Institutional
Short 10/31 % % % % % % % %
Fixed-Inco
me - Class
A
Short 10/31 % % % % % % % %
Fixed-Inco
me - Class
T
Short % % % % % % % %
Fixed-Inco
me -
Institutional
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal Yield2 Tax One Five Ten One Five Ten
Year Equiva Year Years Years/ Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
High 10/31 % % % % % % % %
Income
Municipal
- - Class A
High % % % % % % % %
Income
Municipal
- - Class T
High % % % % % % % %
Income
Municipal
- - Class B
High % % % % % % % %
Income
Municipal
- -
Institutional
Municipal 12/31 % % % % % % % %
Bond -
Class A
Municipal % % % % % % % %
Bond -
Class T
Municipal % % % % % % % %
Bond -
Class B
Municipal % % % % % % % %
Bond -
Institutional
Municipal % % % % % % % %
Bond -
Initial
Intermediat 11/30 % % % % % % % %
e Municipal
Income -
Class A
Intermediat % % % % % % % %
e Municipal
Income -
Class T
Intermediat 11/30 % % % % % % % %
e Municipal
Income -
Class B
Intermediat % % % % % % % %
e Municipal
Income -
Institutional
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal Yield2 Tax One Five Ten One Five Ten
Year Equiva Year Years Years/ Year Years Years/
Ended lent Life of Life of
Yield2 Fund+ Fund+
Short-Inter 11/30 % % % % % % % %
mediate
Municipal
Income -
Class A
Short-Inter % % % % % % % %
mediate
Municipal
Income -
Class T
Short-Inter % % % % % % % %
mediate
Municipal
Income -
Institutional
New York 10/31 % % % % % % % %
Municipal
Income -
Class A
New York % % % % % % % %
Municipal
Income -
Class T
New York % % % % % % % %
Municipal
Income -
Class B
New York % % % % % % % %
Municipal
Income -
Institutional
California 10/31 % % % % % % % %
Municipal
- - Class A
California % % % % % % % %
Municipal
- - Class T
California 10/31 % % % % % % % %
Municipal
- - Class B
California % % % % % % % %
Municipal
- -
Institutional
</TABLE>
+ Life of fund figures are from commencement of operations (March 10, 1994
for Emerging Markets Income; January 5, 1987 for High Yield; January 7,
1987 for Government Investment; October 31, 1994 for Strategic Income;
September 16, 1987 for Short Fixed-Income and High Income Municipal; March
16, 1994 for Short-Intermediate Municipal Income; August 21, 1995 for New
York Municipal Income and February 20, 1996 for California Municipal
Income) through each fund's fiscal period ended 1996.
1 Average annual and cumulative total returns for Class A shares include
the effect of paying Class A's maximum applicable front-end sales charge of
4.25% for Bond Funds, 3.25% for Intermediate-Term Bond Funds, and 1.50% for
Short-Term Bond Funds.
Average annual and cumulative total returns for Class T shares include the
effect of paying Class T's maximum applicable front-end sales charge of
3.50% for Bond Funds; 2.75% for Intermediate-Term Bond Funds; and 1.50% for
Short-Term Bond Funds.
Average annual and cumulative total returns for Class B shares include the
effect of paying Class B's CDSC upon redemption based on the following
schedule: for Bond Funds for the periods one year or less, 5%; greater than
one year to two years, 4%; greater than two years to four years, 3%;
greater than four years to five years, 2%; greater than five years to six
years, 1%; greater than six years, 0%; for Intermediate-Term Bond Funds for
the periods of one year or less, 3%; greater than one year to two years,
2%; greater than two years to three years, 1%; greater than three years,
0%.
Initial offering of Class A shares for each fund (except Mortgage
Securities and Municipal Bond) took place on September 3, 1996. Returns
prior to September 3, 1996 for bond funds (except Intermediate Bond and
Intermediate Municipal Income) are those of Class T, the original class of
each fund and reflect Class T's then applicable 12b-1 fee. For Intermediate
Bond and Intermediate Municipal Income, returns between commencement of
operations and September 10, 1992 reflect the returns of Institutional
Class, which does not have a 12b-1 fee. Returns between September 10, 1992
and each fund's respective fiscal period ended 1996, are those of Class T,
and reflect Class T's then applicable 12b-1 fee. Class A's returns would
have been lower if 12b-1 fees were reflected prior to September 10, 1992.
Class T returns prior to September 10, 1992 for Intermediate Bond and
Intermediate Municipal Income are those of Institutional Class and do not
reflect Class T's then-applicable 12b-1 fees of 0.25% (the Bond Funds and
Intermediate-Term Bond Funds).
Class B returns prior to June 30, 1994 for all Bond Funds except
Intermediate Bond, Intermediate Municipal Income, and New York Municipal
Income are those of Class T shares and include the applicable Class T 12b-1
fees discussed above. Class B returns from each fund's commencement of
operations up to September 10, 1992 for Intermediate Bond and Intermediate
Municipal Income reflect the returns of Institutional Class, which does not
have a 12b-1 fee.
Returns prior to July 3, 1995 for Institutional Class shares of all Bond
Funds except Intermediate Bond, Intermediate Municipal Income, New York
Municipal Income, and California Municipal Income are those of each fund's
Class T shares and include the then-current Class T 12b-1 fees of either
0.25% for Emerging Markets Income, High Yield, Strategic Income, and
Government Investment or 0.15% for Short-Fixed Income and
Short-Intermediate Municipal Income.
Class A, Class T, and Class B shares of Mortgage Securities are expected to
commence operations on February 28, 1997. Returns prior to that date are
those of Initial Class, the original class of the fund which does not bear
a 12b-1 fee. Class T and Class A returns would have been lower if their
respective 12b-1 fees were reflected in returns prior to that date. Class
B returns would have been lower if its 12b-1 fee (including shareholder
servicing fee) had been reflected in returns prior to that date.
Class A of Municipal Bond is expected to commence operations on February
28, 1997. Returns between July 1, 1996 and February 28, 1997 are those of
Class T and reflect Class T's 0.25% 12b-1 fee. Returns prior to that date
are those of Initial Class, the original class of the fund which does not
bear a 12b-1 fee. Class A's returns would have been lower if its 12b-1 fee
was reflected in returns prior to July 1, 1996.
Initial offering of Class B shares for Intermediate Bond and Intermediate
Municipal Income took place on June 30, 1994, and bear a 12b-1 fee
(including a shareholder servicing fee)(at a then currently applicable
combined rate of 1.00%) which is not reflected in prior date returns.
Returns prior to June 30, 1994, and September 10, 1992, are those of Class
T and Institutional Class shares, respectively. Class T returns include a
then currently applicable 12b-1 fee of 0.25% for Intermediate Bond and
Intermediate Municipal Income. Institutional Class, the original class of
these funds, does not bear a 12b-1 fee. Class B share returns would have
been lower had it 12b-1 fee (including a shareholder servicing fee) had
been reflected in prior date returns.
Initial offering of Class B shares for High Yield, Government Investment,
and High Income Municipal took place on June 30, 1994, and bear a 12b-1 fee
( including a shareholder servicing fee)(at a then currently applicable
combined rate of 1.00%) which is not reflected in prior date returns.
Returns prior to June 30, 1994, are those of Class T shares, the original
class of these funds and include the then applicable Class T 12b-1 fee of
0.25%. Class B returns would have been lower had its 12b-1 fee (including
a shareholder servicing fee) been reflected in prior date returns.
Initial offering of Class T and Class B shares for Municipal Bond took
place on July 1, 1996. Returns prior to that date are those of Initial
Class, the original class of the fund which does not have a 12b-1 fee.
Class T returns would have been lower had its 12b-1 fee been reflected in
returns prior to that date. Class B returns would have been lower if its
12b-1 fee ( including shareholder servicing fee) had been reflected in
prior date returns.
2 Yields and tax-equivalent yields shown for Class A shares include the
effect of the applicable Class A front-end sales charge and 12b-1 fee.
Yields and tax-equivalent yields shown for Class T shares include the
effect of the applicable Class T front-end sales charge and 12b-1 fee.
Yields and tax-equivalent yields shown for Class B shares include the
effect of the applicable Class B 12b-1 fee, but not the CDSC. Yields and
tax-equivalent yields shown for Strategic Opportunities - Initial Class
include the effect of its 3.50% sales charge.
Note: If FMR had not reimbursed certain class expenses during certain of
these periods, the yields and total returns for those periods for Emerging
Markets Income, High Yield, Strategic Income, Government Investment,
Intermediate Bond, Short Fixed-Income, High Income Municipal, Intermediate
Municipal Income, and Short-Intermediate Municipal Income would have been
lower. The table below shows what yields and tax-equivalent yields (if
applicable) would have been if the class had not been in reimbursement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class T Class B Institutional Class
Fund Yield* Tax- Yield* Tax-Equiva Yield* Tax-Equiva
Equivalent lent Yield* lent Yield*
Yield*
Emerging Markets 8.66% N/A 8.37% N/A N/A N/A
Income
High Yield N/A N/A N/A N/A 6.15 N/A
Government Investment N/A N/A 4.81% N/A 4.89% N/A
High Income Municipal N/A N/A N/A N/A 4.62% 7.22%
Short-Intermediate 3.76% 5.88% N/A N/A 2.12% 2.12%
Municipal Income
New York Municipal 2.47% 4.36% 1.25% 2.21% -0.74% -0.74%
Income
</TABLE>
* See footnote 2 above.
HISTORICAL EQUITY FUND RESULTS. The following table shows the total returns
for each class of each equity fund for the fiscal year ended October 31,
November 30, or December 31, 1996 as indicated below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal One Five Ten One Five Ten
Period Year Years Years/Life Year Years Years/Life
Ended of Fund+ of Fund+
TechnoQuant Growth - 11/30 N/A N/A % N/A N/A %
Class A
TechnoQuant Growth - N/A N/A % N/A N/A %
Class T
TechnoQuant Growth - N/A N/A % N/A N/A %
Class B
TechnoQuant Growth - N/A N/A % N/A N/A %
Institutional
Overseas - Class A 10/31 % % % % % %
Overseas - Class T % % % % % %
Overseas - Class B % % % % % %
Overseas - Institutional % % % % % %
Mid Cap - Class A 11/30 N/A N/A N/A N/A N/A %
Mid Cap - Class T N/A N/A N/A N/A N/A %
Mid Cap - Class B N/A N/A N/A N/A N/A %
Mid Cap - Institutional N/A N/A N/A N/A N/A %
Equity Growth - Class 11/30 % % % % % %
A
Equity Growth - Class % % % % % %
T
Equity Growth - Class % % % % % %
B
Equity Growth - % % % % % %
Institutional
Growth Opportunities - 10/31 % % % % % %
Class A
Growth Opportunities - % % % % % %
Class T
Growth Opportunities - % % % % % %
Class B
Growth Opportunities - % % % % % %
Institutional
Strategic Opportunities 12/31 % % % % % %
- - Class A
Strategic Opportunities % % % % % %
- - Class T
Strategic Opportunities % % % % % %
- - Class B
Strategic Opportunities % % % % % %
- - Institutional
Strategic Opportunities % % % % % %
- - Initial
</TABLE>
Average Annual Total Cumulative Total
Returns1 Returns1
Fiscal One Five Ten One Five Ten
Period Year Years Years/Life Year Years Years/Life
Ended of Fund+ of Fund+
Large Cap - Class A 11/30 N/A N/A % N/A N/A -%
Large Cap - Class T N/A N/A % N/A N/A %
Large Cap - Class B N/A N/A % N/A N/A %
Large Cap - N/A N/A % N/A N/A %
Institutional
Growth & Income - 11/30 N/A N/A % N/A N/A %
Class A
Growth & Income - N/A N/A % N/A N/A %
Class T
Growth & Income - N/A N/A % N/A N/A %
Class B
Growth & Income - N/A N/A % N/A N/A %
Institutional
Equity Income - Class 11/30 % % % % % %
A
Equity Income - Class % % % % % %
T
Equity Income - Class % % % % % %
B
Equity Income - % % % % % %
Institutional
Balanced - Class A 10/31 % % % % % %
Balanced - Class T % % % % % %
Balanced - Class B % % % % % %
Balanced - Institutional % % % % % %
+ Life of fund figures are from commencement of operations (April 23, 1990
for Overseas; November 18, 1987 for Growth Opportunities; January 6, 1987
for Balanced and February 20, 1996 for Mid Cap and Large Cap) through each
fund's fiscal period ended 1996.
1 Average annual and cumulative total returns for Class A shares include
the effect of paying Class A's maximum applicable front-end sales charge of
5.25% for Equity Funds.
Average annual and cumulative total returns for Class T shares include the
effect of paying Class T's maximum applicable front-end sales charge of
3.50% for Equity Funds.
Average annual and cumulative total returns for Class B shares include the
effect of paying Class B's CDSC upon redemption based on the following
schedule: for Equity Funds for the periods of one year or less, 5%; greater
than one year to two years, 4%; greater than two years to four years, 3%;
greater than four years to five years, 2%; greater than five years to six
years, 1%; greater than six years, 0%.
Initial offering of Class A shares for each fund (except TechnoQuant Growth
and Growth & Income) took place on September 3, 1996. Returns prior to
September 3, 1996 for Equity Funds funds (except Equity Growth and Equity
Income) are those of Class T, the original class of each fund and reflect
Class T's then applicable 12b-1 fee. For Equity Growth and Equity Income
returns between commencement of operations and September 10, 1992 reflect
the returns of Institutional Class, which does not have a 12b-1 fee.
Returns between September 10, 1992 and each fund's respective fiscal period
ended 1996, are those of Class T, and reflect Class T's then applicable
12b-1 fee. Class A's returns would have been lower if 12b-1 fees were
reflected prior to September 10, 1992.
Class T returns prior to September 10, 1992 for Equity Growth and Equity
Income are those of the Institutional Class which does not have a 12b-1
fee. Class T returns prior to August 20, 1986 for Strategic Opportunities
reflect those of Initial Class shares, the fund's original class which does
not have a 12b-1 fee.
Class B returns prior to June 30, 1994 for all Equity Funds except,
Overseas, Strategic Opportunities, and Equity Income are those of Class T
shares and include the applicable Class T 12b-1 fee. Class B returns from
each fund's commencement of operations to September 10, 1992 for Equity
Growth and Equity Income reflect the returns of the Institutional Class,
which does not have a 12b-1 fee. Class B returns for Strategic
Opportunities from August 20, 1986 through June 30, 1994 reflect the
performance of Class T shares, including the then-applicable 0.65% 12b-1
fee and from December 31, 1983 through August 20, 1986 reflect the
performance of Initial Class shares. Class B returns prior to July 3, 1995
for Overseas reflect Class T performance, including the then-applicable
0.65% 12b-1 fee.
Initial offering of Class B shares for Equity Growth and Balanced took
place on January 2, 1997, and bare a 12b-1 and shareholder servicing fee.
Returns between September 10, 1992 and January 2, 1997 are those of Class T
and reflect Class T's then effective 12b-1 fee (0.65% prior to January 1,
1996). Returns prior to September 10, 1992 are those of Institutional
Class, the original class of the fund which does not bare a 12b-1 fee.
Class B share returns would have been lower had its 12b-1 and shareholder
servicing fee been reflected in prior date returns. Balanced returns prior
to January 2, 1997 are those of Class T the original class of the fund and
reflect Class T's then applicable 12b-1 fee. Class B share returns would
have been lower had its 12b-1 and shareholder servicing fee been reflected
in prior date returns.
Class B of Growth Opportunities is expected to commence operations on
February 28, 1997. Returns prior to that date are those of Class T, the
original class of the fund and reflect Class T's then applicable 12b-1 fee
(0.65% prior to January 1, 1996). Class B share returns would have been
lower had its 12b-1 and shareholder servicing fee been reflected in prior
date returns.
Note: If FMR had not reimbursed certain class expenses during certain of
these periods, the total returns for those periods for Overseas, Mid Cap,
Natural Resources, Strategic Opportunities, Large Cap, Equity Income, and
Income & Growth would have been lower.
The following tables show the income and capital elements of each class's
cumulative total return. The table compares each class's return to the
record of the S&P 500, the Dow Jones Industrial Average (DJIA), and the
cost of living as measured by the Consumer Price Index (CPI), over the same
period. The CPI information is as of the month end closest to the initial
investment date for each fund. The S&P 500 and DJIA comparisons are
provided to show how each class's total return compared to the record of a
broad unmanaged index of common stocks and a narrower set of stocks of
major industrial companies, respectively, over the same period. Because
each of the Bond Funds invest in fixed-income securities, common stocks
represent a different type of investment from the funds. Common stocks
generally offer greater growth potential than the Bond Funds, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than a
fixed-income investment such as the Bond Funds. Each of the Equity Funds
has the ability to invest in securities not included in either index, and
its investment portfolio may or may not be similar in composition to the
indices. The S&P 500 and DJIA returns are based on the prices of unmanaged
groups of stocks and, unlike each class's returns, do not include the
effect of brokerage commissions or other costs of investing.
The following tables show the growth in value of a hypothetical $10,000
investment in each class of each fund (except TechnoQuant Growth and Growth
& Income for which performance history will be available after the funds
have been in operation for six months) during the past 10 fiscal years
ended 1996 or life of each fund, as applicable, assuming all distributions
were reinvested. The figures below reflect the fluctuating interest rates,
bond prices, and stock prices of the specified periods and should not be
considered representative of the dividend income or capital gain or loss
that could be realized from an investment in a class today. Tax
consequences of different investments have not been factored into the
figures.
During the period from April 23, 1990 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class A of Overseas
would have grown to $_______, including the effect of Class A's 5.25% sales
charge.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OVERSEAS - CLASS A INDICES
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $ $
1995 $ 13,189 $ 476 $ 103 $ 13,768 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 13,322 481 0 13,803 13,786 16,208 16,684 11,598
1993 12,251 422 0 12,673 12,522 15,604 15,291 11,303
1992 8,594 199 0 8,793 9,110 13,575 13,020 11,001
1991 9,267 76 0 9,343 10,497 12,344 12,027 10,659
1990* 9,049 0 0 9,049 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Overseas on April 23, 1990 assuming the 5.25% maximum sales charge had been
in effect, the net amount invested in Class A shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from April 23, 1990 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class T of Overseas
would have grown to $_______, including the effect of Class T's 3.50% sales
charge.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OVERSEAS - CLASS T INDICES
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $ $
1995 $ 13,433 $ 484 $ 105 $ 14,022 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 13,568 489 0 14,057 13,786 16,208 16,684 11,598
1993 12,477 430 0 12,907 12,522 15,604 15,291 11,303
1992 8,753 202 0 8,955 9,110 13,575 13,020 11,001
1991 9,438 77 0 9,515 10,497 12,344 12,027 10,659
1990* 9,216 0 0 9,216 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Overseas on April 23, 1990 assuming the 3.50% maximum sales charge had been
in effect, the net amount invested in Class T shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from April 23, 1990 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class B of Overseas
would have grown to $_______, including the effect of Class B's maximum
applicable CDSC.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OVERSEAS - CLASS B INDICES
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $ $
1995 $ 13,920 $ 502 $ 109 $ 14,531 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 14,060 507 0 14,567 13,786 16,208 16,684 11,598
1993 12,930 445 0 13,375 12,522 15,604 15,291 11,303
1992 9,070 210 0 9,280 9,110 13,575 13,020 11,001
1991 9,780 80 0 9,860 10,497 12,344 12,027 10,659
1990* 9,550 0 0 9,550 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Overseas on April 23, 1990 assuming the 5.00% maximum CDSC had been in
effect, the net amount invested in Class B shares was $_____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from April 23, 1990 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Institutional Class
of Overseas would have grown to $_______.
OVERSEAS - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total EAFE S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Index 500 of
Oct. 31 $10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $ $
1995 $ 13,970 $ 504 $ 109 $ 14,583 $ 13,734 $ 20,493 $ 20,816 $ 11,924
1994 14,060 507 0 14,567 13,786 16,208 16,684 11,598
1993 12,930 445 0 13,375 12,522 15,604 15,291 11,303
1992 9,070 210 0 9,280 9,110 13,575 13,020 11,001
1991 9,780 80 0 9,860 10,497 12,344 12,027 10,659
1990* 9,550 0 0 9,550 9,815 9,246 9,246 10,357
</TABLE>
* From April 23, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Overseas on April 23, 1990 the net amount invested in Class B
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period from February 20, 1996 (commencement of operations) to
November 30, 1996, a hypothetical $10,000 investment in Class A of Mid Cap
would have grown to $_______, including the effect of Class A's 5.25% sales
charge.
MID CAP - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of Mid
Cap on February 20, 1996, assuming the 5.25% maximum sales charge had been
in effect, the net amount invested in Class A shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from February 20, 1996 (commencement of operations) to
November 30, 1996, a hypothetical $10,000 investment in Class T of Mid Cap
would have grown to $_______, including the effect of Class T's 3.50% sales
charge.
MID CAP - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of Mid
Cap on February 20, 1996, assuming the 3.50% maximum sales charge had been
in effect, the net amount invested in Class T shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from February 20, 1996 (commencement of operations) to
November 30, 1996, a hypothetical $10,000 investment in Class B of Mid Cap
would have grown to $_______, including the effect of Class B's maximum
applicable CDSC.
MID CAP - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of Mid
Cap on February 20, 1996, assuming the 5.00% maximum CDSC had been in
effect, the net amount invested in Class B shares was $_____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from February 20, 1996 (commencement of operations) to
November 30, 1996, a hypothetical $10,000 investment in Institutional Class
of Mid Cap would have grown to $_______.
MID CAP - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Mid Cap on February 20, 1996, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class A of Equity Growth would have grown to $_______,
including the effect of Class A's 5.25% sales charge.
EQUITY GROWTH - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 34,030 $ 1,637 $ 22,887 $ 58,554 $ 41,199 $ 47,557 $ 14,092
1994 24,367 1,053 16,075 41,495 30,077 34,192 13,752
1993 25,204 1,089 14,555 40,848 29,766 32,779 13,376
1992 22,496 864 12,310 35,669 27,035 28,578 13,028
1991 20,744 758 7,987 29,489 22,814 24,302 12,642
1990 13,286 485 5,115 18,886 18,956 20,777 12,275
1989 14,798 440 3,143 18,381 19,640 21,131 11,550
1988 10,270 38 2,181 12,489 15,010 15,910 11,037
1987 8,475 22 1,126 9,624 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Equity Growth on December 1, 1987, assuming the 5.25% maximum sales charge
had been in effect, the net amount invested in Class A shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Equity Growth would have grown to $_______,
including the effect of the Class T's 3.50% sales charge.
EQUITY GROWTH - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 34,658 $ 1,668 $ 23,309 $ 59,635 $ 41,199 $ 47,557 $ 14,092
1994 24,817 1,072 16,372 42,261 30,077 34,192 13,752
1993 25,670 1,109 14,823 41,602 29,766 32,779 13,376
1992 22,911 880 12,537 36,328 27,035 28,578 13,028
1991 21,127 771 8,135 30,033 22,814 24,302 12,642
1990 13,531 494 5,210 19,235 18,956 20,777 12,275
1989 15,071 449 3,201 18,721 19,640 21,131 11,550
1988 10,459 38 2,222 12,719 15,010 15,910 11,037
1987 8,632 22 1,147 9,801 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Equity Growth on December 1, 1987, assuming the 3.50% maximum sales charge
had been in effect, the net amount invested in Class T shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Equity Growth would have grown to $_______,
including the effect of Class B's maximum applicable CDSC.
EQUITY GROWTH - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 34,658 $ 1,668 $ 23,309 $ 59,635 $ 41,199 $ 47,557 $ 14,092
1994 24,817 1,072 16,372 42,261 30,077 34,192 13,752
1993 25,670 1,109 14,823 41,602 29,766 32,779 13,376
1992 22,911 880 12,537 36,328 27,035 28,578 13,028
1991 21,127 771 8,135 30,033 22,814 24,302 12,642
1990 13,531 494 5,210 19,235 18,956 20,777 12,275
1989 15,071 449 3,201 18,721 19,640 21,131 11,550
1988 10,459 38 2,222 12,719 15,010 15,910 11,037
1987 8,632 22 1,147 9,801 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Equity Growth on December 1, 1987, assuming the 5.00% maximum CDSC had been
in effect, the net amount invested in Class B shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Equity Growth would have grown to
$_______.
EQUITY GROWTH - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 36,420 $ 2,443 $ 24,480 $ 63,343 $ 41,199 $ 47,557 $ 14,092
1994 26,060 1,318 17,183 44,561 30,077 34,192 13,752
1993 26,817 1,191 15,485 43,493 29,766 32,779 13,376
1992 23,778 913 13,012 37,703 27,035 28,578 13,028
1991 21,894 799 8,430 31,123 22,814 24,302 12,642
1990 14,022 511 5,399 19,932 18,956 20,777 12,275
1989 15,618 465 3,317 19,400 19,604 21,131 11,550
1988 10,839 40 2,302 13,181 15,010 15,910 11,037
1987 8,945 23 1,189 10,157 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Equity Growth on December 1, 1987, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period from November 18, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class A of Growth
Opportunities would have grown to $_______, including the effect of Class
A's 5.25% sales charge.
GROWTH OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995 $ 29,268 $ 1,523 $ 12,525 $ 43,317 $ 30,770 $ 31,921 $ 13,319
1994 25,222 921 9,109 35,252 24,336 25,585 12,955
1993 24,057 786 7,583 32,426 23,430 23,449 12,626
1992 20,030 497 4,785 25,312 20,383 19,966 12,288
1991 19,500 369 2,713 22,581 18,534 18,444 11,906
1990 12,308 71 1,712 14,091 13,882 14,179 11,568
1989 15,662 35 891 16,588 15,006 14,775 10,884
1988* 13,521 0 0 13,521 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Growth Opportunities on November 18, 1987, assuming the 5.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from November 18, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class T of Growth
Opportunities would have grown to $_______, including the effect of Class
T's 3.50% sales charge.
GROWTH OPPORTUNITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995 $ 29,809 $ 1,552 $ 12,756 $ 44,117 $ 30,770 $ 31,921 $ 13,319
1994 25,688 938 9,277 35,903 24,336 25,585 12,955
1993 24,501 801 7,723 33,025 23,430 23,449 12,626
1992 20,400 506 4,873 25,779 20,383 19,966 12,288
1991 19,860 375 2,763 22,998 18,534 18,444 11,906
1990 12,535 72 1,744 14,351 13,882 14,179 11,568
1989 15,951 37 907 16,895 15,006 14,775 10,884
1988* 13,771 0 0 13,771 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Growth Opportunities on November 18, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from November 18, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class B of Growth
Opportunities would have grown to $_______, including the effect of Class
B's maximum applicable CDSC.
GROWTH OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995 $ 29,809 $ 1,552 $ 12,756 $ 44,117 $ 30,770 $ 31,921 $ 13,319
1994 25,688 938 9,277 35,903 24,336 25,585 12,955
1993 24,501 801 7,723 33,025 23,430 23,449 12,626
1992 20,400 506 4,873 25,779 20,383 19,966 12,288
1991 19,860 375 2,763 22,998 18,534 18,444 11,906
1990 12,535 72 1,744 14,351 13,882 14,179 11,568
1989 15,951 37 907 16,895 15,006 14,775 10,884
1988* 13,771 0 0 13,771 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Growth Opportunities on November 18, 1987, assuming the 5.00% maximum CDSC
had been in effect, the net amount invested in Class B shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period from November 18, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Institutional Class
of Growth Opportunities would have grown to $_______.
GROWTH OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995 $ 30,970 $ 1,612 $ 13,253 $ 45,835 $ 30,770 $ 31,921 $ 13,319
1994 26,620 971 9,614 37,205 24,336 25,585 12,955
1993 25,390 830 8,003 34,223 23,430 23,449 12,626
1992 21,140 524 5,050 26,714 20,383 19,966 12,288
1991 20,580 390 2,863 23,833 18,534 18,444 11,906
1990 12,990 75 1,807 14,872 13,882 14,179 11,568
1989 16,530 37 940 17,507 15,006 14,775 10,884
1988* 14,270 0 0 14,270 11,872 11,566 10,416
</TABLE>
* From November 18, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Growth Opportunities on November 18, 1987, the net amount invested
in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class A of Strategic Opportunities would have grown to
$_______, including the effect of Class A's 5.25% sales charge.
STRATEGIC OPPORTUNITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 17,475 $ 6,406 $ 12,777 $ 36,658 $ 40,054 $ 45,581 $ 14,044
1994 13,134 4,392 9,007 26,533 29,114 33,338 13,696
1993 14,609 4,351 9,622 28,582 28,735 31,759 13,339
1992 13,380 3,494 6,858 23,732 26,104 27,146 12,983
1991 12,987 2,748 5,291 21,026 24,251 25,300 12,617
1990 12,390 2,015 2,679 17,083 18,585 20,347 12,242
1989 13,914 1,480 3,008 18,403 19,183 20,457 11,537
1988 10,788 758 2,333 13,879 14,567 15,526 11,025
1987 9,145 231 1,977 11,353 12,492 13,394 10,558
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Strategic Opportunities on January 1, 1987, assuming the 5.25% maximum
sales charge had been in effect, the net amount invested in Class A shares
was $_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class T of Strategic Opportunities would have grown to
$_______, including the effect of Class T's 3.50% sales charge.
STRATEGIC OPPORTUNITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 17,798 $ 6,524 $ 13,013 $ 37,335 $ 40,054 $ 45,581 $ 14,044
1994 13,377 4,473 9,173 27,023 29,114 33,338 13,696
1993 14,879 4,432 9,799 29,110 28,735 31,759 13,339
1992 13,627 3,559 6,985 24,171 26,104 27,146 12,983
1991 13,227 2,798 5,389 21,414 24,251 25,300 12,617
1990 12,619 2,052 2,728 17,399 18,585 20,347 12,242
1989 14,171 1,508 3,064 18,743 19,183 20,457 11,537
1988 10,988 771 2,376 14,135 14,567 15,526 11,025
1987 9,314 234 2,014 11,562 12,492 13,394 10,558
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Strategic Opportunities on January 1, 1987, assuming the 3.50% maximum
sales charge had been in effect, the net amount invested in Class T shares
was $_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class B of Strategic Opportunities would have grown to
$_______, including the effect of Class B's maximum applicable CDSC.
STRATEGIC OPPORTUNITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 18,206 $ 6,906 $ 13,331 $ 38,443 $ 40,054 $ 45,851 $ 14,044
1994 13,766 4,781 9,443 27,990 29,114 33,338 13,696
1993 15,419 4,592 10,155 30,166 28,735 31,759 13,339
1992 14,122 3,687 7,238 25,047 26,104 27,146 12,983
1991 13,706 2,901 5,584 22,191 24,251 25,300 12,617
1990 13,076 2,127 2,827 18,030 18,585 20,347 12,242
1989 14,685 1,562 3,175 19,422 19,183 20,457 11,537
1988 11,386 800 2,462 14,648 14,567 15,526 11,025
1987 9,652 243 2,087 11,982 12,492 13,394 10,558
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Strategic Opportunities on January 1, 1987, assuming the 5.00% maximum CDSC
had been in effect, the net amount invested in Class B shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Institutional Class of Strategic Opportunities would have
grown to $_______.
STRATEGIC OPPORTUNITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 18,384 $ 6,984 $ 13,444 $ 38,812 $ 40,054 $ 45,581 $ 14,044
1994 13,862 4,635 9,506 28,003 29,114 33,338 13,696
1993 15,419 4,592 10,155 30,166 28,735 31,759 13,339
1992 14,122 3,687 7,238 25,047 26,104 27,146 12,983
1991 13,706 2,901 5,584 22,191 24,251 25,300 12,617
1990 13,076 2,127 2,827 18,030 18,585 20,347 12,242
1989 14,685 1,562 3,175 19,422 19,183 20,457 11,537
1988 11,386 800 2,462 14,648 14,567 15,526 11,025
1987 9,652 243 2,087 11,982 12,492 13,394 10,558
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Strategic Opportunities on January 1, 1987, the net amount
invested in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Initial Class of Strategic Opportunities would have grown to
$_______, including the effect of Initial Class's 3.50% sales charge.
STRATEGIC OPPORTUNITIES - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 18,384 $ 6,984 $ 13,444 $ 38,812 $ 40,054 $ 45,581 $ 14,044
1994 13,862 4,635 9,506 28,003 29,114 33,338 13,696
1993 15,419 4,592 10,155 30,166 28,735 31,759 13,339
1992 14,122 3,687 7,238 25,047 26,104 27,146 12,983
1991 13,706 2,901 5,584 22,191 24,251 25,300 12,617
1990 13,076 2,127 2,827 18,030 18,585 20,347 12,242
1989 14,685 1,562 3,175 19,422 19,183 20,457 11,537
1988 11,386 800 2,462 14,648 14,567 15,526 11,025
1987 9,652 243 2,087 11,982 12,492 13,394 10,558
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial Class
of Strategic Opportunities on January 1, 1987, assuming the 3.50% maximum
sales charge had been in effect, the net amount invested in Initial Class
shares was $_____.The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period from February 20, 1996 and November 30, 1996, a
hypothetical $10,000 investment in Class A of Large Cap would have grown to
$_______, including the effect of Class A's 5.25% sales charge.
LARGE CAP - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Large Cap on February 20, 1996, assuming the 5.25% maximum sales charge had
been in effect, the net amount invested in Class A shares was $_____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period from February 20, 1996 and November 30, 1996, a
hypothetical $10,000 investment in Class T of Large Cap would have grown to
$_______, including the effect of Class T's 3.50% sales charge.
LARGE CAP - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Large Cap on February 20, 1996, assuming the 3.50% maximum sales charge had
been in effect, the net amount invested in Class T shares was $_____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period from February 20, 1996 and November 30, 1996, a
hypothetical $10,000 investment in Class B of Large Cap would have grown to
$_______, including the effect of Class B's maximum applicable CDSC.
LARGE CAP - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Large Cap on February 20, 1996, assuming the 5.00% maximum CDSC had been in
effect, the net amount invested in Class B shares was $_____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from February 20, 1996 and November 30, 1996, a
hypothetical $10,000 investment in Institutional Class of Large Cap would
have grown to $_______.
LARGE CAP - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996*
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Large Cap on February 20, 1996, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class A of Equity Income would have grown to $_______,
including the effect of Class A's 5.25% sales charge.
EQUITY INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 15,818 $ 11,618 $ 6,595 $ 34,031 $ 41,199 $ 47,557 $ 14,092
1994 12,654 8,826 4,806 26,286 30,077 34,192 13,752
1993 11,782 7,895 4,474 24,151 29,766 32,779 13,376
1992 10,197 6,394 3,872 20,463 27,035 28,578 13,028
1991 8,785 4,829 3,336 16,950 22,814 24,302 12,642
1990 7,548 3,369 2,866 13,784 18,956 20,777 12,275
1989 9,729 3,189 3,281 16,198 19,640 21,131 11,550
1988 8,801 2,007 2,968 13,776 15,010 15,910 11,037
1987 8,666 1,088 1,094 10,848 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Equity Income on December 1, 1987, assuming the 5.25% maximum sales charge
had been in effect, the net amount invested in Class A shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Equity Income would have grown to $_______,
including the effect of Class T's 3.50% sales charge.
EQUITY INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 16,110 $ 11,832 $ 6,717 $ 34,659 $ 41,199 $ 47,557 $ 14,092
1994 12,888 8,989 4,894 26,771 30,077 34,192 13,752
1993 12,000 8,041 4,557 24,598 29,766 32,779 13,376
1992 10,385 6,511 3,944 20,840 27,035 28,578 13,028
1991 8,947 4,919 3,398 17,264 22,814 24,302 12,642
1990 7,688 3,432 2,919 14,039 18,956 20,777 12,275
1989 9,908 3,248 3,341 16,497 19,640 21,131 11,550
1988 8,964 2,044 3,023 14,031 15,010 15,910 11,037
1987 8,826 1,109 1,114 11,049 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Equity Income on December 1, 1987, assuming the 3.50% maximum sales charge
had been in effect, the net amount invested in Class T shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Equity Income would have grown to $_______,
including the effect of Class B's maximum applicable CDSC.
EQUITY INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distribut
ions
1996
1995 $ 16,653 $ 12,152 $ 6,944 $ 35,749 $ 41,199 $ 47,557 $ 14,092
1994 13,339 9,319 5,066 27,724 30,077 34,192 13,752
1993 12,435 8,333 4,722 25,490 29,766 32,779 13,376
1992 10,762 6,747 4,087 21,596 27,035 28,578 13,028
1991 9,272 5,097 3,521 17,890 22,814 24,302 12,642
1990 7,967 3,556 3,025 14,548 18,956 20,777 12,275
1989 10,268 3,366 3,462 17,096 19,640 21,131 11,550
1988 9,289 2,118 3,132 14,539 15,010 15,910 11,037
1987 9,146 1,149 1,154 11,449 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Equity Income on December 1, 1987, assuming the 5.00% maximum CDSC had been
in effect, the net amount invested in Class B shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Equity Income would have grown to
$_______.
EQUITY INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 16,812 $ 13,012 $ 7,013 $ 36,837 $ 41,199 $ 47,557 $ 14,092
1994 13,448 9,688 5,107 28,243 30,077 34,192 13,752
1993 12,494 8,479 4,745 25,718 29,766 32,779 13,376
1992 10,778 6,759 4,093 21,630 27,035 28,578 13,028
1991 9,272 5,097 3,521 17,890 22,814 24,302 12,642
1990 7,967 3,556 3,025 14,548 18,956 20,777 12,275
1989 10,268 3,366 3,462 17,096 19,640 21,131 11,550
1988 9,289 2,118 3,132 14,539 15,010 15,910 11,037
1987 9,146 1,149 1,154 11,449 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Equity Income on December 1, 1987, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period from January 6, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class A of Balanced
would have grown to $_______, including the effect of Class A's 5.25% sales
charge.
BALANCED - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
ions
1996
1995 $ 14,497 $ 7,103 $ 3,259 $ 24,859 $ 30,447 $ 31,938 $ 13,910
1994 13,900 6,024 3,125 23,049 24,080 25,598 13,529
1993 15,075 5,971 2,639 23,685 23,183 23,462 13,186
1992 13,653 4,617 1,524 19,794 20,169 19,977 12,833
1991 13,388 3,903 660 17,951 18,339 18,454 12,434
1990 9,863 2,316 486 12,666 13,736 14,187 12,081
1989 12,100 1,541 0 13,640 14,849 14,782 11,367
1988 10,489 770 0 11,259 11,747 11,572 10,878
1987* 8,944 161 0 9,105 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Balanced on January 6, 1987, assuming the 5.25% maximum sales charge had
been in effect, the net amount invested in Class A shares was $_____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period from January 6, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class T of Balanced
would have grown to $_______, including the effect of Class T's 3.50% sales
charge.
BALANCED - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 14,765 $ 7,234 $ 3,319 $ 25,318 $ 30,447 $ 31,938 $ 13,910
1994 14,157 6,136 3,182 23,475 24,080 25,598 13,529
1993 15,353 6,082 2,688 24,123 23,183 23,462 13,186
1992 13,906 4,701 1,552 20,159 20,169 19,977 12,833
1991 13,635 3,975 672 18,282 18,339 18,454 12,434
1990 10,046 2,359 495 12,900 13,736 14,187 12,081
1989 12,323 1,569 0 13,892 14,849 14,782 11,367
1988 10,683 784 0 11,467 11,747 11,572 10,878
1987* 9,110 163 0 9,273 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Balanced on January 6, 1987, assuming the 3.50% maximum sales charge had
been in effect, the net amount invested in Class T shares was $_____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period from January 6, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class B of Balanced
would have grown to $_______, including the effect of Class B's maximum
applicable CDSC.
BALANCED - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 14,765 $ 7,234 $ 3,319 $ 25,318 $ 30,447 $ 31,938 $ 13,910
1994 14,157 6,136 3,182 23,475 24,080 25,598 13,529
1993 15,353 6,082 2,688 24,123 23,183 23,462 13,186
1992 13,906 4,701 1,552 20,159 20,169 19,977 12,833
1991 13,635 3,975 672 18,282 18,339 18,454 12,434
1990 10,046 2,359 495 12,900 13,736 14,187 12,081
1989 12,323 1,569 0 13,892 14,849 14,782 11,367
1988 10,683 784 0 11,467 11,747 11,572 10,878
1987* 9,110 163 0 9,273 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Balanced on January 6, 1987, assuming the 5.00% maximum CDSC had been in
effect, the net amount invested in Class B shares was $_____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from January 6, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Institutional Class
of Balanced would have grown to $_______.
BALANCED - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 15,400 $ 7,597 $ 3,462 $ 26,459 $ 30,447 $ 31,938 $ 13,910
1994 14,670 6,358 3,298 24,326 24,080 25,598 13,529
1993 15,910 6,302 2,786 24,998 23,183 23,462 13,186
1992 14,410 4,873 1,608 20,891 20,169 19,977 12,833
1991 14,130 4,119 696 18,945 18,339 18,454 12,434
1990 10,410 2,444 513 13,367 13,736 14,187 12,081
1989 12,770 1,626 0 14,396 14,849 14,782 11,367
1988 11,070 813 0 11,883 11,747 11,572 10,878
1987* 9,440 170 0 9,610 10,232 10,358 10,434
</TABLE>
* From January 6, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Balanced on January 6, 1987, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period from March 10, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Class A of Emerging
Markets Income would have grown to $_______, including the effect of Class
A's 4.25% sales charge.
EMERGING MARKETS INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
1996 $ $ $ $ $ $ $ $ $
1995 $ 8,886 $ 1,381 $ 231 $ 10,497 $ 11,477 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,115 459 237 9,811 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Emerging Markets Income on March 10, 1994, assuming the 4.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from March 10, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Class T of Emerging
Markets Income would have grown to $_______, including the effect of Class
T's 3.50% sales charge.
EMERGING MARKETS INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
1996 $ $ $ $ $ $ $ $ $
1995 $ 8,955 $ 1,392 $ 232 $ 10,579 $ 11,437 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,187 463 238 9,888 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Emerging Markets Income on March 10, 1994, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from March 10, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Class B of Emerging
Markets Income would have grown to $_______, including the effect of Class
B's maximum applicable CDSC.
EMERGING MARKETS INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
1996 $ $ $ $ $ $ $ $ $
1995 $ 9,021 $ 1,306 $ 240 $ 10,567 $ 11,437 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,520 430 246 10,196 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Emerging Markets Income on March 10, 1994, assuming the 5.00% maximum CDSC
had been in effect, the net amount invested in Class B shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period from March 10, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Institutional Class
of Emerging Markets Income would have grown to $_______.
EMERGING MARKETS INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Reinvested Total J.P. Morgan J.P. Morgan S&P DJIA Cost
Ended Initial Reinvested Capital Gain Value Emerging Emerging 500 of
Dec. 31 $10,000 Dividend Distributions Market Bond Market Living**
Investment Distributions Index Bond Index
Plus
1995 $ 9,280 $ 1,455 $ 241 $ 10,976 $ 11,437 $ 11,359 $ 13,849 $ 13,909 $ 10,464
1994* 9,520 480 247 10,247 8,967 8,960 10,067 10,173 10,204
</TABLE>
* From March 10, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Emerging Markets Income on March 10, 1994 the net amount invested
in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from January 5, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class A of High
Yield would have grown to $_______, including the effect of Class A's 4.25%
sales charge.
HIGH YIELD - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period
Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,404 $ 17,641 $ 1,046 $ 30,091 $ 31,158 $ 32,670 $ 13,910
1994 10,743 14,425 985 26,153 24,643 26,185 13,529
1993 11,500 13,490 490 25,480 23,725 23,999 13,186
1992 10,600 10,551 0 21,151 20,640 20,435 12,833
1991 9,690 7,653 0 17,343 18,768 18,877 12,434
1990 7,804 4,613 0 12,416 14,057 14,512 12,081
1989 8,589 3,399 0 11,988 15,196 15,121 11,367
1988 9,441 2,160 0 11,601 12,022 11,837 10,878
1987* 8,704 793 0 9,497 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of High
Yield on January 5, 1987, assuming the 4.25% maximum sales charge had been
in effect, the net amount invested in Class A shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from January 5, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class T of High
Yield would have grown to $_______, including the effect of Class T's 3.50%
sales charge.
HIGH YIELD - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,493 $ 17,779 $ 1,054 $ 30,326 $ 31,158 $ 32,670 $ 13,910
1994 10,827 14,538 993 26,358 24,643 26,185 13,529
1993 11,590 13,596 494 25,680 23,725 23,999 13,186
1992 10,683 10,634 0 21,317 20,640 20,435 12,833
1991 9,766 7,712 0 17,478 18,768 18,877 12,434
1990 7,865 4,649 0 12,514 14,057 14,512 12,081
1989 8,656 3,426 0 12,082 15,196 15,121 11,367
1988 9,515 2,177 0 11,692 12,022 11,837 10,878
1987* 8,772 800 0 9,572 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of High
Yield on January 5, 1987, assuming the 3.50% maximum sales charge had been
in effect, the net amount invested in Class T shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from January 5, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class B of High
Yield would have grown to $_______, including the effect of Class B's
maximum applicable CDSC.
HIGH YIELD - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,890 $ 18,039 $ 1,090 $ 31,019 $ 31,158 $ 32,670 $ 13,910
1994 11,210 14,942 1,028 27,180 24,643 26,185 13,529
1993 12,010 14,089 512 26,611 23,725 23,999 13,186
1992 11,070 11,020 0 22,090 20,640 20,435 12,833
1991 10,120 7,992 0 18,112 18,768 18,877 12,434
1990 8,150 4,818 0 12,968 14,057 14,512 12,081
1989 8,970 3,550 0 12,520 15,196 15,121 11,367
1988 9,860 2,256 0 12,116 12,022 11,837 10,878
1987* 9,090 829 0 9,919 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of High
Yield on January 5, 1987, assuming the 5.00% maximum CDSC had been in
effect, the net amount invested in Class B shares was $_____. The cost of
the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period from January 5, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Institutional Class
of High Yield would have grown to $_______.
HIGH YIELD - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,760 $ 18,438 $ 1,078 $ 31,276 $ 31,158 $ 32,670 $ 13,910
1994 11,220 15,065 1,029 27,314 24,643 26,185 13,529
1993 12,010 14,089 512 26,611 23,725 23,999 13,186
1992 11,070 11,020 0 22,090 20,640 20,435 12,833
1991 10,120 7,992 0 18,112 18,768 18,877 12,434
1990 8,150 4,818 0 12,968 14,057 14,512 12,081
1989 8,970 3,550 0 12,520 15,196 15,121 11,367
1988 9,860 2,256 0 12,116 12,022 11,837 10,878
1987* 9,090 829 0 9,919 10,472 10,595 10,434
</TABLE>
* From January 5, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of High Yield on January 5, 1987, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period from October 31, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Class A of
Strategic Income would have grown to $_______, including the effect of
Class A's 4.25% sales charge.
STRATEGIC INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 10,533 $ 934 $ 238 $ 11,704 $ 13,414 $ 13,400 $ 10,268
1994* 9,498 93 0 9,592 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Strategic Income on October 31, 1994, assuming the 4.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from October 31, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Class T of
Strategic Income would have grown to $_______, including the effect of
Class T's 3.50% sales charge.
STRATEGIC INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 10,615 $ 941 $ 240 $ 11,796 $ 13,414 $ 13,400 $ 10,268
1994* 9,573 94 0 9,667 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Strategic Income on October 31, 1994, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from October 31, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Class B of
Strategic Income would have grown to $_______, including the effect of
Class B's maximum applicable CDSC.
STRATEGIC INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 10,710 $ 871 $ 247 $ 11,828 $ 13,414 $ 13,400 $ 10,268
1994* 9,910 84 0 9,994 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Strategic Income on October 31, 1994, assuming the 5.00% maximum sales
charge had been in effect, the net amount invested in Class B shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period from October 31, 1994 (commencement of operations) to
December 31, 1996, a hypothetical $10,000 investment in Institutional Class
of Strategic Income would have grown to $_______.
STRATEGIC INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Dec. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,030 $ 983 $ 249 $ 12,262 $ 13,414 $ 13,400 $ 10,268
1994* 9,920 97 0 10,017 9,750 9,801 10,013
</TABLE>
* From October 31, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Strategic Income on October 31, 1994, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class A of Mortgage Securities would have grown to $_______,
including the effect of Class A's 4.25% sales charge.
MORTGAGE SECURITIES - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
July 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ $ $ $ $ $ $
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Mortgage Securities on January 1, 1987, assuming the 4.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class T of Mortgage Securities would have grown to $_______,
including the effect of Class T's 3.50% sales charge.
MORTGAGE SECURITIES - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
July 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ $ $ $ $ $ $
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Mortgage Securities on January 1, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Class B of Mortgage Securities would have grown to $_______,
including the effect of Class B's maximum applicable CDSC.
MORTGAGE SECURITIES - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
July 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ $ $ $ $ $ $
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Mortgage Securities on January 1, 1987, assuming the 5.00% maximum CDSC had
been in effect, the net amount invested in Class B shares was $_____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Institutional Class of Mortgage Securities would have grown
to $_______.
MORTGAGE SECURITIES - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
July 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ $ $ $ $ $ $
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Mortgage Securities on January 1, 1987, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Initial Class of Mortgage Securities would have grown to
$_______.
MORTGAGE SECURITIES - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
July 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ $ $ $ $ $ $
1994
1993
1992
1991
1990
1989
1988
1987
</TABLE>
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial Class
of Mortgage Securities on January 1, 1987, the net amount invested in Class
A shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period January 7, 1987 (commencement of operations) to October
31, 1996, a hypothetical $10,000 investment in Class A of Government
Investment would have grown to $_______, including the effect of Class A's
4.25% sales charge.
GOVERNMENT INVESTMENT - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 9,259 $ 8,111 $ 546 $ 17,916 $ 30,373 $ 31,879 $ 13,910
1994 8,579 6,506 506 15,591 24,022 25,550 13,529
1993 9,709 6,429 320 16,458 23,127 23,418 13,186
1992 9,316 5,309 0 14,625 20,120 19,940 12,833
1991 9,182 4,299 0 13,481 18,295 18,419 12,434
1990 8,761 3,206 0 11,968 13,703 14,160 12,081
1989 8,914 2,325 0 11,240 14,813 14,755 11,367
1988 8,866 1,410 0 10,277 11,719 11,551 10,878
1987* 8,809 590 0 9,399 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Government Investment on January 7, 1987, assuming the 4.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period January 7, 1987 (commencement of operations) to October
31, 1996, a hypothetical $10,000 investment in Class T of Government
Investment would have grown to $_______, including the effect of Class T's
3.50% sales charge.
GOVERNMENT INVESTMENT - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 9,332 $ 8,174 $ 550 $ 18,056 $ 30,373 $ 31,879 $ 13,910
1994 8,646 6,557 510 15,713 24,022 25,550 13,529
1993 9,785 6,479 322 16,587 23,127 23,418 13,186
1992 9,389 5,351 0 14,740 20,120 19,940 12,833
1991 9,254 4,333 0 13,587 18,295 18,419 12,434
1990 8,830 3,231 0 12,061 13,703 14,160 12,081
1989 8,984 2,344 0 11,328 14,813 14,755 11,367
1988 8,936 1,421 0 10,357 11,719 11,551 10,878
1987* 8,878 595 0 9,473 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Government Investment on January 7, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period January 7, 1987 (commencement of operations) to October
31, 1996, a hypothetical $10,000 investment in Class B of Government
Investment would have grown to $_______, including the effect of Class B's
maximum applicable CDSC.
GOVERNMENT INVESTMENT - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 9,670 $ 8,275 $ 570 $ 18,515 $ 30,373 $ 31,879 $ 13,910
1994 8,950 6,737 528 16,215 24,022 25,550 13,529
1993 10,140 6,715 334 17,189 23,127 23,418 13,186
1992 9,730 5,545 0 15,275 20,120 19,940 12,833
1991 9,590 4,490 0 14,080 18,295 18,419 12,434
1990 9,150 3,349 0 12,499 13,703 14,160 12,081
1989 9,310 2,429 0 11,739 14,813 14,755 11,367
1988 9,260 1,473 0 10,733 11,719 11,551 10,878
1987* 9,200 616 0 9,816 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Government Investment on January 7, 1987, assuming the 5.00% maximum CDSC
had been in effect, the net amount invested in Class B shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period January 7, 1987 (commencement of operations) to October
31, 1996, a hypothetical $10,000 investment in Institutional Class of
Government Investment would have grown to $_______.
GOVERNMENT INVESTMENT - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 9,670 $ 8,490 $ 570 $ 18,730 $ 30,373 $ 31,879 $ 13,910
1994 8,960 6,795 528 16,283 24,022 25,550 13,529
1993 10,140 6,715 334 17,189 23,127 23,418 13,186
1992 9,730 5,545 0 15,275 20,120 19,940 12,833
1991 9,590 4,490 0 14,080 18,295 18,419 12,434
1990 9,150 3,349 0 12,499 13,703 14,160 12,081
1989 9,310 2,429 0 11,739 14,813 14,755 11,367
1988 9,260 1,473 0 10,733 11,719 11,551 10,878
1987* 9,200 616 0 9,816 10,208 10,339 10,434
</TABLE>
* From January 7, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Government Investment on January 7, 1987, the net amount invested
in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class A of Intermediate Bond would have grown to $_______,
including the effect of Class A's 3.25% sales charge.
INTERMEDIATE BOND - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,868 $ 12,502 $ 236 $ 22,606 $ 41,199 $ 47,557 $ 14,092
1994 9,409 10,654 225 20,288 30,077 34,192 13,752
1993 10,216 10,334 244 20,795 29,766 32,779 13,376
1992 9,758 8,493 234 18,485 27,035 28,578 13,028
1991 9,675 7,045 232 16,951 22,814 24,302 12,642
1990 9,299 5,434 223 14,955 18,956 20,777 12,275
1989 9,547 4,273 228 14,048 19,640 21,131 11,550
1988 9,336 2,980 223 12,539 15,010 15,910 11,037
1987 9,400 1,899 225 11,524 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Intermediate Bond on January 7, 1987, assuming the 3.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class T of Intermediate Bond would have grown to $_______,
including the effect of Class T's 2.75% sales charge.
INTERMEDIATE BOND - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,919 $ 12,567 237 22,723 $ 41,199 $ 47,557 $ 14,092
1994 9,458 10,709 226 20,393 30,077 34,192 13,752
1993 10,269 10,387 246 20,902 29,766 32,779 13,376
1992 9,808 8,537 235 18,580 27,035 28,578 13,028
1991 9,725 7,081 233 17,039 22,814 24,302 12,642
1990 9,347 5,461 224 15,032 18,956 20,777 12,275
1989 9,596 4,294 230 14,120 19,640 21,131 11,550
1988 9,384 2,995 225 12,604 15,010 15,910 11,037
1987 9,448 1,910 226 11,584 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Intermediate Bond on January 7, 1987, assuming the 2.75% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Class B of Intermediate Bond would have grown to $_______,
including the effect of Class B's maximum applicable CDSC.
INTERMEDIATE BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 10,190 $ 12,650 $ 244 $ 23,084 $41,199 $ 47,557 $ 14,092
1994 9,716 10,919 233 20,868 30,077 34,192 13,752
1993 10,559 10,681 253 21,493 29,766 32,779 13,376
1992 10,085 8,779 241 19,105 27,035 28,578 13,028
1991 10,000 7,282 239 17,521 22,814 24,302 12,642
1990 9,611 5,616 230 15,547 18,956 20,777 12,275
1989 9,867 4,417 236 14,520 19,640 21,131 11,550
1988 9,649 3,081 231 12,961 15,010 15,910 11,037
1987 9,716 1,962 233 11,911 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Bond on January 7, 1987, assuming the 3.00% maximum CDSC had
been in effect, the net amount invested in Class B shares was $_____. The
cost of the initial investment ($10,000) together with the aggregate cost
of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996, a hypothetical $10,000
investment in Institutional Class of Intermediate Bond would have grown to
$_______.
INTERMEDIATE BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 10,209 $ 13,235 $ 244 $ 23,688 $ 41,199 $ 47,577 $ 14,092
1994 9,735 11,233 233 21,201 30,077 34,192 13,752
1993 10,578 10,824 253 21,655 29,766 32,779 13,376
1992 10,085 8,809 241 19,135 27,035 28,578 13,028
1991 10,000 7,282 239 17,521 22,814 24,302 12,642
1990 9,611 5,616 230 15,457 18,956 20,777 12,275
1989 9,867 4,417 236 14,520 19,640 21,131 11,550
1988 9,649 3,081 231 12,961 15,010 15,910 11,037
1987 9,716 1,962 233 11,911 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Intermediate Bond on January 7, 1987, the net amount invested in
Institutional Class shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class A of Short
Fixed-Income would have grown to $_______, including the effect of Class
A's 1.50% sales charge.
SHORT FIXED-INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,328 $ 8,221 $ 0 $ 17,549 $ 23,674 $ 24,051 $ 13,365
1994 9,338 7,210 0 16,548 18,273 19,276 13,000
1993 9,939 6,646 0 16,585 18,026 17,668 12,670
1992 9,801 5,397 0 15,198 15,682 15,043 12,330
1991 9,722 4,165 0 13,887 14,260 13,896 11,948
1990 9,476 2,902 0 12,378 10,681 10,683 11,609
1989 9,801 1,921 0 11,722 11,545 11,132 10,922
1988 9,791 974 0 10,765 9,134 8,714 10,452
1987* 9,909 100 0 10,009 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Short Fixed-Income on September 16, 1987, assuming the 1.50% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class T of Short
Fixed-Income would have grown to $_______, including the effect of Class
T's 1.50% sales charge.
SHORT FIXED-INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,328 $ 8,221 $ 0 $ 17,549 $ 23,674 $ 24,051 $ 13,365
1994 9,338 7,210 0 16,548 18,273 19,276 13,000
1993 9,939 6,646 0 16,585 18,026 17,668 12,670
1992 9,801 5,397 0 15,198 15,682 15,043 12,330
1991 9,722 4,165 0 13,887 14,260 13,896 11,948
1990 9,476 2,902 0 12,378 10,681 10,683 11,609
1989 9,801 1,921 0 11,722 11,545 11,132 10,922
1988 9,791 974 0 10,765 9,134 8,714 10,452
1987* 9,909 100 0 10,009 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Short Fixed-Income on September 16, 1987, assuming the 1.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Institutional Class
of Short Fixed-Income would have grown to $_______.
SHORT FIXED-INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,470 $ 8,355 $ 0 $ 17,825 $ 23,674 $ 24,051 $ 13,365
1994 9,480 7,320 0 16,800 18,723 19,276 13,000
1993 10,090 6,748 0 16,838 18,026 17,668 12,670
1992 9,950 5,479 0 15,429 15,682 15,043 12,330
1991 9,870 4,228 0 14,098 14,260 13,896 11,948
1990 9,620 2,946 0 12,566 10,681 10,683 11,609
1989 9,950 1,951 0 11,901 11,545 11,132 10,922
1988 9,940 989 0 10,929 9,134 8,714 10,452
1987* 10,060 101 0 10,161 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Short Fixed-Income on September 16, 1987, the net amount invested
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class A of High
Income Municipal would have grown to $_______, including the effect of
Class A's 3.50% sales charge.
HIGH INCOME MUNICIPAL - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,375 $ 8,443 $ 504 $ 20,321 $ 23,674 $ 24,051 $ 13,365
1994 10,743 6,844 476 18,063 18,723 19,276 13,000
1993 12,179 6,611 431 19,222 18,026 17,668 12,670
1992 11,155 5,071 353 16,578 15,682 15,043 12,330
1991 10,925 3,923 332 15,180 14,260 13,896 11,948
1990 10,408 2,736 169 13,313 10,681 10,683 11,609
1989 10,360 1,768 54 12,183 11,545 11,132 10,922
1988 10,015 857 0 10,872 9,134 8,714 10,452
1987* 9,431 88 0 9,519 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of High
Income Municipal on September 16, 1987, assuming the 4.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class T of High
Income Municipal would have grown to $_______, including the effect of
Class T's 3.50% sales charge.
HIGH INCOME MUNICIPAL - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 11,464 $ 8,509 $ 508 $ 20,481 $ 23,674 $ 24,051 $ 13,365
1994 10,827 6,899 479 18,205 18,723 19,276 13,000
1993 12,275 6,663 435 19,373 18,026 17,668 12,670
1992 11,242 5,111 355 16,708 15,682 15,043 12,330
1991 11,011 3,954 334 15,299 14,260 13,896 11,948
1990 10,490 2,757 170 13,417 10,681 10,683 11,609
1989 10,441 1,782 55 12,278 11,545 11,132 10,922
1988 10,094 864 0 10,958 9,134 8,714 10,452
1987* 9,505 89 0 9,594 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of High
Income Municipal on September 16, 1987, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Class B of High
Income Municipal would have grown to $_______, including the effect of
Class B's maximum applicable CDSC.
HIGH INCOME MUNICIPAL - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,860 $ 8,563 $ 525 $ 20,948 $ 23,674 $ 24,051 $ 13,365
1994 11,210 7,069 496 18,775 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987* 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of High
Income Municipal on September 16, 1987, assuming the 5.00% maximum sales
charge had been in effect, the net amount invested in Class B shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period September 16, 1987 (commencement of operations) to
October 31, 1996, a hypothetical $10,000 investment in Institutional Class
of High Income Municipal would have grown to $_______.
HIGH INCOME MUNICIPAL - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987* 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From September 16, 1987 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of High Income Municipal on September 16, 1987, the net amount
invested in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended December 31, 1996 a hypothetical $10,000
investment in Class A of Municipal Bond would have grown to $_______,
including the effect of Class A's 4.25% sales charge.
MUNICIPAL BOND - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Municipal Bond on January 1, 1987, assuming the 4.25% maximum sales charge
had been in effect, the net amount invested in Class A shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996 a hypothetical $10,000
investment in Class T of Municipal Bond would have grown to $_______,
including the effect of Class T's 3.50% sales charge.
MUNICIPAL BOND - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Municipal Bond on January 1, 1987, assuming the 3.50% maximum sales charge
had been in effect, the net amount invested in Class T shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the 10-year period ended December 31, 1996 a hypothetical $10,000
investment in Class B of Municipal Bond would have grown to $_______,
including the effect of Class B's maximum applicable CDSC.
MUNICIPAL BOND - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Municipal Bond on January 1, 1987, assuming the 5.00% maximum CDSC had been
in effect, the net amount invested in Class B shares was $_____. The cost
of the initial investment ($10,000) together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the 10-year period ended December 31, 1996 a hypothetical $10,000
investment in Institutional Class of Municipal Bond would have grown to
$_______.
MUNICIPAL BOND - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Municipal Bond on January 1, 1987, the net amount invested in
Institutional Class shares was $_____. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $_____. If distributions had not
been reinvested, the amount of distributions earned from the class over
time would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended December 31, 1996 a hypothetical $10,000
investment in Initial Class of Municipal Bond would have grown to $_______.
MUNICIPAL BOND - INITIAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 11,880 $ 8,834 $ 526 $ 21,240 $ 23,674 $ 24,051 $ 13,365
1994 11,220 7,148 497 18,865 18,723 19,276 13,000
1993 12,720 6,905 450 20,075 18,026 17,668 12,670
1992 11,650 5,296 368 17,314 15,682 15,043 12,330
1991 11,410 4,097 347 15,854 14,260 13,896 11,948
1990 10,870 2,858 176 13,904 10,681 10,683 11,609
1989 10,820 1,846 57 12,723 11,545 11,132 10,922
1988 10,460 895 0 11,355 9,134 8,714 10,452
1987 9,850 92 0 9,942 7,956 7,800 10,026
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Initial Class
of Municipal Bond on January 1, 1987, the net amount invested in Initial
Class shares was $_____. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996 a hypothetical $10,000
investment in Class A of Intermediate Municipal Income would have grown to
$_______, including the effect of Class A's 3.25% sales charge.
INTERMEDIATE MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,769 $ 7,896 $ 1,475 $ 19,140 $ 41,199 $ 47,557 $ 14,092
1994 8,847 6,391 1,335 16,573 30,077 34,192 13,752
1993 9,844 6,293 1,453 17,590 29,766 32,779 13,376
1992 10,428 5,779 122 16,329 27,035 28,578 13,028
1991 10,164 4,705 119 14,988 22,814 24,302 12,642
1990 10,014 3,727 117 13,858 18,956 20,777 12,275
1989 9,986 2,845 116 12,947 19,640 21,131 11,550
1988 9,901 2,027 115 12,043 15,010 15,910 11,037
1987 9,769 1,292 114 11,175 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Intermediate Municipal Income on January 1, 1987, assuming the 3.25%
maximum sales charge had been in effect, the net amount invested in Class A
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996 a hypothetical $10,000
investment in Class T of Intermediate Municipal Income would have grown to
$_______, including the effect of Class T's 2.75% sales charge.
INTERMEDIATE MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 9,820 $ 7,939 $ 1,483 $ 19,242 $ 41,199 $ 47,557 $ 14,092
1994 8,893 6,426 1,343 16,662 30,077 34,192 13,752
1993 9,895 6,329 1,460 17,684 29,766 32,779 13,376
1992 10,482 5,812 122 16,416 27,035 28,578 13,028
1991 10,217 4,729 119 15,065 22,814 24,302 12,642
1990 10,066 3,747 117 13,930 18,956 20,777 12,275
1989 10,037 2,860 117 13,014 19,640 21,131 11,550
1988 9,952 2,038 116 12,106 15,010 15,910 11,037
1987 9,820 1,298 115 11,233 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Intermediate Municipal Income on January 1, 1987, assuming the 2.75%
maximum sales charge had been in effect, the net amount invested in Class T
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the 10-year period ended November 30, 1996 a hypothetical $10,000
investment in Class B of Intermediate Municipal Income would have grown to
$_______, including the effect of Class B's maximum applicable CDSC.
INTERMEDIATE MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 10,097 $ 7,936 $ 1,524 $ 19,557 $ 41,199 $ 47,557 $ 14,092
1994 9,144 6,542 1,380 17,066 30,077 34,192 13,752
1993 10,175 6,507 1,502 18,184 29,766 32,779 13,376
1992 10,778 5,976 126 16,880 27,035 28,578 13,028
1991 10,506 4,862 123 15,491 22,814 24,302 12,642
1990 10,350 3,852 121 14,323 18,956 20,777 12,275
1989 10,321 2,941 120 13,382 19,640 21,131 11,550
1988 10,233 2,096 119 12,448 15,010 15,910 11,037
1987 10,097 1,335 118 11,550 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
Intermediate Municipal Income on January 1, 1987, assuming the 3.00%
maximum CDSC had been in effect, the net amount invested in Class B shares
was $_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the 10-year period ended November 30, 1996 a hypothetical $10,000
investment in Institutional Class of Intermediate Municipal Income would
have grown to $_______.
INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living*
Investment Distributions
1996
1995 $ 10,078 $ 8,311 $ 1,522 $ 19,911 $ 41,199 $ 47,557 $ 14,092
1994 9,154 6,711 1,383 17,248 30,077 34,192 13,752
1993 10,175 6,562 1,502 18,239 29,766 32,779 13,376
1992 10,778 5,982 126 16,886 27,035 28,578 13,028
1991 10,506 4,862 123 15,491 22,814 24,302 12,642
1990 10,350 3,852 121 14,323 18,956 20,777 12,275
1989 10,321 2,941 120 13,382 19,640 21,131 11,550
1988 10,233 2,096 119 12,448 15,010 15,910 11,037
1987 10,097 1,335 118 11,550 12,171 13,310 10,587
</TABLE>
* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Intermediate Municipal Income on January 1, 1987, the net amount
invested in Class Institutional Class shares was $_____. The cost of the
initial investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period March 16, 1994 (commencement of operations) to November
30, 1996 a hypothetical $10,000 investment in Class A of Short-Intermediate
Municipal Income would have grown to $_______, including the effect of
Class A's 1.50% sales charge.
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 10,086 $ 717 $ 0 $ 10,803 $ 13,583 $ 13,775 $ 10,435
1994* 9,623 254 0 9,877 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
Short-Intermediate Municipal Income on March 16, 1994, assuming the 1.50%
maximum sales charge had been in effect, the net amount invested in Class A
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period March 16, 1994 (commencement of operations) to November
30, 1996 a hypothetical $10,000 investment in Class T of Short-Intermediate
Municipal Income would have grown to $_______, including the effect of
Class T's 1.50% sales charge.
SHORT-INTERMEDIATE MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 10,086 $ 717 $ 0 $ 10,803 $ 13,583 $ 13,775 $ 10,435
1994* 9,623 254 0 9,877 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
Short-Intermediate Municipal Income on March 16, 1994, assuming the 1.50%
maximum sales charge had been in effect, the net amount invested in Class T
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period March 16, 1994 (commencement of operations) to November
30, 1996 a hypothetical $10,000 investment in Institutional Class of
Short-Intermediate Municipal Income would have grown to $_______.
SHORT-INTERMEDIATE MUNICIPAL INCOME - INSTITUTIONAL INDICES
CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Nov. 30 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996
1995 $ 10,230 $ 734 $ 0 $ 10,964 $ 13,583 $ 13,775 $ 10,435
1994* 9,770 257 0 10,027 9,916 9,904 10,183
</TABLE>
* From March 16, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of Short-Intermediate Municipal Income on March 16, 1994, the net
amount invested in Institutional Class shares was $_____. The cost of the
initial investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period August 21, 1995 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Class A of New York Municipal
Income would have grown to $_______, including the effect of Class A's
4.25% sales charge.
NEW YORK MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995* $ 9,958 $ 81 $ 0 $ 10,039 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of New
York Municipal Income on August 21, 1995, assuming the 4.25% maximum sales
charge had been in effect, the net amount invested in Class A shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period August 21, 1995 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Class T of New York Municipal
Income would have grown to $_______, including the effect of Class T's
3.50% sales charge.
NEW YORK MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995* $ 10,036 $ 82 $ 0 $ 10,118 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of New
York Municipal Income on August 21, 1995, assuming the 3.50% maximum sales
charge had been in effect, the net amount invested in Class T shares was
$_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period August 21, 1995 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Class B of New York Municipal
Income would have grown to $_______, including the effect of Class B's
maximum applicable CDSC.
NEW YORK MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995* $ 9,990 $ 75 $ 0 $ 10,065 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of New
York Municipal Income on August 21, 1995, assuming the 5.00% maximum CDSC
had been in effect, the net amount invested in Class B shares was $_____.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$_____. If distributions had not been reinvested, the amount of
distributions earned from the class over time would have been smaller, and
cash payments for the period would have amounted to $________ for dividends
and $____ for capital gain distributions.
During the period August 21, 1995 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Institutional Class of New
York Municipal Income would have grown to $_______.
NEW YORK MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996 $ $ $ $ $ $ $
1995* $ 10,400 $ 96 $ 0 $ 10,496 $ 10,445 $ 10,346 $ 10,052
</TABLE>
* From August 21, 1995 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of New York Municipal Income on August 21, 1995, the net amount
invested in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
During the period February 20, 1996 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Class A of California
Municipal Income would have grown to $_______, including the effect of
Class A's 4.25% sales charge.
CALIFORNIA MUNICIPAL INCOME - CLASS A INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class A of
California Municipal Income on February 20, 1996, assuming the 4.25%
maximum sales charge had been in effect, the net amount invested in Class A
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period February 20, 1996 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Class T of California
Municipal Income would have grown to $_______, including the effect of
Class T's 3.50% sales charge.
CALIFORNIA MUNICIPAL INCOME - CLASS T INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class T of
California Municipal Income on February 20, 1996, assuming the 3.50%
maximum sales charge had been in effect, the net amount invested in Class T
shares was $_____. The cost of the initial investment ($10,000) together
with the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time they
were reinvested) amounted to $_____. If distributions had not been
reinvested, the amount of distributions earned from the class over time
would have been smaller, and cash payments for the period would have
amounted to $________ for dividends and $____ for capital gain
distributions.
During the period February 20, 1996 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Class B of California
Municipal Income would have grown to $_______, including the effect of
Class B's maximum applicable CDSC.
CALIFORNIA MUNICIPAL INCOME - CLASS B INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Class B of
California Municipal Income on February 20, 1996, assuming the 5.00%
maximum CDSC had been in effect, the net amount invested in Class B shares
was $_____. The cost of the initial investment ($10,000) together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested)
amounted to $_____. If distributions had not been reinvested, the amount
of distributions earned from the class over time would have been smaller,
and cash payments for the period would have amounted to $________ for
dividends and $____ for capital gain distributions.
During the period February 20, 1996 (commencement of operations) to October
31, 1996 a hypothetical $10,000 investment in Institutional Class of
California Municipal Income would have grown to $_______.
CALIFORNIA MUNICIPAL INCOME - INSTITUTIONAL CLASS INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Reinvested Total S&P DJIA Cost
Oct. 31 Initial Reinvested Capital Gain Value 500 of
$10,000 Dividend Distributions Living**
Investment Distributions
1996* $ $ $ $ $ $ $
</TABLE>
* From February 20, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Institutional
Class of California Municipal Income on February 20, 1996, the net amount
invested in Institutional Class shares was $_____. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested) amounted to $_____. If
distributions had not been reinvested, the amount of distributions earned
from the class over time would have been smaller, and cash payments for the
period would have amounted to $________ for dividends and $____ for capital
gain distributions.
The yield for the S&P 500 for the year ended December 31, 1996 was ___%,
calculated by dividing the dollar value of dividends paid by the S&P 500
stocks during the period by the average value of the S&P 500 on December
31, 1995. The S&P 500 yield is calculated differently from each class's
yield. For example, a class's yield calculation treats dividends as accrued
in anticipation of payment, rather than recording them when paid.
INTERNATIONAL INDICES, MARKET CAPITALIZATION, AND NATIONAL STOCK MARKET
RETURN. The following tables show the total market capitalization of
certain countries according to the Morgan Stanley Capital International
(MSCI) Indices database, the total market capitalization of Latin American
countries according to the International Finance Corporation Emerging
Market database, and the performance of national stock markets as measured
in U.S. dollars by the MSCI stock market indices for the twelve months
ended October 31, 1996. Of course, these results are not indicative of
future stock market performance or the classes' performance. Market
conditions during the periods measured fluctuated widely. Brokerage
commissions and other fees are not factored into the values of the indices.
MARKET CAPITALIZATION. Companies outside the United States now make up
nearly two-thirds of the world's stock market capitalization. According to
MSCI, the size of the markets as measured in U.S. dollars grew from
$5,080.3 (8621.7 including the US) billion in 1995 to $5,749.4 (10,078.9
including the US) billion in 1996.
The following table measures the indexed market capitalization of certain
countries according to the MSCI indices database. The value of the markets
are measured in billions of U.S. dollars as of October 31, 1996.
TOTAL MARKET CAPITALIZATION
Australia $ 163.6 Japan $ 1944.0
Austria $ 22.9 Netherlands $ 248.1
Belgium $ 66.2 Norway $ 26.2
Canada $ 250.8 Singapore/Malaysia $ 213.6
Denmark $ 47.2 Spain $ 108.4
France $ 372.2 Sweden $ 134.0
Germany $ 401.6 Switzerland $ 325.4
Hong Kong $ 200.6 United Kingdom $ 1002.8
Italy $ 147.0 United States $ 4329.4
The following table measures the total market capitalization of certain
Latin American countries according to the International Finance Corporation
Emerging Markets database. The value of the markets is measured in billions
of U.S. dollars as of October 31, 1996.
TOTAL MARKET CAPITALIZATION - LATIN AMERICA
Argentina $ 24,980.3
Brazil $ 89,501.4
Chile $ 38,528.7
Colombia $ 9,277.4
Mexico $ 72,037.8
Venezuela $ 5,384.5
Total Latin America $ 239,710.1
NATIONAL STOCK MARKET PERFORMANCE. Certain national stock markets have
outperformed the U.S. stock market. The first table below represents the
performance of national stock markets as measured in U.S. dollars by the
MSCI stock market indices for the twelve months ended October 31, 1996. The
second table shows the same performance as measured in local currency. Each
table measures total return based on the period's change in price,
dividends paid on stocks in the index, and the effect of reinvesting
dividends net of any applicable foreign taxes. These are unmanaged indices
composed of a sampling of selected companies representing an approximation
of the market structure of the designated country.
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN U.S. DOLLARS
Australia 16.9% Japan -0.8%
Austria -0.5% Netherlands 26.2%
Belgium 16.3% Norway 15.4%
Canada 29.9% Singapore/Malaysia -3.1/26.8%
Denmark 16.8% Spain 32.1%
France 18.2% Sweden 28.9%
Germany 12.5% Switzerland 8.9%
Hong Kong 28.0% United Kingdom 20.3%
Italy 7.8% United States 23.8%
STOCK MARKET PERFORMANCE (CUMULATIVE TOTAL RETURNS)
MEASURED IN LOCAL CURRENCY
Australia 12.1% Japan 10.3%
Austria 6.9% Netherlands 35.5%
Belgium 25.2% Norway 18.1%
Canada 29.6% Singapore/Malaysia -3.5/26.0%
Denmark 24.2% Spain 37.8%
France 23.4% Sweden 27.4%
Germany 20.8% Switzerland 20.6%
Hong Kong 28.0% United Kingdom 16.6%
Italy 2.5% United States 23.8%
The following table shows the average annualized stock market returns
measured in U.S. dollars as of October 31, 1996.
STOCK MARKET PERFORMANCE
<TABLE>
<CAPTION>
<S> <C> <C>
FIVE YEARS ENDED OCTOBER 31, 1996 TEN YEARS ENDED OCTOBER 31, 1996
Germany 11.98% 8.73%
Hong Kong 26.94% 22.25%
Japan 0.58% 5.35%
Spain 8.15% 11.16%
United Kingdom 11.50% 15.03%
United States 14.98% 13.73%
</TABLE>
PERFORMANCE COMPARISONS. A class's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings are
based on total return, assume reinvestment of distributions, do not take
sales charges or redemption fees into consideration, and are prepared
without regard to tax consequences. Lipper may also rank bond funds based
on yield. In addition to mutual fund rankings, perfo rmance 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, performance may also be compared to other mutual funds
tracked by financial or business publications and periodicals. For example,
a class may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
A class's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest. The
total return of a benchmark index reflects reinvestment of all dividends
and capital gains paid by securities included in the index. Unlike [the/a]
fund's returns, however, the index returns do not reflect brokerage
commissions, transaction fees, or other costs of investing directly in the
securities included in the index.
Each of TechnoQuant Growth, Equity Growth, Growth Opportunities, Strategic
Opportunities, Large Cap, Growth & Income, Equity-Income, and Balanced may
compare its performance to that of the Standard & Poor's 500 Index, a
widely recognized, unmanaged index of common stocks.
Overseas may compare its performance to the Morgan Stanley Capital
International Europe, Australasia, Far East Index, a market capitalization
weighted, unmanaged index of over 1,000 foreign stocks.
Mid-Cap may compare its performance to that of the Standard & Poor's MidCap
400 Index, a widely recognized, unmanaged index of 400
medium-capitalization stocks.
Balanced may also compare its performance to the Lehman Brothers Aggregate
Bond Index, a market value weighted performance benchmark for
investment-grade fixed-rate debt issues, including government, corporate,
asset-backed, and mortgage-backed securities. Issues included in the index
have an outstanding par value of at least $100 million and maturities of at
least one year. Government and corporate issues include all public
obligations of the U.S. Treasury (excluding flower bonds and
foreign-targeted issues) and U.S. government agencies, as well as
nonconvertible investment-grade, SEC-registered corporate debt.
Mortgage-backed securities include 15- and 30-year fixed-rate securities
backed by mortgage pools of the Government National Mortgage Association
(GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Federal
National Mortgage Association (FNMA). Asset-backed securities include
credit card, auto, and home equity loans.
Emerging Markets Income may compare its performance to that of the J.P.
Morgan Emerging Markets Bond Index Plus, a market capitalization weighted
total return index of U.S. dollar- and other external currency-denominated
Brady bonds, loans, Eurobonds, and local market debt instruments traded in
emerging markets.
Each of High Yield and Strategic Income may compare its performance to that
of the Merrill Lynch High Yield Master Index, a market capitalization
weighted index of all domestic and yankee high-yield bonds with an
outstanding par value of at least $50 million and maturities of at least
one year. Issues included in the index have a credit rating lower than
BBB-/Baa3 but are not in default (DDD1 or lower). Split-rated issues (i.e.,
rated investment-grade by one rating agency and high-yield by another) are
included in the index based on the issue's corresponding composite rating.
Structured-note issues, deferred interest bonds, and pay-in-kind bonds are
excluded.
Mortgage Securities may compare its performance to that of the Salomon
Brothers Mortgage Index, a market capitalization weighted index of 15- and
30-year fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal National Mortgage Association
(FNMA) and Federal Home Loan Mortgage Corporation (FHLMC), and FNMA and
FHLMC balloon mortgages with fixed-rate coupons. For mortgage issues, the
entry and exit amounts are $1 billion public amount outstanding.
Government Investment may compare its performance to that of the Salomon
Brothers Treasury/Agency Index, a market capitalization weighted index of
U.S. Treasury and U.S. government agency securities with fixed-rate coupons
and weighted average lives of at least one year. For U.S. Treasury issues,
the entry and exit amounts are $1 billion public amount outstanding. For
U.S. government agency issues, the entry and exit amounts are $100 million
and $75 million, respectively.
Intermediate Bond may compare its performance to that of the Lehman
Brothers Intermediate Government/Corporate Bond Index, a market value
weighted performance benchmark for government and corporate fixed-rate debt
issues. Issues included in the index have an outstanding par value of at
least $100 million and maturities between one and 10 years. Government and
corporate issues include all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-targeted issues) and U.S. government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt.
Short Fixed-Income may compare its performance to that of the Lehman
Brothers 1-3 Year Government/Corporate Bond Index, a market value weighted
performance benchmark for government and corporate fixed-rate debt issues.
Issues included in the index have an outstanding par value of at least $100
million and maturities between one and three years. Government and
corporate issues include all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-targeted issues) and U.S. government
agencies, as well as nonconvertible investment-grade, SEC-registered
corporate debt.
Each class of the municipal funds may compare to the Lehman Brothers
Municipal Bond Index, a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year. In
addition, High Income Municipal may compare its performance to that of the
Lehman Brothers 70% Municipal/30% Non-Investment Grade Composite Index, a
total return performance benchmark for both investment-grade and
non-investment grade municipal bonds. The Lehman Brothers 70% Municipal/30%
Non-Investment Grade Composite Index has a Municipal Bond Index weight of
70% and a Non-Investment Grade Bond Index weight of 30%. The Lehman
Brothers Non-Investment Grade Municipal Bond Index includes municipal bonds
with maturities of at least one year that have a maximum credit rating of
BA1 or are unrated. Intermediate Municipal Income may compare its
performance to that of the Lehman Brothers 1-17 Year Municipal Bond Index,
a total return performance benchmark for investment-grade municipal bonds
with maturities between one and 17 years. Short-Intermediate Municipal
Income may compare its performance to that of the Lehman Brothers 1-5 Year
Municipal Bond Index, a total return performance benchmark for
investment-grade municipal bonds with maturities between one and five
years. New York Municipal Income may compare its performance to that of the
Lehman Brothers New York 4 Plus Year Municipal Bond Index, a total return
performance benchmark for New York investment-grade municipal bonds with
maturities of at least four years. California Municipal Income may compare
its performance to that of the Lehman Brothers California Municipal Bond
Index, a total return performance benchmark for California investment-grade
municipal bonds with maturities of at least one year. Issues included in
each index have been issued after December 31, 1990 and have an outstanding
par value of at least $50 million. Subsequent to December 31, 1995, zero
coupon bonds and issues subject to the alternative minimum tax are included
in each index.
A class may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the classes.
The classes may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
Each class of a bond fund may compare its performance or the performance of
securities in which that bond fund may invest to averages published by IBC
Financial Data, Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Taxable (Emerging Markets Income, Strategic Income,
Mortgage Securities, Government Investment, Intermediate Bond, High Yield,
and Short-Fixed Income), which is reported in IBC's MONEY FUND
REPORT(trademark), covers over ___ taxable money market funds. IBC's MONEY
FUND REPORT AVERAGES(trademark)/Municipal (High Income Municipal, Municipal
Bond, Intermediate Municipal Income, Short-Intermediate Municipal Income,
New York Municipal Income, and California Municipal Income), which is
reported in IBC's MONEY FUND REPORT(trademark), covers over ___ municipal
money market funds. IBC's Bond Fund Report
AverageS(trademark)(checkmark)All Taxable (Emerging Markets Income,
Strategic Income, Mortgage Securities, Government Investment, Intermediate
Bond, High Yield, and Short-Fixed Income), which is reported in IBC's BOND
FUND REPORT(trademark), covers over ___ taxable bond funds. IBC's Bond Fund
Report AverageS(trademark)(checkmark)Municipal (High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, New York Municipal Income, and California Municipal Income), which
is reported in IBC's BOND FUND REPORT(trademark), covers over ___ municipal
bond funds. When evaluating comparisons to money market funds, investors
should consider the relevant differences in investment objectives and
policies. Specifically, money market funds invest in short-term,
high-quality instruments and seek to maintain a stable $1.00 share price.
Bond funds, however, invest in longer-term instruments and their share
prices change daily in response to a variety of factors.
A municipal fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike municipal mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many municipal mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include the following: other Fidelity funds;
retirement investing; model portfolios or allocations; and saving for
college or other goals. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Each fund may be advertised as part of certain asset allocation programs
involving other Fidelity or non-Fidelity mutual funds. These asset
allocation programs may advertise a model portfolio and its performance
results.
Each fund may be advertised as part of a no transaction fee (NTF) program
in which Fidelity and non-Fidelity mutual funds are offered. An NTF program
may advertise performance results.
Each fund may present its fund number, QuotronTM number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A class may quote various measures of volatility and benchmark
correlation in advertising. In addition, a fund may compare these measures
to those of other funds. Measures of volatility seek to compare a class'
historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents the
class's percentage change in price movements over that period.
A class 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 class at periodic intervals,
thereby purcha sing 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 December 31, 1996, FMR advised over $____ billion in tax-free fund
assets, $__ billion in money market fund assets, $___ billion in equity
fund assets, $__ billion in international fund assets, and $__ 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.
In addition to performance rankings, each class of each bond fund may
compare its total expense ratio to the average total expense ratio of
similar funds tracked by Lipper. A class's total expense ratio is a
significant factor in comparing bond and money market investments because
of its effect on yield.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
CLASS T SHARES ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class T's maximum 3.50% (Equity Funds and Bond Funds); 2.75%
( Intermediate Bond Funds); or 1.50% (Short Bond Funds) front-end
sales charge in connection with a fund's merger with or acquisition of any
investment company or trust. In addition, FDC has chosen to waive Class T's
front-end sales charge in certain instances because of efficiencies
involved in those sales of shares. The sales charge will not apply:
1. to shares purchased by a bank trust officer, registered representative,
or other employee (or a member of one of their immediate families) of
investment professionals having agreements with FDC;
2. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or FIL or their direct or indirect
subsidiaries (a Fidelity Trustee or employee), the spouse of a Fidelity
Trustee or employee, a Fidelity Trustee or employee acting as custodian for
a minor child, or a person acting as trustee of a trust for the sole
benefit of the minor child of a Fidelity Trustee or employee;
3. to shares purchased by a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more;
4. to shares purchased for a charitable remainder trust or life income pool
established for the benefit of a charita ble organization (as defined for
purposes Section 501(c)(3) of the Internal Revenue Code);
5. to shares in a Fidelity or Fidelity Advisor account purchased (including
purchases by exchange) with the proceeds of a distribution (i) from an
employee benefit plan that qualified for waiver (11) or had a minimum of $3
million in plan assets invested in Fidelity funds; or (ii) from an
insurance company separate account qualifying under (6) below or used to
fund annuity contacts purchased by employee benefit plans having in the
aggregate at least $3 million in plan assets invested in Fidelity funds.
(Distributions other than those transferred to an IRA account must be
transferred directly into a Fidelity account.)
6. 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 ERISA)), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor funds;
7. to shares purchased for any state, county, or city, or any
governmental instrumentality, department, authority or agency;
8. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge;
9. to shares purchased by a trust institution or bank trust department
( excluding assets described in (11) and (12) below) that has
executed a participation agreement with FDC specifying certain asset
minimums and qualifications, and marketing restrictions. Assets managed
by third parties do not qualify for this waiver;
10. to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. to shares purchased as part of an employee benefit plan having more
than (i) 200 eligible employees or a minimum of $1,000,000 of plan
assets invested in Fidelity Advisor funds, or (ii) 25 eligible employees or
$250,000 of plan assets invested in Fidelity Advisor funds that
subscribe to the Advisor Retirement Connection or similar program
sponsored by Fidelity Investments Institutional Services Company, Inc.;
12. to shares purchased as part of an employee benefit plan through an
intermediary that has signed a p articipation a greement
with FDC specifying certain asset minimums and qualifications, and
marketing, program and trading restrictions;
13. to shares purchased on a discretionary basis by a registered investment
adviser which is not part of an organization primarily engaged in the
brokerage business, that has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver; or
14. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined Trusts.
Certain investors (trust institutions or bank trust departments,
broker-dealers, and registered investment advisers) that purchased Class T
shares load waived prior to June 30, 1995 but do not meet the
qualifications of waivers (9), (10) or (13), as applicable, may continue to
purchase Class T shares load waived until June 30, 1997, after which
they will be prevented from making new or subsequent purchases in Class T
load waived unless they meet the qualifications of waivers (9), (10) or
(13), as applicable. E mployee benefit plans that purchased Class T
shares load waived prior to June 30, 1995 but do not meet the
qualifications of waiver (12) will be permitted to make additional
purchases of Class T shares load waived.
For the purposes of qualifying for waiver (11), employee benefit plans
subscribing to the Premiere Retirement Savings Plan Program offered by
National Financial Correspondent Services may be aggregated.
A sales load waiver form must accompany these transactions.
FINDERS FEE. On eligible purchases of Class T shares in amounts of $1
million or more, investment professionals will be compensated with a fee of
0.25%. Eligible purchases are the following purchases made through
broker-dealers and banks (excluding trust departments): an individual trade
of $1 million or more; a trade which brings the value of the accumulated
account(s) of an investor (including an employee benefit plan) past $1
million; a trade for an investor with an accumulated account value of $1
million or more; and an incremental trade toward an investor's $1 million
"Letter of Intent."
Any assets in relation to which an investment professional has received
such compensation will bear a contingent deferred sales charge (Class T
CDSC) if they do not remain in Class T shares of the Fidelity Advisor
Funds, Initial Class shares of Daily Money Fund: U.S. Treasury
Portfolio , Daily Money Fund: Money Market Portfolio or shares of
Daily Tax-Exempt Money Fund, for a period of at least one uninterrupted
year. The Class T CDSC will be 0.25% of the lesser of the cost of the
shares at the initial date of purchase or the value of the shares at
redemption, not including any reinvested dividends or capital gains. Class
T CDSC shares representing reinvested dividends or capital gains, if any,
will be redeemed first, followed by other Class T CDSC shares that have
been held for the longest period of time.
With respect to employee benefit plans, the Class T CDSC does not apply to
the following types of redemptions: (i) plan loans or distributions or (ii)
exchanges to non-Advisor fund investment options. With respect to
Individual Retirement Accounts, the Class T CDSC does not apply to
redemptions made for disability, payment of death benefits, or required
partial distributions starting at age 70 1/2.
STRATEGIC OPPORTUNITIES: INITIAL CLASS ONLY
Pursuant to Rule 22d-1 under the Investment Company Act of 1940 (the 1940
Act), FDC exercises its right to waive each 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
each 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 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 above) of such employer, maintained
at least one employee benefit plan that qualified for exemption 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) either (a) the distribution is
transferred from the plan to a Fidelity IRA account within 60 days from the
date of the distribution or (b) the distribution is transferred directly
from the plan into another Fidelity account;
4. to shares purchased by a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more;
5. to shares purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code);
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 by a mutual fund for which FMR or an affiliate
serves as investment manager;
8. to shares purchased through Portfolio Advisory Services or Fidelity
Charitable Advisory Services;
9. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or FIL or their direct or indirect subsidiaries (a
Fidelity Trustee or employee), the spouse of a Fidelity Trustee or
employee, a Fidelity Trustee or employee acting as custodian for a minor
child, or a person acting as trustee of a trust for the sole benefit of the
minor child of a Fidelity Trustee or employee; [or]
10. 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[./;] [or]
11. 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);
12. 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;
13. 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
14. 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.
The 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.
A sales load waiver form must accompany these transactions.
CLASS B SHARES ONLY
The contingent deferred sales charge (CDSC) on Class B shares may be
waived in the case of (1) disability or death, provided that Class B shares
are redeemed within one year following the death or the initial
determination of disability; or (2) in connection with a total or partial
redemption related to certain distributions from retirement plans or
accounts at age 70 1/2, which are permitted without penalty pursuant to the
Internal Revenue Code.
A sales load waiver form must accompany these transactions.
CLASS A, CLASS T, AND CLASS B SHARES ONLY
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A or Class T shares, you or your investment professional must notify
the transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation or Letter of Intent programs,
the following may qualify as an individual or a "company" as defined in
Section 2(a)(8) of the 1940 Act: an individual, spouse, and their children
under age 21 purchasing for his, her, or their own account; a trustee,
administrator or other fiduciary purchasing for a single trust estate or a
single fiduciary account or for a single or a parent-subsidiary group of
"employee benefits plans" (as defined in Section 3(3) of ERISA); and
tax-exempt organizations as defined under Section 501(c)(3) of the Internal
Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A or Class T shares after you have reached a new
breakpoint in a fund's sales charge schedule. The value of currently held
(i) Fidelity Advisor fund Class A, Class T, and Class B shares, (ii) Class
B shares of Daily Money Fund: U.S. Treasury Portfolio, and (iii) Initial
Class shares of Daily Money Fund: U.S. Treasury Portfolio, Initial Class
shares of Daily Money Fund: Money Market Portfolio, and shares of Daily
Tax-Exempt Money Fund acquired by exchange from any Fidelity Advisor fund,
is determined at the current day's NAV at the close of business, and is
added to the amount of your new purchase valued at the current offering
price to determine your reduced front-end sales charge.
CLASS A AND CLASS T SHARES ONLY
LETTER OF INTENT. You may obtain Class A or Class T shares at the same
reduced front-end sales charge by filing a non-binding Letter of Intent
(the Letter) within 90 days of the start of Class A or Class T purchases.
Each Class A or Class T investment you make after signing the Letter will
be entitled to the front-end sales charge applicable to the total
investment indicated in the Letter. For example, a $2,500 purchase of Class
A or Class T shares toward a $50,000 Letter would receive the same reduced
sales charge as if the $50,000 ($500,000 for the Short-Term Bond Funds) had
been invested at one time. To ensure that you receive a reduced front-end
sales charge on future purchases, you or your investment professional must
inform the transfer agent that the Letter is in effect each time Class A or
Class T shares are purchased. Reinvested income and capital gain
distributions do not count toward the completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, Class A or Class T shares equal to
5% of the dollar amount specified in the Letter will be registered in
your name and held in escrow. The Class A or Class T shares held in escrow
cannot be redeemed or exchanged until the Letter is satisfied or the
additional sales charges have been paid. You will earn income dividends and
capital gain distributions on escrowed Class A or Class T shares. The
escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A or
Class T shares at the then-current offering price applicable to the total
purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A or Class T shares will be redeemed to pay such charges.
CLASS A, CLASS T, CLASS B, AND INSTITUTIONAL CLASS SHARES ONLY
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A, Class T, Class B, or Institutional Class shares of
the funds monthly, bimonthly, quarterly, or semi-annually with the
Systematic Investment Program by completing the appropriate section of the
account application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is
jointly owned, be sure that all owners sign.
You may cancel your participation in the Systematic Investment Program at
any time without payment of a cancellation fee. You will receive a
confirmation from the transfer agent for every transaction, and a debit
entry will appear on your bank statement.
CLASS A, CLASS T, AND INSTITUTIONAL CLASS SHARES ONLY
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A, Class
T, or Institutional Class shares worth $10,000 or more, you can have
monthly, quarterly or semi - annual checks sent from your account to
you, to a person named by you, or to your bank checking account. Your
Systematic Withdrawal Program payments are drawn from Class A, Class T, or
Institutional Class share redemptions. If Systematic Withdrawal Plan
redemptions exceed income dividends earned on your shares, your account
eventually may be exhausted.
Each fund is open for business and the NAV and, where applicable, the
offering price, for each class is calculated each day the New York Stock
Exchange (NYSE) is open for trading. The NYSE has designated the following
holiday closings for 1997: New Year's Day, Washington's Birthday, Good
Friday, Memorial Day, 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.
FSC normally determines each class's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a class's NAV may be affected on days when investors do
not have access to the fund to purchase or redeem shares. In addition,
trading in some of a fund's portfolio securities may not occur on days when
the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing 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 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
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. A portion of each fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that each fund's income is derived from qualifying dividends. For
any fund that invests significantly in foreign securities, corporate
shareholders should not expect fund dividends to qualify for the
dividends-received deduction. For those funds that may earn other types of
income, such as interest, income from securities loans, non-qualifying
dividends, and short-term capital gains, the percentage of dividends from
the funds that qualify for the deduction will generally be less than 100%.
For those funds whose income is primarily derived from interest, dividends
will not qualify for the dividends-received deduction available to
corporate shareholders. Each fund will notify corporate shareholders
annually of the percentage of fund dividends that qualifies for the
dividends-received deduction. A portion of each fund's dividends derived
from certain U.S. Government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and, therefore, will increase
(decrease) dividend distributions. As a consequence, FMR may adjust a
fund's income distributions to reflect the effect of currency fluctuations.
However, if foreign currency losses exceed a fund's net investment income
during a taxable year, all or a portion of the distributions made in the
same taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing each shareholder's cost basis in his or her
fund.
Short-term capital gains are distributed as dividend income, but do not
qualify for the dividends-received deduction. These gains will be taxed as
ordinary income.
Each fund will send each of its shareholders a notice in January describing
the tax status of dividends and capital gain distributions, if any, for the
prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each municipal fund purchases securities that are free of federal income
tax based on opinions of bond counsel regarding their tax status. These
opinions will generally be based on covenants by the issuers or other
parties regarding continuing compliance with federal tax requirements. If
at any time the covenants are not complied with, distribution to
shareholders of interest on a security could become federally taxable
retroactive to the date the security was issued. For certain types of
structured securities, opinions of bond counsel may also be based on the
effect of the structure on the federal and state tax treatment of the
income.
As a result of The Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code) is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of High Income Municipal's, Municipal
Bond's, Intermediate Municipal Income's, and Short-Intermediate Municipal
Income's policies of investing 80% of its net assets in securities whose
i nterest is free from federal income tax, and New York Municipal
Income's and California Municipal Income's policies of investing 80% of its
net assets in securities whose interest is free from federal and state
income tax. Interest from private activity securities is a tax preference
item for the purposes of determining whether a taxpayer is subject
to the AMT and the amount of AMT tax to be paid, if any. Private activity
securities issued after August 7, 1986 to benefit a private or industrial
user or to finance a private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by a fund are federally
taxable to shareholders as dividends, not as capital gains. Dividend
distributions resulting from a recharacterization of gain from the sale of
bonds purchased at a discount after April 30, 1993 are not considered
income for the purposes of High Income Municipal's, Municipal Bond's,
Intermediate Municipal Income's, and Short-Intermediate Municipal Income's
policies of investing 80% of its net assets in securities whose
i nterest is free from federal income tax, and New York Municipal
Income's and California Municipal Income's policies of investing 80% of its
net assets in securities whose interest is free from federal and state
personal income tax.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which include tax-exempt interest) exceed the alternative minimum taxable
income of the corporation. If a shareholder receives an exempt-interest
dividend and sells shares at a loss after holding them for a period of six
months or less, the loss will be disallowed to the extent of the amount of
the exempt-interest dividend.
NEW YORK TAX MATTERS. It is not expected that New York Municipal Income
will incur New York income or franchise tax liability. In addition, New
York personal income tax law also provides that exempt-interest dividends
paid by a regulated investment company, or series thereof, from interest on
obligations which are exempt from tax under New York law are excludable
from gross income.
CALIFORNIA TAX MATTERS. As long as California Municipal Income continues to
qualify as a regulated investment company under the federal Internal
Revenue Code, it will incur no California income or franchise tax liability
on income and capital gains distributed to shareholders. California
personal income tax law provides that exempt-interest dividends paid by a
regulated investment company, or series thereof, from interest on
obligations that are exempt from California personal income tax are
excludable from gross income. For a fund to qualify to pay exempt-interest
dividends under California law, at least 50% of the value of its assets
must consist of such obligations at the close of each quarter of its fiscal
year. For purposes of California personal income taxation, distributions to
individual shareholders derived from interest on other types of obligations
and short-term capital gains will be taxed as dividends, and long-term
capital gain distributions will be taxed as long-term capital gains.
California has an alternative minimum tax similar to the federal AMT
described above. However, the California AMT does not include interest from
private activity municipal obligations as an item of tax preference.
Interest on indebtedness incurred or continued by a shareholder in
connection with the purchase of shares of a fund will not be deductible for
California personal income tax purposes.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a 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
each fund are taxable to shareholders as dividends, not as capital gains.
As of the fiscal year ended October 31, 1996, Overseas hereby designates
approximately $______ as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of the fiscal year ended November 30, 1996, Mid Cap hereby designates
approximately $______ as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of the fiscal year ended November 30, 1996, Equity Growth hereby
designates approximately $________ as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended October 31, 1996, Growth Opportunities hereby
designates approximately $________ as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended December 31, 1996, Strategic Opportunities
hereby designates approximately $________ as a capital gain dividend for
the purpose of the dividend-paid deduction.
As of the fiscal year ended November 30, 1996, Large Cap hereby designates
approximately $______ as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of the fiscal year ended November 30, 1996, Equity Income hereby
designates approximately $_________ as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of the fiscal year ended October 31, 1996, Balanced hereby designates
approximately $_________ as a capital gain dividend for the purpose of the
dividend-paid deduction.
As of the fiscal year ended December 31, 1996, Emerging Markets Income had
a capital loss carryforward aggregating approximately $_________. This loss
carryforward, all of which will expire on December 31, 2003, is available
to offset future capital gains.
As of October 31, 1996, High Yield had a capital loss carryforward
aggregating approximately $_________. This loss carryforward, all of which
will expire on October 31, 2002, is available to offset future capital
gains.
As of the fiscal year ended December 31, 1996, Strategic Income had a
capital gain dividend/capital loss carryforward aggregating approximately
$_________.
As of October 31, 1996, Government Investment had a capital loss
carryforward aggregating approximately $________. This loss carryforward,
all of which will expire on October 31, 2002, is available to offset future
capital gains.
As of November 30, 1996, Intermediate Bond had a capital loss carryforward
aggregating approximately $________. This loss carryforward, of which
$2,841,000, $1,035,000, and $134,000 will expire on November 30, 1998,
1999, and 2002, respectively, is available to offset future capital gains.
As of the fiscal year ended November 30, 1996, Mortgage Securities hereby
designates approximately $_________ as a capital gain dividend for the
purpose of the dividend-paid deduction.
As of October 31, 1996, Short Fixed-Income had a capital loss carryforward
aggregating approximately $_________. This loss carryforward, of which
$128,000, $63,000, $286,000, $38,000, $336,000, $17,692,000, and
$19,449,000 will expire on October 31, 1997, 1998, 1999, 2000, 2001, 2002
and 2003, respectively, is available to offset future capital gains.
As of October 31, 1996, High Income Municipal had a capital loss
carryforward aggregating approximately $_________. This loss carryforward,
of which $3,173,000 and $7,510,000 will expire on October 31, 2002 and
2003, respectively, is available to offset future capital gains.
As of the fiscal year ended December 31, 1996, Municipal Bond had a capital
loss carryforward aggregating approximately $_________. This loss
carryforward, all of which will expire on December 31, 2003, is available
to offset future capital gains.
As of November 30, 1996, Intermediate Municipal Income had a capital loss
carryforward aggregating approximately ____________. This loss
carryforward, of which $627,000 and $442,000 will expire on November 30,
2002 and 2003, respectively, is available to offset future capital gains.
As of November 30, 1996, Short-Intermediate Municipal Bond had a capital
gain/capital loss carryforward aggregating approximately $________.
As of October 31, 1996, New York Municipal Income had a capital
gain/capital loss carryforward aggregating approximately $________.
As of October 31, 1996, California Municipal Income had a capital
gain/capital loss carryforward aggregating approximately $________.
STATE AND LOCAL TAXES. For mutual funds organized as business trusts, state
law provides for a pass-through of the state and local income tax exemption
afforded to direct owners of U.S. Government securities. Some states limit
this to mutual funds that invest a certain amount in U.S. Government
securities, and some types of securities, such as repurchase agreements and
some agency-backed securities, may not qualify for this benefit. The tax
treatment of your dividend distributions from a fund will be the same as if
you directly owned your proportionate share of the U.S. Government
securities in the fund's portfolio. Because the income earned on most U.S.
Government securities in which each fund invests is exempt from state and
local income taxes, the portion of your dividends from each fund
attributable to these securities will also be free from income taxes. The
exemption from state and local income taxation does not preclude states
from assessing other taxes on the ownership of U.S. Government securities.
In a number of states, corporate franchise (income) tax laws do not exempt
interest earned on U.S. Government securities, whether such securities are
held directly or through a fund.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of a fund's
total assets are invested in securities of foreign issuers, the fund may
elect to pass through foreign taxes paid and thereby allow shareholders to
take a credit or deduction on their individual tax returns.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a "
regulated investment company" for tax purposes, so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and realized capital gains within each calendar year as well as on a
fiscal year basis. Each fund also intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held for less than three months
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 the fund with respect to deferred taxes
arising from such distributions or gains. Generally, a fund will elect to
mark-to-market any PFIC shares. Unrealized gains will be recognized as
income for tax purposes and must be distributed to shareholders as
dividends.
Each fund is treated as a separate entity from the other funds, if any, in
its trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a fund may be subject to
state and local taxes on fund distributions, and shares may also be subject
to state and local personal property taxes. Investors should consult their
tax advisers to determine whether a fund is suitable for their particular
tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company 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 predo minantly by non-Johnson
family member employees of FMR Corp. and its affiliates and is entitled to
51% of the vote on any such matter. The Johnson family group and all other
Class B shareholders have entered into a shareholders' voting agreement
under which all Class B shares will be voted in accordance with the
majority vote of Class B shares. Under the 1940 Act, control of a company
is presumed where one individual or group of individuals owns more than 25%
of the voting stock of that company. Therefore, through their ownership of
voting common stock and the execution of the shareholders' voting
agreement, members of the Johnson family may be deemed, under the 1940 Act,
to form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
FIIOC, 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 , Members of the Advisory Board, and executive officers
of the trusts are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the last
five years. All persons named as Trustees and Members of the Advisory
Board also serve in similar capacities for other funds advised by FMR.
The business address of each Trustee and officer who is an "interested
person" (as defined in the 1940 Act) is 82 Devonshire Street, Boston,
Massachusetts 02109, which is also the address of FMR. The business address
of all the other Trustees and Members of the Advisory Board is
Fidelity Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235.
Those Trustees who are "interested persons" by virtue of their affiliation
with either a trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, (66), 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., Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, (55), Trustee and Senior Vice President, is President
of FMR; and President and a Dire ctor of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, (64), Trustee (1991), is a management consultant (1994).
Prior to February 1994, he was President of Greenhill Petroleum Corporation
(petroleum exploration and production). Until March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Sanifill Corporation
(non-hazardous waste, 1993), CH2M Hill Companies (engineering), Rio Grande,
Inc. (oil and gas production), and Daniel Industries (petroleum measurement
equipment manufacturer). In addition, he is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, (65), 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, (72), Trustee and Chairman of the non-interested
Trustees, 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 Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES, (69), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company. He
is a Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc. (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products),
and he previously served as a Director of NACCO Industries, Inc. (mining
and 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, (64), Trustee, is Executive-in-Residence (1995) at
Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at Columbia
University Graduate School of Business. Prior to 1987, he was Chairman of
the Financial Accounting Standards Board. Mr. Kirk is a Director of
General Re Corporation (reinsurance) and he previously served as a Director
of Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Chairman of the Board of Trustees of the Greenwich
Hospital Association, a Member of the Public Oversight Board of the
American Institute of Certified Public Accountants' SEC Practice Section
(1995), and as a Public Govenor of the National Association of Securities
Dealers, Inc. (1996).
*PETER S. LYNCH, (53), Trustee, is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals) 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 Eng land Antiquities, and as an Overseer of
the Museum of Fine Arts of Boston.
GERALD C. McDONOUGH, (67), Trustee and Vice-Chairman of the non-interested
Trustees, 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 Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products, 1996), and
Associated Estates Realty Corporation (a real estate investment trust,
1993). Mr. McDonough served as a Director of ACME-Cleveland Corp. (metal
working, telecommunications, and electronic products) from 1987-1996.
EDWARD H. MALONE, (72), Trustee. Prior to his retirement in 1985, Mr.
Malone was Chairman, General Ele ctric 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 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, (63), 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.
WILLIAM O. McCOY (63), Member of the Advisory Board (1996), is the Vice
President of Finance for the University of North Carolina (16-school
system, 1995). Prior to his retirement in December 1994, Mr. McCoy was
Vice Chairman of the Board of BellSouth Corporation (telecommunications)
and President of BellSouth Enterprises. He is currently a Director of
Liberty Corporation (holding company), Weeks Corporation of Atlanta (real
estate, 1994), and Carolina Power and Light Company (electric utility,
1996). Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member of
the Board of Visitors for the University of North Carolina at Chapel Hill
(1994) and for the Kenan Flager Business School (University of North
Carolina at Chapel Hill).
THOMAS R. WILLIAMS, (68), Trustee, is President of The Wales Group, Inc.
(management and financial advis ory 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., and AppleSouth,
Inc. (restaurants, 1992).
WILLIAM J. HAYES (62), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice Pres ident of FMR; and Managing
Director of FMR Corp.
ROBERT H. MORRISON (56), Manager of Security Transactions of Fidelity's
equity funds, is Vice President of FMR.
ROBERT A. LAWRENCE (44), Vice President (1994), is Vice President of
Fidelity's high income funds and Senior Vice President of FMR (1993).
Prior to joining FMR, Mr. Lawrence was Managing Director of the High Yield
Department for Citicorp (1984-1991).
FRED L. HENNING, JR. (57), Vice President, is Vice President of
Fidelity's fixed-income funds (1995) and Senior Vice President of FMR
(1995).
JOHN H. CARLSON (47), is Vice President of Emerging Markets Income (1996)
and Strategic Income (1996), and an employee of FMR.
BETTINA E. DOULTON (31) is Vice President of Balanced (1996), and other
funds advised by FMR, and an employee of FMR.
MARGARET L. EAGLE (46), is Vice President of High Yield and an employee of
FMR.
KEVIN E. GRANT (35), is Vice President of Balanced (1996), Intermediate
Bond (1996), and Mortgage Securities (1995), and an employee of FMR.
LAWRENCE GREENBERG (33), is Vice President of Equity Growth (1996), and
other funds advised by FMR, and an employee of FMR.
HARRIS LEVITON (35), is Vice President of Strategic Opportunities (1996)
and an employee of FMR.
NORMAN U. LIND (39) is Vice President of Short-Intermediate Municipal
Income (1995), and other funds advised by FMR, and an employee of FMR.
RICHARD R. MACE Jr. (34), is Vice President of Overseas (1996), and other
funds advised by FMR, and an employee of FMR.
DAVID L. MURPHY (49), is Vice President of Intermediate Municipal Income
(1996), and other funds advised by FMR, and an employee of FMR.
GEORGE A. VANDERHEIDEN (50), is Vice President of Growth Opportunities
(1990), and other funds advised by FMR, and an employee of FMR.
JENNIFER S. UHRIG (36), is Vice President of Mid Cap (1996), and other
funds advised by FMR, and an employee of FMR.
ARTHUR S. LORING (49), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice Pres ident-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (49), 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 (50), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (50), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assi s tant Treasurer of the Fidelity funds,
Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
The following table sets forth information describing the compensation of
each current Trustee or Member of the Advisory Board of each fund
for his or her services as trustee for the fiscal year ended 1996.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Gary Ralph Phyllis Richar Edward C. E. Donal Gerald C. Edward Marvin Thomas William
Burkhead
(dagger) F. Cox Burke d J. Johnson Bradley d Peter S. McDonou H. L. Mann R. O.
Davis Flynn 3d
(dagger) Jones J. Kirk Lynch
(dagger) gh Malone William McCoy
s
TechnoQuant $0 $ $ $ $0 $ $ $0 $ $ $ $
Growth**+
Overseas* 0 0 0
Mid Cap** 0 0 0
Equity
Growth** 0 0 0
Growth 0 0 0
Opportunities*
Strategic 0 0 0
Opportunities***
Large Cap** 0 0 0
Growth &
Income**+ 0 0 0
Equity
Income** 0 0 0
Balanced* 0 0 0
Emerging
Markets 0 0 0
Income***
High Yield* 0 0 0
Strategic
Income*** 0 0 0
Government 0 0 0
Investment*
Intermediate
Bond** 0 0 0
Mortgage 0 0 0
Securities****
Short Fixed- 0 0 0
Income*
High Income 0 0 0
Municipal*
Municipal
Bond*** 0 0 0
Intermediate 0 0 0
Municipal
Income**
Short-
Intermediate 0 0 0
Municipal
Income**
New York 0 0 0
Municipal
Income*
California 0 0 0
Municipal
Income*
</TABLE>
* Fiscal period ended October 31
** Fiscal period ended November 30
*** Fiscal period ended December 31
**** Fiscal period ended July 31
***** For the fiscal year ended ____, 1996, certain of the non-interested
trustee's aggregate compensation from a fund includes accrued deferred
compensation as follows: [trustee name, dollar amount deferred
compensation, fund name]; [trustee name, dollar amount of deferred
compensation, fund name]; and [trustee name, dollar amount of deferred
compensation, fund name].
+ Estimated
(dagger) Interested trustees of each fund are compensated by FMR.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or Estimated Annual Total Compensation
Retirement Benefits Benefits Upon from the Fund
Accrued as part of Retirement Complex*
Fund Expenses from the
from Fund Complex*
the Fund Complex*
J. Gary Burkhead(dagger) $ $ $
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d(dagger)
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch(dagger)
Gerald C. McDonough
Edward H. Malone
Marvin L. Mann
Thomas R. Williams
William O. McCoy
</TABLE>
* Information is as of December 31, 1996 for ___ funds in the complex.
(dagger) Interested Trustees of each fund are compensated by FMR.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
Each fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program that was adopted in July 1988 and modified in
November 1995, each non-interested Trustee may receive payments from a
Fidelity fund during his or her lifetime based on his or her basic trustee
fees and length of service. The obligation of a fund to make such payments
is neither secured nor funded. A trustee becomes eligible to participate
in the program at the end of the calendar year in which he or she reaches
age 72, provided that, at the time of retirement, he or she has served as a
Fidelity fund Trustee 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 January 31, 1997, approximately ___% of [funds' names] total
outstanding shares were held by [an] FMR affiliate[s]. FMR Corp. is the
ultimate parent company of [this/these] FMR affiliate[s]. By virtue of his
ownership interest in FMR Corp., as described in the "FMR" section on page
___, Mr. Edward C. Johnson 3d, President and Trustee of the funds, may be
deemed to be a beneficial owner of these shares. As of the above date,
with the exception of Mr. Johnson 3d's deemed ownership of [fund name]'s
shares, the Trustees and officers of the funds owned, in the aggregate,
less than ___% of each fund's total outstanding shares.
A shareholder owning of record or beneficially more than 25% of a fund's
outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other shareholders.
As of January 31, 1997, the following owned of record or beneficially 5% or
more of the outstanding shares of the classes of the following Fidelity
Advisor funds:
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 each fund in accordance with its investment objective,
policies and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing each fund's investments,
compensates all officers of each fund and all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of each fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters and
other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state laws; developing management and shareholder services for each 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
the transfer agent and the pricing and bookkeeping agent, each fund pays
all of its expenses, without limitation, that are not assumed by those
parties. Each fund pays for the typesetting, printing, and mailing of its
proxy materials to shareholders, legal expenses, and the fees of the
custodian, auditor and non-interested Trustees. Although each fund's
current management contract provides that each fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices and reports to shareholders, each trust, on behalf of
each of fund, has entered into a revised transfer agent agreement, pursuant
to which the transfer agent bears the costs of providing these services to
existing shareholders. Other expenses paid by each fund include interest,
taxes, brokerage commissions, each fund's proportionate share of insurance
premiums and Investment Company Institute dues, and the costs of
registering shares under federal and state securities laws. Each fund is
also liable for such non-recurring expenses as may arise, including costs
of any litigation to which each 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 and
approved by shareholders on the dates shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND DATE OF MANAGEMENT CONTRACT DATE OF SHAREHOLDER APPROVAL
TechnoQuant Growth
Overseas 1/1/93 12/1/92
Mid Cap 1/18/96 1/18/96*
Equity Growth 12/1/90 11/14/90
Growth Opportunities 1/1/95 12/14/94
Strategic Opportunities 11/29/90 9/19/90
Large Cap 1/18/96 1/18/96*
Growth & Income
Equity Income 8/1/86 7/23/86
Balanced 1/1/95 12/14/94
Emerging Markets Income 1/20/94 2/10/94
High Yield 1/1/95 12/14/94
Strategic Income 9/16/94 10/14/94
Mortgage Securities 8/1/94 7/13/94
Government Investment 1/1/95 12/14/94
Intermediate Bond 1/1/95 12/14/94
Short Fixed-Income 1/1/95 12/14/94
High Income Municipal 12/1/94 11/16/94
Municipal Bond 1/1/94 12/15/93
Intermediate Municipal Income 7/1/95 6/14/95
Short-Intermediate Municipal Income 7/1/95 6/14/95
FUND DATE OF MANAGEMENT CONTRACT DATE OF SHAREHOLDER APPROVAL
New York Municipal Income 11/17/94 12/8/94
California Municipal Income 12/14/95 12/14/95*
</TABLE>
* Approved by FMR, then the sole shareholder of the fund.
For the services of FMR under its contract, Equity Income pays FMR a
monthly management fee at the annual rate of .50% of its average net assets
throughout the month.
For the services of FMR under each contract, TechnoQuant Growth, Mid
Cap, Equity Growth, Large Cap, Growth & Income, Balanced, Emerging Markets
Income, High Yield, Strategic Income, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond, Intermediate Munic ipal Income, Short-Intermediate
Municipal Income, New York Municipal Income, and California Municipal
Income each pays FMR a monthly management fee composed of the sum of two
elements: a group fee rate and an individual fund fee rate.
For the services of FMR under each contract, Overseas, Growth
Opportunities, and Strategic Opportunities each pays FMR a monthly
management fee composed of the sum of two elements: a basic fee and a
performance adjust ment based on a comparison of the performance of
Growth Opportunities and Strategic Opportunities to that of the S&P 500
and the performance of Overseas to that of the capitalization-weighted
EAFE. The capitalization weighted (cap-weighted) EAFE is an approximate
representation of each country's share of the stock market value of all
countries in the index.
COMPUTING THE BASIC FEE. Each fund's (except Equity Income) basic fee rate
is composed of two elements: a group fee rate and an individual fund fee
rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated 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 $_____ billion of group net
assets - the approximate level for ________ 1996 - was ______% for equity
funds and _______% for fixed-income funds, which is the weighted average of
the respective fee rates for each level of group net assets up $_______
billion.
BOND FUNDS
The following fee schedule is the current fee schedule for all bond
funds except Emerging Markets Income, Mortgage Securities, Municipal Bond
and California Municipal Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
Over 372 .1200
This fee schedule has been approved by the shareholders of each bond fund
except Emerging Markets Income, Mortgage Securities, Municipal Bond and
California Municipal Income.
EMERGING MARKETS INCOME, MORTGAGE SECURITIES, AND MUNICIPAL BOND. The
following fee schedule is the current fee schedule for Emerging Markets
Income, Mortgage Securities and Municipal Bond.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
On August 1, 1994, FMR voluntarily revised the group fee rate schedule for
Emerging Markets Income, Mortgage Securities and Municipal Bond, and added
new breakpoints, pending shareholder approval of a new management contract
reflecting the additional breakpoints. The revised group fee rate schedule
is identical to the above schedule for average group assets under $156
billion. For average group assets in excess of $156 billion, the group fee
rate schedule voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 120 - 156 billion .1450% $150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
Over 372 .1200 325 .1514
350 .1494
375 .1476
400 .1459
On January 1, 1996, FMR voluntarily added new breakpoints to the
(revised, in the case of Emerging Markets Income, Mortgage Securities and
Municipal Bond) schedule for average group assets in excess of $372
billion, pending shareholder approval of a new management contract
reflecting the additional breakpoints. The (revised, in the case of
Emerging Markets Income, Mortgage Securities and Municipal Bond) group fee
rate schedule and its extension provide for lower management fee rates as
FMR's assets under management increase. For average group assets in excess
of $372 billion, the group fee rate schedule voluntarily adopted by FMR is
as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 372 - 408 billion .1200% $ 400 billion .1459
408 - 444 .1175 425 .1443
444 - 480 .1150 450 .1427
480 - 516 .1125 475 .1413
Over 516 .1100 500 .1399
525 .1385
550 .1372
CALIFORNIA MUNICIPAL INCOME. The following fee schedule is the current fee
schedule for California Municipal Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
The fee schedule has been approved by the shareholders of California
Municipal Income.
EQUITY FUNDS
The following fee schedule is the current fee schedule for all equity
funds (except TechnoQuant Growth, Overseas, Mid Cap, Equity Growth,
Strategic Opportunities, Large Cap, Equity Income, and Growth &
Income).
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000
210 - 246 .2950
246 - 282 .2900
282 - 318 .2850
318 - 354 .2800
354 - 390 .2750
Over 390 .2700
This fee schedule has been approved by shareholders of each equity fund
except TechnoQuant Growth, Overseas, Mid Cap, Equity Growth, Strategic
Opportunities, Large Cap, Equity Income, and Growth & Income (see chart
indicating date of management contract and date of shareholder approval).
On January 1, 1996, FMR voluntarily added new breakpoints to the schedule
for average group assets in excess of $390 billion, pending shareholder
approval of a new management contract reflecting the additional
breakpoints. The revised group fee rate schedule and its extensions provide
for lower management fee rates as FMR's assets under management increase.
The revised group fee rate schedule for average group assets in excess of
$210 billion and up to $390 billion with additional breakpoints voluntarily
adopted by FMR for average group assets in excess of $390 billion is as
follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 174 - 210 billion .3000% $150 billion .3371%
210 - 246 .2950 175 .3325
246 - 282 .2900 200 .3284
282 - 318 .2850 225 .3249
318 - 354 .2800 250 .3219
354 - 390 .2750 275 .3190
390 - 426 .2700 300 .3163
426 - 462 .2650 325 .3137
462 - 498 .2600 350 .3113
498 - 534 .2550 375 .3090
Over 534 .2500 400 .3067
425 .3046
450 .3024
475 .3003
500 .2982
525 .2962
550 .2942
EQUITY GROWTH AND STRATEGIC OPPORTUNITIES. The following fee schedule is
the current fee schedule for Equity Growth and Strategic Opportunities.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
Under each fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .3100% for average group
assets in excess of $102 billion. The group fee rate breakpoints shown
above for average group assets in excess of $138 billion and under $228
billion were voluntarily adopted by FMR on January 1, 1992. The additional
breakpoints shown above for average group assets in excess of $228 billion
were voluntarily adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for average group assets
in excess of $210 billion and under $390 billion as shown in the schedule
below. The revised group fee rate schedule was identical to the above
schedule for average group assets under $210 billion. For average group
assets in excess of $210 billion, the group fee rate schedule voluntarily
adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 138 - 174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $390 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. The revised group fee rate schedule for average
group assets in excess of $210 billion and up to $390 billion with
additional breakpoints voluntarily adopted by FMR for average group assets
in excess of $390 billion is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 174 - 210 billion .3000% $150 billion .3371%
210 - 246 .2950 175 .3325
246 - 282 .2900 200 .3284
282 - 318 .2850 225 .3249
318 - 354 .2800 250 .3219
354 - 390 .2750 275 .3190
390 - 426 .2700 300 .3163
426 - 462 .2650 325 .3137
462 - 498 .2600 350 .3113
498 - 534 .2550 375 .3090
Over 534 .2500 400 .3067
425 .3046
450 .3024
475 .3003
500 .2982
525 .2962
550 .2942
OVERSEAS. The following fee schedule is the current fee schedule for
Overseas.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
Under the fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .3000% for average group
assets in excess of $174 billion. Prior to January 1, 1993, the group fee
rate breakpoints shown above for average group assets in excess of $138
billion and under $228 billion were voluntarily adopted by FMR on January
1, 1992. The additional breakpoints shown above for average group assets in
excess of $228 billion were voluntarily adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule is identical to the above schedule for average group assets
under $210 billion. For average group assets in excess of $210 billion, the
group fee rate schedule voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 138 - 174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $390 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of of $210
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 174 - 210 billion .3000% $150 billion .3371%
210 - 246 .2950 175 .3325
246 - 282 .2900 200 .3284
282 - 318 .2850 225 .3249
318 - 354 .2800 250 .3219
354 - 390 .2750 275 .3190
390 - 426 .2700 300 .3163
426 - 462 .2650 325 .3137
462 - 498 .2600 350 .3113
498 - 534 .2550 375 .3090
Over 534 .2500 400 .3067
425 .3046
450 .3024
475 .3003
500 .2982
525 .2962
550 .2942
TECHNOQUANT GROWTH, MID CAP, LARGE CAP AND GROWTH & INCOME. The following
fee schedule is the current fee schedule for TechnoQuant Growth, Mid Cap,
Large Cap and Growth & Income.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3249
36 - 42 .3400 250 .3219
42 - 48 .3350 275 .3190
48 - 66 .3250 300 .3163
66 - 84 .3200 325 .3137
84 - 102 .3150 350 .3113
102 - 138 .3100 375 .3090
138 - 174 .3050 400 .3067
174 - 210 .3000 425 .3046
210 - 246 .2950 450 .3024
246 - 282 .2900 475 .3003
282 - 318 .2850 500 .2982
318 - 354 .2800 525 .2962
354 - 390 .2750 550 .2924
390 - 426 .2700
426 - 462 .2650
462 - 498 .2600
498 - 534 .2550
Over 534 .2500
This fee schedule has been approved by the shareholders of each of
TechnoQuant Growth, Mid Cap, Large Cap and Growth & Income.
The individual fund fee rates for each fund (except Equity Income) are set
forth in the following chart. Based on the average group net assets of the
funds advised by FMR for January 1997, the annual basic fee rate would be
calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
TechnoQuant Growth % + 0.30% = %
Overseas % + 0.45% = %
Mid Cap % + 0.30% = %
Equity Growth % + 0.30%* = %
Growth Opportunities % + 0.30% = %
Strategic Opportunities % + 0.30% = %
Large Cap % + 0.30% = %
Growth & Income % + 0.20% = %
Balanced % + 0.15%** = %
Emerging Markets Income % + 0.55% = %
High Yield % + 0.45% = %
Strategic Income % + 0.45% = %
Mortgage Securities % + 0.30% = %
Government Investment % + 0.30% = %
Intermediate Bond % + 0.30% = %
Short Fixed-Income % + 0.30% = %
High Income Municipal % + 0.25% = %
Municipal Bond % + 0.25% = %
Intermediate Municipal Income % + 0.25% = %
Short-Intermediate Municipal % + 0.25% = %
Income
New York Municipal Income % + 0.25% = %
California Municipal Income % + 0.25% = %
</TABLE>
* Effective August 1, 1994, FMR voluntarily agreed to reduce the individual
fund fee rate from 0.33% to 0.30%. If this reduction were not in effect
during the fiscal year ended 1996, the total management fee would have been
___%.
** Effective August 1, 1996, FMR voluntarily agreed to reduce the
individual fund fee rate from 0.20% to 0.15%. If this reduction were not in
effect the total management fee would have been ____%.
One-twelfth (1/12) of this annual basic fee or management fee, as
applicable, rate is applied to each fund's net assets averaged for the most
recent month, giving a dollar amount, which is the fee for that month.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee for Strategic
Opportunities, Overseas, and Growth Opportunities is subject to upward or
downward adjustment, depending upon whether, and to what extent, the
investment performance of each applicable fund for the performance period
exceeds, or is exceeded by, the record of the S&P 500 (Strategic
Opportunities and Growth Opportunities), or the cap-weighted EAFE
(Overseas) (the Indices) over the same period. The performance period
consists of the most recent month plus the previous 35 months. Each
percentage point of difference, calculated to the nearest 1.0% (up to a
maximum difference of (plus/minus)10.00) is multiplied by a performance
adjustment rate of 0.02%. Thus, the maximum annualized adjustment rate is
(plus/minus)0.20%. This performance comparison is made at the end of each
month. One-twelfth of this rate is then applied to each fund's average net
assets for the entire performance period, giving the dollar amount which
will be added to (or subtracted from) the basic fee. For each fund,
investment performance will be measured separately for each class of shares
offered by that fund and the least of the results obtained will be used in
calculating the performance adjustment to the management fee paid by the
fund.
Each class's performance is calculated based on change in NAV. For purposes
of calculating the performance adjustment, any dividends or capital gain
distributions paid by each class are treated as if reinvested in that
class's shares at the NAV as of the record date for payment. The record of
each Index is based on change in value and is adjusted for any cash
distributions from the companies whose securities compose the Index.
Because the adjustment to the basic fee is based on each fund's performance
compared to the investment record of the applicable Index, the controlling
factor is not whether each fund's performance is up or down per se, but
whether it is up or down more or less than the record of the Index.
Moreover, the comparative performance of each fund is based solely on the
relevant performance period without regard to the cumulative performance
over a longer or shorter period of time.
The table below shows the management fees paid to FMR (including the amount
of the performance adjustment); the dollar amount of negative or positive
performance adjustments, if applicable; and the net management fee as a
percentage of each fund's average net assets for the three most recent
fiscal years.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL YEAR MANAGEMENT FEE+ PERFORMANCE ADJUSTMENT MANAGEMENT FEE
ENDED AS A PERCENTAGE OF
AVERAGE NET ASSETS
OVERSEAS 10/31
1996 $ $ (upward) %
1995 5,589,729 307,727 (upward) 0.81
1994 3,435,695 133,032 (upward) 0.80
MID CAP 11/30
1996* N/A
EQUITY GROWTH 11/30
1996 N/A
1995 12,057,390 N/A 0.61
1994 6,567,305 N/A 0.64
GROWTH OPPORTUNITIES 10/31
1996 $ $ (upward)
1995 46,903,758 5,210,490 (upward) 0.69
1994 22,087,985 2,130,192 (upward) 0.69
STRATEGIC OPPORTUNITIES+++ 12/31
1996 $ $ (upward)
1995 3,510,812 91,269 (upward) 0.62
10/1/94 - 12/31/94 682,856 37,843 (upward) 0.67***
10/1/93 - 9/30/94 2,582,584 359,674 (upward) 0.72
LARGE CAP 11/30
1996* N/A
EQUITY INCOME 11/30
1996 $ $ N/A
1995 4,257,045 N/A 0.50
1994 1,392,206 N/A 0.50
BALANCED 10/31
1996 $ $ N/A
1995 17,383,377 N/A 0.51
1994 13,325,884 N/A 0.52
EMERGING MARKETS INCOME 12/31
1996 $ $ N/A
1995 283,122 N/A 0.70
1994++ 122,088 N/A 0.70
HIGH YIELD 10/31
1996 $ $ N/A
1995 5,796,415 N/A 0.60
1994 3,737,959 N/A 0.60
STRATEGIC INCOME 12/31
1996 $ $ N/A
1995 277,990 N/A 0.60
1994++ 10,348 N/A 0.60
GOVERNMENT INVESTMENT 10/31
1996 $ $ N/A
1995 766,114 N/A 0.45
1994 422,255 N/A 0.46
INTERMEDIATE BOND 11/30
1996 $ $ N/A
1995 1,703,722 N/A 0.45
1994 1,180,785 N/A 0.41
MORTGAGE SECURITIES 7/31
1996 $ $ N/A
1995 N/A
1994 N/A
SHORT FIXED-INCOME 10/31
1996 $ $ N/A
1995 $ 2,889,187 N/A 0.45%
1994 3,713,144 N/A 0.46
HIGH INCOME MUNICIPAL 10/31
1996 $ $ N/A
1995 2,289,466 N/A 0.40
1994 2,257,113 N/A 0.41
MUNICIPAL BOND 12/31
1996 $ $ N/A
1995 4,282,000 N/A 0.40
1994 4,605,000 N/A 0.41
INTERMEDIATE MUNICIPAL 11/30
INCOME
1996 $ $ N/A
1995 292,469 N/A 0.40
1994 286,027 N/A 0.41
SHORT-INTERMEDIATE 11/30
MUNICIPAL INCOME
1996 $ $ N/A
1995 79,349 N/A 0.40
1994++ 31,109 N/A 0.41
NEW YORK MUNICIPAL 10/31
INCOME
1996 $ $ N/A
1995* 2,203** N/A 0.39***
CALIFORNIA MUNICIPAL 10/31
INCOME
1996* ** N/A
</TABLE>
* Calculations are from the commencement of operations. Mid Cap, Large Cap,
New York Municipal Income and California Municipal Income commenced
operation on February 20, 1996, February 20, 1996, August 21, 1995 and
February 20, 1996, respectively.
** Before reimbursement
*** Annualized
+ Management fee includes performance adjustments for Overseas, Growth
Opportunities, and Strategic Opportunities.
++ Emerging Markets Income, Strategic Income, Short-Intermediate Municipal
Income, and New York Municipal Income commenced operations on March 10,
1994, October 31, 1994, March 16, 1994, and August 21, 1995, respectively.
Management fee percentages for these funds are annualized.
+++ Strategic Opportunities' fiscal year end changed from September 30 to
December 31 as of November 9, 1994.
FMR may, from time to time, voluntarily reimburse all or a portion of a
class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursement
by FMR will increase each class's total returns and yield and repayment of
the reimbursement by each class will lower its total returns and yield.
To comply with the California Code of Regulations, FMR will reimburse each
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 each fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISERS. On behalf of TechnoQuant Growth, Mid Cap, Equity Growth,
Growth Opportunities, Strategic Opportunities, Large Cap, Growth & Income,
Equity Income, Balanced, High Yield, Intermediate Bond, Mortgage
Securities and Short Fixed-Income, FMR has entered into sub-advisory
agreements with FMR U.K. and FMR Far East. O n behalf of Overseas, 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 Emerging Markets Income and Strategic Income,
FMR has entered into sub-advisory agreements with FMR U.K., FMR Far East,
FIJ, and FIIA. FIIA, in turn, has entered into a sub-advisory agreement
with FIIAL U.K. Pursuant to the sub-advisory agreements, FMR may receive
investment advice and research services outside the United States from the
sub-advisers.
O n behalf of TechnoQuant Growth, Overseas, Mid Cap, Growth
Opportunities, Large Cap, Growth & Income, Balanced, Emerging Markets
Income, High Yield, Strategic Income, Intermediate Bond, Mortgage
Securities and Short Fixed-Income, FMR may also grant FMR U.K. and FMR Far
East investment management authority as well as the authority to buy
and sell securities if FMR believes it would be beneficial to the funds.
Currently, FMR U.K., FMR Far East, FIJ, FIIA, and FIIAL U.K. each focuses
on issuers in countries other than the United States such as those in
Europe, Asia, and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly owned
subsidiaries of FMR. FIJ and FIIA are wholly owned subsidiaries of Fidelity
International Limited (FIL), a Bermuda company formed in 1968 which
primarily provides investment advisory services to non-U.S. investment
companies and institutional investors investing in securities throughout
the world. Edward C. Johnson 3d, Johnson family members, and various trusts
for the benefit of the Johnson family own, directly or indirectly, more
than 25% of the voting common stock of FIL. FIJ was organized in Japan in
1986. FIIA was organized in Bermuda in 1983. 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:
FMR pays FMR U.K. and FMR Far East fees equal to 110% and 105%,
respectively, of FMR U.K.'s and FMR Far East's costs incurred in connection
with providing investment advice and research services.
FMR pays FIIA 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.
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.
On behalf of TechnoQuant Growth, Overseas, Mid Cap, Growth
Opportunities, Large Cap, Growth & Income, Balanced, Emerging Markets
Income, High Yield, Strategic Income, Intermediate Bond, Mortgage
Securities and Short Fixed-Income for providing discretionary investment
management and executing portfolio transactions, the sub-advisers are
compensated as follows:
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, if
applicable) with respect to the fund's average net assets managed by the
sub-adviser on a discretionary basis.
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.
The table below shows the fees paid by FMR to FMR U.K., FMR Far East,
FIIA, and FIJ, and by FIIA to FIIAL U.K. for providing investment advice
and research services with respect to certain of the funds for the fiscal
periods ended 1996, 1995, and 1994.
The other funds paid no investment sub-advisory fees for the fiscal periods
ended ____, 1995, and 1994.
FEES PAID TO FOREIGN SUB-ADVISERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FUND FEES PAID BY FMR TO FMR U.K. FEES PAID BY FMR TO FMR FAR EAST
1996 1995 1994 1996 1995 1994
Overseas $ 541,988 $ 364,803 $ 153,288 $ 550,513 $ 352,004 $ 174,129
Mid Cap N/A N/A N/A N/A
Equity Growth 31,519 13,191 30,883 15,192
Growth Opportunities 642,845 212,175 67,818 645,049 203,140 82,741
Strategic Opportunities 5,261 7,794* 5,862 7,712*
7,352** 7,701**
Large Cap N/A N/A N/A N/A
Equity Income 23,713 12,197 23,140 13,970
Balanced 235,847 330,971 248,936 251,109 304,870 299,094
Emerging Markets $ $ N/A $ N/A $ N/A $ N/A
Income
High Yield $ $ N/A $ N/A $ N/A $ N/A
Strategic Income $ $ N/A $ N/A $ N/A $ N/A
Mortgage Securities $ $ N/A $ N/A $ N/A $ N/A
Intermediate Bond $ $ N/A $ N/A $ N/A $ N/A
Short Fixed-Income $ $ N/A $ N/A $ N/A $ N/A
TOTAL $ $ 978,314 $ 513,174 $ $ 929,620 $ 603,471
</TABLE>
* From 10/1/93 - 9/30/94.
** From 10/1/94 - 12/31/94.
[to be confirmed: No fees were paid to FIJ, FIIA, and FIIAL U.K. for
fiscal periods ended 1996, 1995 and 1994.]
CONTRACTS WITH FMR AFFILIATES
FIIOC, an affiliate of FMR, is transfer, dividend disbursing, and
shareholder servicing agent for Class A, Class T, Class B, and the
Institutional Class shares of the taxable funds. FSC, an affiliate of FMR,
is the transfer, dividend disbursing, and shareholder servicing agent for
the Initial Class shares of the taxable funds. UMB is the transfer,
dividend disbursing, and shareholder servicing agent for Class A, Class
T, Class B, the Institutional Class, and the Initial Class shares of the
municipal funds. UMB has entered into sub-contracts with FIIOC and FSC
pursuant to which FIIOC performs transfer, dividend disbursing, and
shareholder services for Class A, Class T, Class B and the Institutional
Class and FSC performs transfer agent and shareholder servicing functions
for the Initial Class of the municipal funds. Under these arrangements,
FIIOC and FSC receive an annual account fee and an asset-based fee each
based on account size and fund type for each retail account and certain
institutional accounts. With respect to certain institutional retirement
accounts, FIIOC and FSC receive an annual account fee and an asset-based
fee based on account type or fund type. These annual account fees are
subject to increase based on postal rate changes. The asset-based fees of
the growth and growth and income funds are subject to adjustment if the
year-to-date total return of the S&P 500 exceeds positive or negative
15%. FIIOC and FSC also collect small account fees from certain accounts
with balances of less than $2,500.
FIIOC and FSC bear 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. Also, FIIOC and FSC as applicable, pay out-of-pocket expenses
associated with providing transfer agent services.
FSC also performs the calculations necessary to determine NAV and dividends
for Class A, Class T, Class B, the Institutional Class, and the Initial
Class of each taxable fund, maintains each taxable fund's accounting
records, and administers each taxable fund's securities lending program.
UMB has an additional sub-contract with FSC pursuant to which FSC performs
the calculations necessary to determine the NAV and dividends for the Class
A, Class T, Class B, the Institutional Class, and the Initial Class of each
municipal fund, and maintains the accounting records for each municipal
fund. The annual fee rates for these pricing and bookkeeping services
are based on each fund's average net assets, specifically, 0.0600% (equity
funds), 0.0750% (international funds), 0.0400% (fixed-income funds), or
0.0750% (high yield funds) for the first $500 million of average net assets
and 0.0300% (equity funds) 0.0375% (international funds), 0.0200%
(fixed-income funds) or 0.0375% (high yield funds) for average net assets
in excess of $500 million. Prior to January 1, 1996, the annual fee rates
for pricing and bookkeeping services for the international funds and high
yield funds were based on each fund's average net assets, specifically,
0.0600% and 0.0400% respectively, for the first $500 million of average net
assets, and 0.0300% and 0.0200%, respectively, for average net assets in
excess of $500 million. The fee is limited to a minimum of $60,000 and a
maximum of $800,000 per year. Pricing and bookkeeping fees, including
reimbursement for out-of-pocket expenses, paid by the funds for the past
three fiscal years were as follows:
FUND 1996 1995 1994
Overseas $ $ 358,827 $ 251,241
Mid Cap N/A N/A
Equity Growth 680,671 461,039
Growth Opportunities 764,407 758,343
Strategic Opportunities 315,623 61,356**
215,648***
Large Cap N/A N/A
Equity Income 404,628 168,364
Balanced 758,290 750,743
Emerging Markets Income 45,004 36,412*
High Yield 296,724 223,567
Strategic Income 45,067 7,500*
Government Investment 68,665 46,218
Intermediate Bond 151,940 118,125
Mortgage Securities
Short Fixed-Income 231,369 264,455
High Income Municipal 229,551 220,222
Municipal Bond 346,000 362,000
Intermediate Municipal Income 48,976 48,062
Short-Intermediate Municipal Income 46,467 31,953*
New York Municipal Income 8,710* N/A
California Municipal Income N/A N/A
* Emerging Markets Income, Strategic Income, and Short-Intermediate
Municipal Income commenced operations on March 10, 1994, October 31, 1994,
and March 16, 1994, respectively. New York Municipal Income commenced
operations on August 21, 1995.
** From 10/1/94 - 12/31/94.
*** From 10/1/93 - 9/30/94.
FSC also receives fees for administering each taxable fund's securities
lending program. Securities lending fees are based on the number and
duration of individual securities loans. For the fiscal years ended 1996,
1995, and 1994, the taxable funds incurred no securities lending fees.
For the municipal funds, the transfer agent fees and charges, and pricing
and bookkeeping fees described above are paid to FIIOC and FSC,
respectively, by UMB, which is entitled to reimbursement from the class or
the fund, as applicable, for these expenses.
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 each fund, which are continuously
offered. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR. The table below shows the sales
charge revenue paid to, and retained by FDC, for the following fiscal
periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SALES CHARGE REVENUE CDSC REVENUE
FISCAL YEAR AMOUNT PAID AMOUNT RETAINED AMOUNT PAID AMOUNT RETAINED
ENDED TO FDC BY FDC TO FDC BY FDC
OVERSEAS Oct. 31, 1996 $ $ $ $
1995 $ 4,446,941 $ 692,471 333 333
1994 9,596,831 1,436,765 N/A N/A
MID CAP Nov. 30,
1996****
1995 N/A N/A N/A N/A
1994 N/A N/A N/A N/A
EQUITY GROWTH Nov. 30, 1996
1995 13,514,763 2,048,524 N/A N/A
1994 9,353,000 1,397,000 N/A N/A
GROWTH OPPORTUNITIES Oct. 31, 1996
1995 73,545,428 11,459,421 N/A N/A
1994 47,564,000 7,108,000 N/A N/A
STRATEGIC OPPORTUNITIES Dec. 31, 1996
1995 1,885,188 146,708 40,916 40,916
Dec. 31, 1994 553,970* 231,911 12,307 12,307
Sep. 30, 1994 2,986,131** 447,011 409 409
LARGE CAP Nov. 30,
1996****
1995 N/A N/A N/A N/A
1994 N/A N/A N/A N/A
EQUITY INCOME Nov. 30, 1996
1995 10,583,118 1,676,479 127,493 127,493
1994 2,450,544 352,678 30,093 30,093
BALANCED Oct. 31, 1996
1995 10,070,941 1,674,121 N/A N/A
1994 37,018,000 6,291,000 N/A N/A
EMERGING MARKETS INCOME Dec. 31, 1996
1995 465,187 245,371 12,203 12,203
1994 406,046 59,134 2,877 2,877
HIGH YIELD Oct. 31, 1996
1995 8,787,240 1,328,830 75,583 75,583
1994 8,980,127 1,342,482 15,765 15,765
STRATEGIC INCOME Dec. 31, 1996
1995 842,000 100,905 23,689 23,689
1994 197,904 0 9,542 9,542
GOVERNMENT INVESTMENT Oct. 31, 1996
1995 954,672 144,831 10,268 10,268
1994 996,242 168,939 978 978
INTERMEDIATE BOND Nov. 30, 1996
1995 1,297,536 198,826 20,310 20,310
1994 1,598,883 237,647 1,279 1,279
MORTGAGE SECURITIES July 31, 1996
1995
1994
SHORT FIXED-INCOME Oct. 31, 1996
1995 786,085 167,907 N/A N/A
1994 4,396,909 877,639 N/A N/A
HIGH INCOME MUNICIPAL Oct. 31, 1996
SALES CHARGE REVENUE CDSC REVENUE
FISCAL YEAR AMOUNT PAID AMOUNT RETAINED AMOUNT PAID AMOUNT RETAINED
ENDED TO FDC BY FDC TO FDC BY FDC
1995 2,247,388 353,128 39,695 39,695
1994 6,327,614 1,038,989 0 0
MUNICIPAL BOND Dec. 31, 1996
1995
1994
INTERMEDIATE MUNICIPAL Nov. 30, 1996
INCOME
Nov. 30, 1995 375,591 141,432 1,449 1,449
1994 635,031 96,813 0 0
SHORT INTERMEDIATE Nov. 30, 1996
MUNICIPAL INCOME
1995 316,185 239,796 N/A N/A
1994 122,128 13,369 N/A N/A
</TABLE>
NEW YORK Oct. 31, 1996 $ 0 $ 0 N/A N/A
MUNICIPAL INCOME
1995*** 0 $ 0 N/A N/A
1994 N/A N/A N/A N/A
CALIFORNIA Oct. 31, 1996**** N/A N/A
MUNICIPAL INCOME
1995 N/A N/A N/A N/A
1994 N/A N/A N/A N/A
* For the fiscal period October 1, 1994 through December 31, 1994
** For the fiscal period October 1, 1993 through September 30, 1994
*** For the fiscal period August 21, 1995 through October 31, 1995
**** For the fiscal period February 20, 1996 through October 31, 1996
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each class of shares of the funds, except Strategic Opportunities: Initial
Class, (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the Rule).
The Rule pr ovides in substance that a mutual fund may not engage
directly or indirectly in financing any activity that is primarily intended
to result in the sale of shares of the fund except pursuant to a
plan approved on behalf of the fund under the Rule. The Plans, as
approved by the Trustees, allow Class A, Class T, Class B, Institutional
Class and Initial Class shares of the funds and FMR to incur certain
expenses that might be considered to constitute direct or indirect payment
by the funds of distribution expenses.
Pursuant to the Class A Plans, FDC is paid a distribution fee as a
percentage of Class A's average net assets at an annual rate of up to
0.75% for each of TechnoQuant Growth, Overseas, Mid Cap, Equity Growth,
Growth Opportunities, Strategic Opportunities, Large Cap, Growth & Income,
Equity Income, and Balanced (the Equity Funds); and up to 0.40% for each
of Emerging Markets Income, High Yield, Strategic Income, Government
Investment, Mortgage Securities, High Income Mu nicipal, Municipal Bond,
New York Municipal Income, and California Municipal Income (the Bond
Funds), Intermediate Bond and Intermediate Municipal Income (the
Intermediate-Term Bond Funds) and Short-Intermediate Municipal Income
and Short Fixed-Income (the Short-Term Bond Funds). Pursuant to the
Class T Plans, FDC is paid a distribution fee as a percentage of Class
T's average net assets at an annual rate of up to 0.75% for each of
TechnoQuant Growth, Equity Growth, Mid Cap, Large Cap, Growth & Income, and
Equity Income; up to 0.65% for each of Overseas, Growth Opportunities,
Strategic Opportunities, and Balanced; up to 0.40% for each of Emerging
Markets Income, High Yield, Strategic Income, Intermediate Bond, Mortgage
Securities, Government Investment, High Income Municipal, Municipal Bond,
Short-Intermediate Municipal Income, Intermediate Municipal Income, New
York Municipal Income, and California Municipal Income; and up to 0.15% for
Short Fixed-Income. Pursuant to the Class B Plans, FDC is paid a
distribution fee as a percentage of Class B's average net assets at an
annual rate of up to 0.75% for each fund with Class B shares. For the
purpose of calculating the distribution fees, average net assets are
determined at the close of business on each day throughout the
month, but excluding assets attributable to Class T shares of Equity
Growth, Equity Income, Emerging Markets Income, Strategic Opportunities,
and Overseas purchased more than 144 months prior to such day and to
Class B shares of Equity Income, Emerging Markets Income, and Strategic
Opportunities purchased more than 144 months prior to such day .
Currently, the Trustees have approved a distribution fee for Class A at an
annual rate of 0.25% for each of the Equity Funds and 0.15% for each of the
Bond Funds, the Intermediate-Term Bond Funds, and the Short-Term
Bond Funds. Currently, the Trustees have approved a distribution fee for
Class T at an annual rate of 0.50% for each of the Equity Funds;
0.25% for each of the Bond Funds and the Intermediate-Term Bond
Funds; and 0.15% for each of the Short-Term Bond Funds.
Cur rently, the Trustees have approved a distribution fee for Class B at
an annual rate of 0.75% for each of the Equity Funds and 0.65% for
each of the Bond Funds and the Intermediate-Term Bond Funds. These
fee rates may be increased only when, in the opinion of the
Trustees, it is in the best interests of the shareholders of the applicable
class to do so. Class B of each fund also pays investment professionals a
service fee at an annual rate of 0.25% of its average daily net assets
determined at the close of business on each day throughout the month for
personal service and/or the maintenance of shareholder accounts.
The tables below show the distribution fees paid for Class A shares for
the fiscal years ended 1996 (Class A shares were not offered prior to
September 3, 1996), for Class T shares for the fiscal years ended 1996,
1995, and 1994, and for Class B shares for the fiscal years ended 1996,
1995, and 1994 (Class B shares were not offered prior to June 30,
1994).
CLASS A DISTRIBUTION FEES
1996
FUND PAID TO RETAINED TOTAL FEES
INVESTMENT BY FDC
PROFESSION
ALS
Overseas $ $ $
Mid Cap
Equity Growth
Growth
Opportunities
Strategic
Opportunities
Large Cap
Equity Income
Balanced
Emerging
Markets
Income
High Yield
Strategic
Income
Government
Investment
Intermediate
Bond
Short Fixed-
Income
High Income
Municipal
Intermediate
Municipal
Income
Short-
Intermediate
Municipal
Income
New York
Municipal
Income
California
Municipal
Income
CLASS T DISTRIBUTION FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996
FUND PAID TO RETAINED TOTAL FEES PAID TO RETAINED TOTAL FEES PAID TO RETAINED TOTAL FEES
INVESTMENT BY FDC INVESTMENT BY FDC INVESTMENT BY FDC
PROFESSION PROFESSION PROFESSION
ALS ALS ALS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas $ 2,139,864 $ 641,958 $ 2781822 $3,452,001 $ 1049755 $4,501,756 $ $ $
Mid Cap N/A N/A N/A N/A N/A N/A
Equity Growth 3,312,525 999,987 4,312,512 6,750,062 2,123,261 8,873,323
Growth 16,056,714 4,817,016 20873730 33,781,082 10228188 44009270
Opportunities
Strategic 470,225 141,067 611,292 2,377,409 804,604 3,182,013
Opportunities
Large Cap N/A N/A N/A N/A N/A N/A
Equity Income 441,208 132,362 573,570 2,339,815 710,240 3,050,055
Balanced 13,406,000 3,203,000 16608814 16,748,635 5,165,858 21,914,493
Emerging 31,604 8,331 39,935 71,061 12300 83,361
Markets
Income
High Yield 1,526,214 0 1,526,214 2,185,795 33,785 2,219,580
Strategic 1,626 488 2,144 62,957 6,002 68,959
Income
Government 227,532 0 227,532 391,918 7,088 399,006
Investment
Intermediate 264,949 0 264,949 463,806 0 463,806
Bond
Short Fixed- 1,212,008 0 1,212,008 933,777 18,975 952,752
Income
High Income 1,374,438 0 1,374,438 1,358,027 8,150 1,366,177
Municipal
Municipal N/A N/A N/A N/A N/A N/A
Bond
Intermediate 138,512 0 138,512 143,424 1,599 145,023
Municipal
Income
Short- 11,446 0 11,446 27,895 1,646 29,541
Intermediate
Municipal
Income
New York N/A N/A N/A 368 0 368
Municipal
Income
California N/A N/A N/A N/A N/A N/A
Municipal
Income
</TABLE>
CLASS B DISTRIBUTION FEES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996
FUND SHAREHOLD RETAINED TOTAL FEES SHAREHOLD RETAINED TOTAL FEES SHAREHOLD RETAINED TOTAL FEES
ER SERVICE BY FDC ER SERVICE BY FDC ER SERVICE BY FDC
FEES FEES FEES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas N/A $ N/A $ N/A $ 1,155 $ 3566 $ 4,721 $ $ $
Mid Cap N/A N/A N/A N/A N/A N/A
Strategic 7,964 23892 31856 116,312 359793 476,105
Opportunities
Large Cap N/A N/A N/A N/A N/A N/A
Equity Income 16,215 54580 70795 332,413 996566 1,328,979
Emerging 3,215 9,771 12986 17,429 52283 69,712
Markets
Income
High Yield 7,052 21157 28209 537580 716,908
Strategic 2,155 6,465 8620 46,578 139735 186,313
Income
Government 817 2449 3266 16,159 48662 64,821
Investment
Intermediate 264,949 5070 6759 21,738 65218 86,956
Bond
High Income 3,238 9,713 12,951 54,382 163,013 215,395
Municipal
Municipal N/A N/A N/A N/A N/A N/A
Bond
Intermediate 965 2,893 3,858 9,498 28,714 38,212
Municipal
Income
New York N/A N/A N/A 432 1,298 1,730
Municipal
Income
California N/A N/A N/A N/A N/A N/A
Municipal
Income
</TABLE>
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
shares, such payment is authorized by the Plans. Each Class A, Class
T , and Class B Plan specifically recognizes that FMR may use its
management fee revenue, as well as its past profits or its other resources,
to pay FDC for expenses incurred in connection with the distribution of
the applicable class's shares, including payments made to third parties
that engage in the sale of the applicable class's shares or to third
parties, including banks, that render shareholder support services.
Each Institutional Class and Initial Class Plan specifically
recognizes that FMR may use its management fee revenue, as well as its
past profits or its other resources , to pay FDC for expenses
incurred in connection with the distribution of the
applicable class's shares. FMR directly, or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of the applicable class's shares or provide
shareholder support services. The Trustees have authorized such payments
for Class A, Class T, Class B, and Inst i tutional Class shares.
Effective January 1, 1996, the Trustees have not authorized such payments
for Initial Class shares.
For the fiscal year ended 1996, payments made by FMR either directly or
indirectly through FDC to third parties amounted to $_____, $_______,
$_______, $_______, and $_________on behalf of Class A, Class T, Class B,
Institutional Class and Initial Class, respectively, of [fund names].
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan, and
determined that there is a reasonable likelihood that the Plan will benefit
the applicable class of each fund and its shareholders. In particular, the
Trustees noted that the Institutional Class and Initial Class Plans
do not authorize payments by the applicable class of a fund
other than those made to FMR under its management contract with the fund.
To the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of shares of the applicable class of each
fund, additional sales of fund shares may result. Furthermore, certain
shareholder support services may be provided more effectively under the
Plans by local entities with whom shareholders have other relationships.
The Class A, Class T, and Class B Plans do not provide for specific
payments by the applicable class of any of the expenses of FDC, or obligate
FDC or FMR to perform any specific type or level of distribution activities
or incur any specific level of expense in connection with distribution
activities. After payments by FDC for advertising, marketing and
distribution, and payments to third parties, the amounts remaining, if any,
may be used as FDC may elect.
The Plans were approved by the shareholders of each class on the dates
shown in the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DATE OF SHAREHOLDER APPROVAL
FUND CLASS A CLASS T CLASS B INSTITUTIONAL
TechnoQuant Growth
Overseas 08/30/96 04/23/90 06/30/95 06/30/95
Mid Cap 08/30/96 0 1/18/96 0 1/18/96 1/18/96
Equity Growth 08/30/96 09/25/86 09/26/86
Growth Opportunities 08/30/96 01/01/95 06/30/95
Strategic Opportunities 08/30/96 08/25/87 06/26/94 06/30/95
Large Cap 08/30/96 0 1/18/96 0 1/18/96 1/18/96
Growth & Income
Equity Income 08/30/96 07/23/86 06/26/94 07/23/86
Balanced 08/30/96 0 1 /01/95 06/30/95
Emerging Markets Income 08/30/96 02/10/94 05/26/95 06/30/95
High Yield 08/30/96 01/01/95 01/01/95 06/30/95
Strategic Income 08/30/96 10/14/94 10/14/94 06/30/95
Government Investment 08/30/96 0 1 /01/95 01/01/95 06/30/95
Intermediate Bond 08/30/96 0 1 /01/95 0 1 /01/95 11/26/86
Mortgage Securities
Short Fixed-Income 08/30/96 01/01/95 N/A 06/30/95
High Income Municipal 08/30/96 1 2/01/94 12/01/94 06/30/95
Municipal Bond 07/01/96 07/01/96 07/01/96
Intermediate Municipal Income 08/30/96 0 7/01/95 0 7/01/95 11/05/86
Short-Intermediate Municipal
Income 08/30/96 0 7/01/95 N/A 06/30/95
New York Municipal Income 08/30/96 12/08/94 12/08/94 06/30/95
California Municipal Income 08/30/96 11/18/94 11/18/94 06/30/95
</TABLE>
The Plans for the Initial Class of Mortgage Securities and Municipal Bond
were approved by the shareholders of the class on January 21, 1987 and
December 31, 1986, respectively.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUSTS
TRUST ORGANIZATION. Fidelity Advisor TechnoQuant Growth Fund,
Fidelity Advisor Mid Cap Fund, Fidelity Advisor Equity Growth Fund,
Fidelity Advisor Large Cap Fund, and Fidelity Advisor Growth & Income Fund
are funds of Fidelity Advisor Series I, an open-end management investment
company organized as a Massachusetts business trust by a Declaration of
Trust dated June 24, 1983, as amended and restated October 26, 1984. On
January 29, 1992, the name was changed from Equity Portfolio Growth to
Fidelity Broad Street Trust by an amendment to the Declaration of Trust.
On April 15, 1993, its name was changed by an amendment to the Declaration
of Trust from Fidelity Broad Street Trust to Fidelity Advisor Series I.
Currently, there are five funds of the trust: Fidelity Advisor TechnoQuant
Growth Fund, Fidelity Advisor Mid Cap Fund, Fidelity Advisor Equity Growth
Fund, Fidelity Advisor Large Cap Fund, and Fidelity Advisor Growth & Income
Fund.
Fidelity Advisor Short Fixed-Income Fund, Fidelity Advisor Government
Investment Fund, Fidelity Advisor High Yield Fund, Fidelity Advisor Growth
Opportunities Fund, and Fidelity Advisor Balanced Fund are funds of
Fidelity Advisor Series II, an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust dated
April 24, 1986. On April 7, 1993, the Board of Trustees voted to change the
name of the trust from Fidelity Diversified Trust to Fidelity Advisor
Series II. Currently there are five funds of the trust: Fidelity Advisor
Short Fixed-Income Fund, Fidelity Advisor Government Investment Fund,
Fidelity Advisor High Yield Fund, Fidelity Advisor Growth Opportunities
Fund, and Fidelity Advisor Balanced Fund.
Fidelity Advisor Equity Income Fund is a fund of Fidelity Advisor Series
III, an open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated May 17, 1982. On January
29, 1986, the name was changed from Equity Portfolio: Income to
Fidelity Franklin Street Trust. On April 15, 1993 the trust's name was
again changed to Fidelity Advisor Series III. Currently there is one
fund of the trust: Fidelity Advisor Equity Income Fund.
Fidelity Advisor Intermediate Bond Fund is a fund of Fidelity Advisor
Series IV, an open-end management inves tment company organized as a
Massachusetts business trust by a Declaration of Trust dated May 6, 1983.
On January 29, 1992 the name of the trust was changed from Income
Portfolios to Fidelity Income Trust, and on April 15, 1993, the Board of
Trustees voted to change the trust's name to Fidelity Advisor Series IV. An
amended and restated Declaration of Trust, dated March 16, 1995, was
filed on April 12, 1995. Currently there are three funds of the trust:
Fidelity Advisor Intermediate Bond Fund, Fidelity Institutional
Short-Intermediate Government Portfolio, and Fidelity Real Estate High
Income Fund.
Fidelity Advisor High Income Municipal Fund, Fidelity Advisor New York
Municipal Income Fund, and Fidelity Advisor California Municipal Income
Fund are funds of Fidelity Advisor Series V, an open-end management
inves tment company organized as a Massachusetts business trust by a
Declaration of Trust dated April 23, 1986, as amended and restated July 18,
1991, and as supplemented April 15, 1993. On July 18, 1991, the Board of
Trustees voted to change the name of the trust from Plymouth Investment
Series to Fidelity Investment Series, and on April 15, 1993, the Board
voted to change the trust's name to Fidelity Advisor Series V. An
amended and restated Declaration of Trust dated March 16, 1995 was filed on
April 12, 1995. Currently there are four funds of the trust: Fidelity
Advisor High Income Municipal Income Fund, Fidelity Advisor New York
Municipal Income Fund, Fidelity Advisor California Municipal Income Fund,
and Fidelity Advisor Natural Resources Fund.
Fidelity Advisor Short-Intermediate Municipal Income Fund and Fidelity
Advisor Intermediate Municipal Income Fund are funds of Fidelity
Advisor Series VI, an open-end management investment company organized as a
Massachusetts business trust by a Declaration of Trust dated June 1, 1983,
as amended and restated May 5, 1993. On January 29, 1992, the name of the
trust was changed from Tax-Exempt Funds to Fidelity Oliver Street Trust and
on April 15, 1993 the Board of Trustees voted to change the name of the
trust to Fidelity Advisor Series VI. Currently there are two funds of the
trust: Fidelity Advisor Short-Intermediate Municipal Income Fund and
Fidelity Advisor Intermediate Municipal Income Fund.
Fidelity Advisor Overseas Fund is a fund of Fidelity Advisor Series VII, an
open-end management investment company organized as a Massachusetts
business trust by a Declaration of Trust dated March 21, 1980 as amended
and restated July 18, 1991 and as supplemented April 15, 1993. On July 18,
1991, the Board of Trustees voted to change the name of the trust from
Plymouth Securities Trust to Fidelity Securities Trust, and on April 15,
1993 the Board of Trustees voted to change the name of the trust to
Advisor Series VII. Currently there are seven funds of the trust:
Fidelity Advisor Overseas Fund, Fidelity Advisor Consumer Industries Fund,
Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Financial
Services Fund, Fidelity Advisor Technology Fund, Fidelity Advisor Utilities
Growth Fund, and Fidelity Advisor Health Care Fund.
Fidelity Advisor Strategic Opportunities Fund, Fidelity Advisor Strategic
Income Fund, and Fidelity Advisor Emerging Markets Income Fund are funds of
Fidelity Advisor Series VIII, an open-end management investment company
organized as a Massachusetts business trust by a Declaration of Trust dated
September 23, 1983, as amended and restated October 1, 1986 and as
supplemented November 29, 1990. On April 15, 1993 the name of the trust was
changed from Fidelity Special Situations Fund to Fidelity Advisor Series
VIII. Currently there are three funds of the trust: Fidelity Advisor
Strategic Opportunities Fund, Fidelity Advisor Strategic Income Fund, and
Fidelity Advisor Emerging Markets Income Fund.
Fidelity Advisor Municipal Bond Fund is a fund of Fidelity Municipal Trust,
an open-end management investment company originally organized as a
Maryland corporation on November 22, 1976 and reorganized as a
Massachusetts business trust on June 22, 1984, at which time its name
changed to Fidelity Municipal Bond Portfolio. On March 1, 1986, the
trust's name was changed to Fidelity Municipal Trust. Currently, there are
seven funds of the trust: Fidelity Advisor Municipal Bond Fund, Fidelity
Aggressive Municipal Fund, Fidelity Insured Municipal Income Fund, Fidelity
Ohio Municipal Income Fund, Fidelity Michigan Municipal Income Fund,
Fidelity Minnesota Municipal Income Fund, and Spartan Pennsylvania
Municipal Income Fund.
Fidelity Advisor Mortgage Securities Fund is a fund of Fidelity Income
Fund, an open-end management investment company organized as a
Massachusetts business trust on August 7, 1984. On October 25, 1987, the
trust's name was changed from Fidelity Mortgage Securities Fund to Fidelity
Income Fund. Currently, there are three funds in the trust: Fidelity
Advisor Mortgage Securities Fund, Fidelity Ginnie Mae Fund, and Spartan
Limited Maturity Government Fund.
The Declarations of Trust permit the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to a trust or a
fund, the right of the trust or fund to use the identifying name "Fidelity"
and "Spartan" may be withdrawn. There is a remote possibility that one fund
might become liable for any misstatement in its prospectus or statement of
additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general liabilities of their respective trusts. Expenses with respect
to each trust are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of each trust, subject to the general
supervision of the 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 a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. Each Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or its Trustees shall include a provision limiting the obligations
created thereby to the trust and its assets. Each Declaration of Trust
provides for indemnification out of each fund's property of any shareholder
held personally liable for the obligations of the fund. Each Declaration of
Trust also provides that its funds shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their office. Claims asserted against
one class of shares may subject the holders of another class of shares to
certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive rights, and Class A, Class T,
Institutional Class, and Initial Class shares have no conversion rights;
the voting and dividend rights, the conversion rights of Class B
shares, the right of redemption, and the privilege of exchange are
described in the Prospectus. Shareholders of Growth Opportunities,
Equity Income, Balanced, High Yield, Mortgage Securities, Government
Investment, Intermediate Bond, Short Fixed-Income, High Income Municipal,
Municipal Bond, Intermediate Municipal Income, Short-Intermediate Municipal
Income, New York Municipal Income, and California Municipal Income receive
one vote for each dollar of net asset value owned. Shares are fully paid
and nonassessable, except as set forth under the heading "Shareholder and
Trustee Liability" above. Shareholders representing 10% or more of a
trust, a fund, or class of a fund may, as set forth in the Declaration of
Trust, call meetings of the trust, fund or class, as applicable, for any
purpose related to the trust, fund, or class, as the case may be,
including, in the case of meeting of an entire trust, the purpose of voting
on removal of one or more Trustees. Each trust or fund may be terminated
upon the sale of its assets to another open-end management investment
company, or upon liquidation and distribution of its assets, if approved by
vote of the holders of a majority of the outstanding shares of the funds of
Advisor Series I, VII, VIII, Municipal Trust, and Income Fund or, as
determined by the current value of each shareholder's investment in the
funds of Advisor Series II, III, IV, V, and VI. If not so terminated, each
trust and funds will continue indefinitely. Growth Opportunities,
Balanced, Emerging Markets Income, Strategic Opportunities, High Yield,
Str ategic Income, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, California Municipal Income, New
York Municipal Income, Mid Cap, Large Cap, Mortgage Securities, and
Intermediate Muni cipal Income may invest all of their assets in another
investment company.
CUSTODIANS. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of Mid Cap, Growth
Opportunities, Strategic Opportunities, and Large Cap. The Chase Manhattan
Bank, 4 Chase MetroTech Center, Brooklyn, New York, is custodian of the
assets of TechnoQuant Growth, Overseas, Equity Growth, Growth & Income,
Equity Income, Balanced, and Emerging Markets Income. The Bank of New York,
110 Washington Street, New York, New York, is custodian of the assets of
High Yield, Strategic Income, Government Investment, Intermediate Bond,
Mortgage Securities and Short Fixed-Income. UMB Bank, n.a., 1010 Grand
Avenue, Kansas City, Missouri, is custodian of the assets of High Income
Municipal, Municipal Bond, Intermediate Municipal Income, California
Municipal Income, New York Municipal Income, and Short-Intermediate
Municipal Income. Each custodian is responsible for the safekeeping of the
funds' assets and the appointment of subcustodian banks and clearing
agencies. A custodian takes no part in determining the investment policies
of the fund or in deciding which securities are purchased or sold by a
fund. However, a fund may invest in obligations of its custodian and may
purchase securities from or sell securities to its custodian. The Bank of
New York and The Chase Manhattan Bank, each headquartered in New York, also
may serve as special purpose custodians of certain assets in connection
with repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. The Boston branch of the custodian bank of Mid Cap, Growth
Opportunities, Strategic Opportunities, and Large Cap 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. __________________ serves as the independent accountant
for Mid Cap, Equity Growth, Growth Opportunities, Strategic Opportunities,
Large Cap, Equity Income, Balanced, Emerging Markets Income, High Yield,
Strategic Income, Government Investment, Intermediate Bond, Short
Fixed-Income, High Income Municipal, Municipal Bond, Intermediate Municipal
Income, and Short-Intermediate Municipal Income, New York Municipal Income,
and California Municipal Income.
_________________________ serves as the independent accountant for
TechnoQuant Growth, Overseas, Growth & Income, and Mortgage Securities. The
auditor examines financial statements for each fund and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's audited financial statements, financial highlights for the
fiscal periods ended July 31, October 31, November 30, or December 31,
1996, as appropriate, and the report of the auditors thereon, are included
in the funds' Annual Reports, which are separate reports supplied with this
Statement of Additional Information. Each fund's financial statements,
financial highlights, and the report of the auditors thereon are
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds. Also, the maturities of mortgage-backed securities,
including collateralized mortgage obligations, and some asset-backed
securities, are determined on a weighted average life basis, which is the
average time for principal to be repaid. For a mortgage security, this
average time is calculated by estimating the timing of principal payments,
including unscheduled prepayments, during the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE 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 edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA - Bonds 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 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; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds 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
issues 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 CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - 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.
TechnoQuant is a trademark of FMR Corp.
Fidelity Advisor Series II
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements and Financial Highlights included in the Annual
Reports for Fidelity Advisor Series II on behalf of Fidelity Advisor
Balanced Fund, Fidelity Advisor Government Investment Fund, Fidelity
Advisor Growth Opportunities Fund, Fidelity Advisor High Yield Fund, and
Fidelity Advisor Short Fixed-Income Fund for the fiscal year ended October
31, 1996, will be filed by subsequent amendment.
(b) Exhibits:
(1) (a) Amended and Restated Declaration of Trust dated May 18, 1995 was
electronically filed and is incorporated herein by reference to Exhibit
1(a) to Post-Effective Amendment No. 27.
(2) (a) Bylaws of the Trust were electronically filed and are
incorporated herein by reference to Exhibit 2(a) to Union Street Trust's
(File No. 2-50318) Post-Effective Amendment No. 87.
(3) Not applicable.
(4) Form of Share Certificate was electronically filed and is
incorporated herein by reference to Exhibit 4 to Post-Effective Amendment
No. 27.
(5) (a) Amended Management Contract between Fidelity Advisor Government
Investment Fund and Fidelity Management & Research Co., dated January 1,
1995, was electronically filed and is incorporated herein by reference to
Exhibit 5(a) to Post-Effective Amendment No. 25.
(b) Amended Management Contract between Fidelity Advisor Growth
Opportunities Fund and Fidelity Management & Research Co., dated January 1,
1995, was electronically filed and is incorporated herein by reference to
Exhibit 5(b) to Post-Effective Amendment No. 25.
(c) Amended Management Contract between Fidelity Advisor High Yield Fund
and Fidelity Management & Research Co., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(c) to Post-Effective Amendment No. 25.
(d) Amended Management Contract between Fidelity Advisor Income & Growth
Fund and Fidelity Management & Research Co., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(d) to Post-Effective Amendment No. 25.
(e) Amended Management Contract between Fidelity Advisor Short
Fixed-Income Fund and Fidelity Management & Research Co., dated January 1,
1995, was electronically filed and is incorporated herein by reference to
Exhibit 5(e) to Post-Effective Amendment No. 25.
(f) Sub-Advisory Agreement between Fidelity Management & Research Co.,
on behalf of Fidelity Advisor Growth Opportunities Fund, and Fidelity
Management & Research (Far East) Inc., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(f) to Post-Effective Amendment No. 25.
(g) Amended Sub-Advisory Agreement between Fidelity Management &
Research Co., on behalf of Fidelity Advisor High Yield Fund, and Fidelity
Management & Research (Far East) Inc., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(g) to Post-Effective Amendment No. 25.
(h) Sub-Advisory Agreement between Fidelity Management & Research Co.,
on behalf of Fidelity Advisor Income & Growth Fund, and Fidelity Management
& Research (Far East) Inc., dated January 1, 1995, was electronically filed
and is incorporated herein by reference to Exhibit 5(h) to Post-Effective
Amendment No. 25.
(i) Sub-Advisory Agreement between Fidelity Management & Research Co.,
on behalf of Fidelity Advisor Short Fixed-Income Fund, and Fidelity
Management & Research (Far East) Inc., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(i) to Post-Effective Amendment No. 25.
(j) Sub-Advisory Agreement between Fidelity Management & Research Co.,
on behalf of Fidelity Advisor Growth Opportunities Fund, and Fidelity
Management & Research (U.K.) Inc., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(j) to Post-Effective Amendment No. 25.
(k) Amended Sub-Advisory Agreement between Fidelity Management &
Research Co., on behalf of Fidelity Advisor High Yield Fund, and Fidelity
Management & Research (U.K.) Inc., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(k) to Post-Effective Amendment No. 25.
(l) Sub-Advisory Agreement between Fidelity Management & Research Co.,
on behalf of Fidelity Advisor Income & Growth Fund, and Fidelity Management
& Research (U.K.) Inc., dated January 1, 1995, was electronically filed and
is incorporated herein by reference to Exhibit 5(l) to Post-Effective
Amendment No. 25.
(m) Sub-Advisory Agreement between Fidelity Management & Research Co.,
on behalf of Fidelity Advisor Short Fixed-Income Fund, and Fidelity
Management & Research (U.K.) Inc., dated January 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
5(m) to Post-Effective Amendment No. 25.
(6) General Distribution Agreement between:
(a) Plymouth Government Securities Portfolio and Fidelity Distributors
Corporation, dated April 1, 1987 (amending in its entirety the Distribution
Agreement dated January 2, 1987), was electronically filed and is
incorporated herein by reference to Exhibit 6(a) to Post-Effective
Amendment No. 27.
(b) Plymouth Aggressive Income Portfolio and Fidelity Distributors
Corporation, dated April 1, 1987 (amending in its entirety the Distribution
Agreement dated January 1, 1987) was electronically filed and is
incorporated herein by reference to Exhibit 6(b) to Post-Effective
Amendment No. 27.
(c) Plymouth Income & Growth Portfolio and Fidelity Distributors
Corporation, dated April 1, 1987 (amending in its entirety the Distribution
Agreement dated January 1, 1987) was electronically filed and is
incorporated herein by reference to Exhibit 6(c) to Post-Effective
Amendment No. 27.
(d) Plymouth Short-Term Bond Portfolio and Fidelity Distributors
Corporation, dated September 1, 1987 was electronically filed and is
incorporated herein by reference to Exhibit 6(d) to Post-Effective
Amendment No. 27.
(e) Plymouth Growth Opportunities Portfolio and Fidelity Distributors
Corporation dated November 1, 1987 was electronically filed and is
incorporated herein by reference to Exhibit 6(e) to Post-Effective
Amendment No. 27.
(f) An Amendment to the General Distribution Agreements, dated January
1, 1988, for each of the Plymouth Fund Portfolios, was electronically filed
and is incorporated herein by reference to Exhibit 6(f) to Post-Effective
Amendment No. 27.
(g) Amendments to the General Distribution Agreement between Fidelity
Advisor Series II on behalf of Fidelity Advisor Government Investment Fund
and Fidelity Distributors Corporation, dated March 14, 1996 and July 15,
1996, are incorporated herein by reference to Exhibit 6(a) of Fidelity
Court Street Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
(h) Amendments to the General Distribution Agreement between Fidelity
Advisor Series II on behalf of Fidelity Advisor High Yield Fund and
Fidelity Distributors Corporation, dated March 14, 1996 and July 15, 1996,
are incorporated herein by reference to Exhibit 6(a) of Fidelity Court
Street Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
(i) Amendments to the General Distribution Agreement between Fidelity
Advisor Series II on behalf of Fidelity Advisor Income & Growth Fund and
Fidelity Distributors Corporation, dated March 14, 1996 and July 15, 1996,
are incorporated herein by reference to Exhibit 6(a) of Fidelity Court
Street Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
(j) Amendments to the General Distribution Agreement between Fidelity
Advisor Series II on behalf of Fidelity Advisor Short Fixed-Income Fund and
Fidelity Distributors Corporation, dated March 14, 1996 and July 15, 1996,
are incorporated herein by reference to Exhibit 6(a) of Fidelity Court
Street Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
(k) Amendments to the General Distribution Agreement between Fidelity
Advisor Series II on behalf of Fidelity Advisor Growth Opportunities Fund
and Fidelity Distributors Corporation, dated March 14, 1996 and July 15,
1996, are incorporated herein by reference to Exhibit 6(b) of Fidelity
Court Street Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
(l) Form of Bank Agency Agreement (most recently revised August, 1996)
was electronically filed and is incorporated herein by reference to Exhibit
6(l) to Post-Effective Amendment No. 34.
(m) Form of Selling Dealer Agreement (most recently revised July, 1996)
was electronically filed and is incorporated herein by reference to Exhibit
6(m) to Post-Effective Amendment No. 34.
(n) Form of Selling Dealer Agreement for Bank Related Transactions (most
recently revised August, 1996) was electronically filed and is incorporated
herein by reference to Exhibit 6(n) to Post-Effective Amendment No. 34.
(7) (a) Retirement Plan for Non Interested Person Trustees, Directors or
General Partners, as amended on November 16, 1995 was electronically filed
and is incorporated herein by reference to Exhibit 7(a) to Fidelity Select
Portfolio's (File No. 2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of December 1, 1995 was
electronically filed and is incorporated herein by reference to Exhibit
7(b) to Fidelity School Street Trust's (File No. 2-57167) Post-Effective
Amendment No. 47.
(8) (a) Custodian Agreement and Appendix C, dated September 1, 1994,
between Brown Brothers Harriman & Company and Fidelity Advisor Series II on
behalf of Fidelity Advisor Growth Opportunities Fund is incorporated herein
by reference to Exhibit 8(a) of Fidelity Commonwealth Trust's
Post-Effective Amendment No. 56 (File No. 2-52322).
(b) Appendix A, dated January 18, 1996, to the Custodian Agreement,
dated September 1, 1994, between Brown Brothers Harriman & Company and
Fidelity Advisor Series II on behalf of Fidelity Advisor Growth
Opportunities Fund is incorporated herein by reference to Exhibit 8(d) of
Fidelity Investment Trust's Post-Effective Amendment No. 65 (File No.
2-90649).
(c) Appendix B, dated May 16, 1996, to the Custodian Agreement, dated
September 1, 1994, between Brown Brothers Harriman & Company and Fidelity
Advisor Series II on behalf of Fidelity Advisor Growth Opportunities Fund
is incorporated herein by reference to Exhibit 8(e) of Fidelity Securities
Fund's Post-Effective Amendment No. 35 (File No. 2-93601).
(d) Custodian Agreement and Appendix C, dated December 1, 1994, between
The Bank of New York and Fidelity Advisor Series II on behalf of Fidelity
Advisor Government Investment Fund, Advisor High Yield Fund and Fidelity
Advisor Short Fixed-Income Fund is incorporated herein by reference to
Exhibit 8(a) of Fidelity Hereford Street Trust's Post-Effective Amendment
No. 4 (File No. 33-52577).
(e) Appendix A, dated August 31, 1996, to the Custodian Agreement, dated
December 1, 1994, between The Bank of New York and Fidelity Advisor
Series II on behalf of Fidelity Advisor Government Investment Fund,
Fidelity Advisor High Yield Fund and Fidelity Advisor Short Fixed-Income
Fund is incorporated herein by reference to Exhibit 8(b) of Daily Money
Fund's Post-Effective Amendment No. 40 (File No. 2-77909).
(f) Appendix B, dated July 31, 1996, to the Custodian Agreement, dated
December 1, 1994, between The Bank of New York and Fidelity Advisor Series
II on behalf of Fidelity Advisor Government Investment Fund, Fidelity
Advisor High Yield Fund and Fidelity Advisor Short Fixed-Income Fund is
incorporated herein by reference to Exhibit 8(c) of Fidelity Income Fund's
Post-Effective Amendment No. 35 (File No. 2-92661).
(g) Custodian Agreement and Appendix C, dated August 1, 1994, between
The Chase Manhattan Bank, N.A. and Fidelity Advisor Series II on behalf of
Fidelity Advisor Income & Growth Fund is incorporated herein by reference
to Exhibit 8(a) of Fidelity Investment Trust's Post-Effective Amendment No.
59 (File No. 2-90649).
(h) Appendix A, dated October 17, 1996, to the Custodian Agreement dated
August 1, 1994, between The Chase Manhattan Bank, N.A. and Fidelity Advisor
Series II on behalf of Fidelity Advisor Income & Growth Fund is
incorporated herein by reference to Exhibit 8(c) of Fidelity Charles Street
Trust's Post-Effective Amendment No. 57(File No. 2-73133).
(i) Appendix B, dated July 18, 1996, to the Custodian Agreement, dated
August 1, 1994, between The Chase Manhattan Bank, N.A. and Fidelity Advisor
Series II on behalf of Fidelity Advisor Income & Growth Fund is
incorporated herein by reference to Exhibit 8(b) of Fidelity Securities
Fund's Post-Effective Amendment No. 35 (File No. 2-93601).
(j) Fidelity Group Repo Custodian Agreement among The Bank of New York,
J. P. Morgan Securities, Inc., and the Registrant, dated February 12, 1996,
is incorporated herein by reference to Exhibit 8(d) to Fidelity
Institutional Cash Portfolios' (File No. 2-74708) Post-Effective Amendment
No. 31.
(k) Schedule 1 to the Fidelity Group Repo Custodian Agreement between
The Bank of New York, J. P. Morgan Securities, Inc., and the Registrant,
dated February 12, 1996, is incorporated herein by reference to Exhibit
8(e) of Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.
(l) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and the Registrant, dated November 13,
1995, is incorporated herein by reference to Exhibit 8(f) to Fidelity
Institutional Cash Portfolios'(File No. 2-74808) Post-Effective Amendment
No. 31.
(m) Schedule 1 to the Fidelity Group Repo Custodian Agreement between
Chemical Bank and the Registrant, dated November 13, 1995, is incorporated
herein by reference to Exhibit 8(g) of Fidelity Institutional Cash
Portfolios'(File No. 2-74808) Post-Effective Amendment No. 31.
(n) Joint Trading Account Custody Agreement between the The Bank of New
York and the Registrant, dated May 11, 1995, is incorporated herein by
reference to Exhibit 8(h) to Fidelity Institutional Cash Portfolios'(File
No. 2-74808) Post-Effective Amendment No. 31
(o) First Amendment to Joint Trading Account Custody Agreement between
the The Bank of New York and the Registrant, dated July 14, 1995, is
incorporated herein by reference to Exhibit 8(i) of Fidelity Institutional
Cash Portfolios'(File No. 2-74808) Post-Effective Amendment No. 31.
(9) Not applicable.
(10) Not applicable.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) (a) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(d) of Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(b) Plymouth Investments Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, was electronically filed and is
incorporated herein by reference to Exhibit 14(o) of Fidelity's
Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No. 57.
(c) The Institutional Prototype Plan Basic Plan Document, Standardized
Adoption Agreement, as currently in effect, was electronically filed and is
incorporated herein by reference to Exhibit 14(o) of Fidelity's Securities
Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(d) Fidelity Advisor Funds Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, were
electronically filed and are incorporated herein by reference to Exhibit
14(b) of Fidelity Advisor Series V Trust's (File No. 33-9148)
Post-Effective Amendment No. 20.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Advisor Government Investment Fund: Class T (formerly Class A)
Shares was electronically filed and is incorporated herein by reference to
Exhibit 15(a) to Post-Effective Amendment No. 25.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Government Investment Fund: Class B Shares was electronically filed
and is incorporated herein by reference to Exhibit 15(b) to Post-Effective
Amendment No. 25.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Growth Opportunities Fund: Class T (formerly Class A) Shares was
electronically filed and is incorporated herein by reference to Exhibit
15(c) to Post-Effective Amendment No. 25.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Yield Fund: Class T (formerly Class A) Shares was
electronically filed and is incorporated herein by reference to Exhibit
15(d) to Post-Effective Amendment No. 25.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Yield Fund: Class B Shares was electronically filed and is
incorporated herein by reference to Exhibit 15(e) to Post-Effective
Amendment No. 25.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Income & Growth Fund: Class T (formerly Class A) Shares was
electronically filed and is incorporated herein by reference to Exhibit
15(f) to Post-Effective Amendment No. 25.
(g) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Short Fixed-Income Fund: Class T (formerly Class A) Shares was
electronically filed and is incorporated herein by reference to Exhibit
15(g) to Post-Effective Amendment No. 30.
(h) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Government Investment Fund: Institutional Class was electronically
filed and is incorporated herein by reference to Exhibit 15(h) to
Post-Effective Amendment No. 27.
(i) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Growth Opportunities Fund: Institutional Class was electronically
filed and is incorporated herein by reference to Exhibit 15(i) to
Post-Effective Amendment No. 27.
(j) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Yield Fund: Institutional Class was electronically filed and
is incorporated herein by reference to Exhibit 15(j) to Post-Effective
Amendment No. 27.
(k) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Income & Growth Fund: Institutional Class was electronically filed
and is incorporated herein by reference to Exhibit 15(k) to Post-Effective
Amendment No. 27.
(l) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Short Fixed-Income Fund: Institutional Class was electronically
filed and is incorporated herein by reference to Exhibit 15(l) to
Post-Effective Amendment No. 27.
(m) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Government Investment Fund: Class A Shares was electronically filed
and is incorporated herein by reference to Exhibit 15(m) to Post-Effective
Amendment No. 32.
(n) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Growth Opportunities Fund: Class A Shares was electronically filed
and is incorporated herein by reference to Exhibit 15(n) to Post-Effective
Amendment No. 32.
(o) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor High Yield Fund: Class A Shares was electronically filed and is
incorporated herein by reference to Exhibit 15(o) to Post-Effective
Amendment No. 32.
(p) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Income & Growth Fund: Class A Shares was electronically filed and
is incorporated herein by reference to Exhibit 15(p) to Post-Effective
Amendment No. 32.
(q) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Short Fixed-Income Fund: Class A Shares was electronically filed
and is incorporated herein by reference to Exhibit 15(q) to Post-Effective
Amendment No. 32.
(r) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Income & Growth Fund: Class B was electronically filed and is
incorporated herein by reference to Exhibit 15(r) to Post-Effective
Amendment No. 34.
(s) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Growth Opportunites Fund: Class B will be filed by subsequent
amendment.
(16) Schedule for computation of cumulative total returns, average
annual returns, 30-day yield, tax-equivalent yield, and adjusted net asset
value was electronically filed and is incorporated herein by reference to
Exhibit 16 to Post-Effective Amendment No. 27.
(17) Financial Data Schedules for Fidelity Advisor Balanced Fund,
Fidelity Advisor Government Investment Fund, Fidelity Advisor Growth
Opportunities Fund, Fidelity Advisor High Yield Fund, and Fidelity Advisor
Short Fixed-Income Fund will be filed by subsequent amendment.
(18) Rule 18f-3 Plan, dated August 1, 1996, was electronically filed
and is incorporated herein by reference to Exhibit 18 to Post-Effective
Amendment No. 31.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of Registrant is the same as the boards of other
funds advised by FMR, each of which has Fidelity Management & Research
Company as its investment adviser. In addition, the officers of these funds
are substantially identical. Nonetheless, Registrant takes the position
that it is not under common control with these other funds since the power
residing in the respective boards and officers arises as the result of an
official position with the respective funds.
Item 26. Number of Holders of Securities
October 31, 1996
Title of Class Number of Record Holders
Fidelity Advisor Government Investment Fund - Class A 15
Fidelity Advisor Government Investment Fund - Class T 11,382
Fidelity Advisor Government Investment Fund - Class B 1,166
Fidelity Advisor Government Investment Fund - Institutional Class 289
Fidelity Advisor High Yield Fund - Class A 188
Fidelity Advisor High Yield Fund - Class T 25,477
Fidelity Advisor High Yield Fund - Class B 8,254
Fidelity Advisor High Yield Fund - Institutional Class 406
Fidelity Advisor Balanced Fund - Class A 61
Fidelity Advisor Balanced Fund - Class T 54,664
Fidelity Advisor Balanced Fund - Class B 0
Fidelity Advisor Balanced Fund - Institutional Class 97
Fidelity Advisor Short Fixed-Income Fund - Class A 23
Fidelity Advisor Short Fixed-Income Fund - Class T 16,539
Fidelity Advisor Short Fixed-Income Fund - Institutional Class 109
Fidelity Advisor Growth Opportunities Fund - Class A 601
Fidelity Advisor Growth Opportunities Fund - Class T 136,667
Fidelity Advisor Growth Opportunities Fund - Class B 0
Fidelity Advisor Growth Opportunities Fund - Institutional Class 1,410
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit, or
proceeding in which he is involved by virtue of his service as a Trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the
obligations and duties under the Distribution Agreement.
Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company ("FIIOC") is appointed transfer agent, the Registrant
agrees to indemnify and hold FIIOC harmless against any losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, including by a shareholder, which names FIIOC and/or the
Registrant as a party and is not based on and does not result from FIIOC's
willful misfeasance, bad faith or negligence or reckless disregard of
duties, and arises out of or in connection with FIIOC's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by FIIOC's willful misfeasance, bad faith or negligence or reckless
disregard of duties) which results from the negligence of the Registrant,
or from FIIOC's acting upon any instruction(s) reasonably believed by it to
have been executed or communicated by any person duly authorized by the
Registrant, or as a result of FIIOC's acting in reliance upon advice
reasonably believed by FIIOC to have been given by counsel for the
Registrant, or as a result of FIIOC's acting in reliance upon any
instrument or stock certificate reasonably believed by it to have been
genuine and signed, countersigned or executed by the proper person.
Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company ("FIIOC") is appointed sub-transfer agent, the Transfer
Agent agrees to indemnify FIIOC for FIIOC's losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and expenses)
(losses) to the extent that the Transfer Agent is entitled to and receives
indemnification from the Portfolio for the same events. Under the Transfer
Agency Agreement, the Registrant agrees to indemnify and hold the Transfer
Agent harmless against any losses, claims, damages, liabilities, or
expenses (including reasonable counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, including by a shareholder which names the Transfer Agent
and/or the Registrant as a party and is not based on and does not result
from the Transfer Agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with the
Transfer Agent's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR;
President and Chief Executive Officer of FMR Corp.;
Chairman of the Board and Director of FMR, FMR
Corp., FMR Texas Inc., FMR (U.K.) Inc., and FMR
(Far East) Inc.; Chairman of the Board and
Representative Director of Fidelity Investments Japan
Limited; President and Trustee of funds advised by
FMR.
J. Gary Burkhead President and Director of FMR, FMR Texas Inc., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Managing
Director of FMR Corp.; Senior Vice President and
Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
Dwight D. Churchill Vice President of FMR.
John D. Crumrine Assistant Treasurer of FMR, FMR (U.K.) Inc., FMR
(Far East) Inc., and FMR Texas Inc.; Vice President
and Treasurer of FMR Corp.
William Danoff Vice President of FMR and of a fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Craig P. Dinsell Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
George C. Domolky Vice President of FMR.
Larry A. Domash Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and a fund advised by FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of
FMR Texas Inc.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Vice President of FMR.
Bart Grenier Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
William J. Hayes Senior Vice President of FMR; Vice President of
Equity funds advised by FMR.
Richard Hazlewood Vice President of FMR and of a fund advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR; Vice President of
Fixed-Income funds advised by FMR.
John R. Hickling Vice President of FMR and of a fund advised by FMR.
Robert F. Hill Vice President of FMR; Director of Technical
Research.
Curt Hollingsworth Vice President of FMR and of funds advised by FMR.
Abigail P. Johnson Vice President of FMR and of a fund advised by FMR.
Stephen P. Jonas Vice President of FMR; Treasurer of FMR, FMR
(U.K.) Inc., FMR (Far East) Inc., and FMR Texas Inc.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
(U.K.) Inc.
David P. Kurrasch Vice President of FMR.
Robert A. Lawrence Senior Vice President of FMR; Vice President of High
Income funds advised by FMR.
Alan Leifer Vice President of FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Arthur S. Loring Senior Vice President, Clerk, and General Counsel of
FMR; Vice President/Legal, and Assistant Clerk of
FMR Corp.; Secretary of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Malcolm W. MacNaught II Vice President of FMR and of a fund advised by FMR.
Robert H. Morrison Vice President of FMR; Director of Equity Trading.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Andrew S. Offit Vice President of FMR and of a fund advised by FMR.
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR.
Kenneth A. Rathgeber Vice President of FMR; Treasurer of funds advised by
FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Vice President of FMR; Senior Vice President and
Director of Operations and Compliance of FMR (U.K.)
Inc.
Robert E. Stansky Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR; Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of a fund advised by FMR.
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
Pembroke Hall, 42 Crow Lane, Pembroke, Bermuda
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR U.K.,
FMR, FMR Corp., FMR Texas Inc., and FMR (Far
East) Inc.; Chairman of the Executive Committee of
FMR; President and Chief Executive Officer of FMR
Corp.; Chairman of the Board and Representative
Director of Fidelity Investments Japan Limited;
President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K., FMR, FMR (Far
East) Inc., and FMR Texas Inc.; Managing Director of
FMR Corp.; Senior Vice President and Trustee of
funds advised by FMR.
Richard Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K.; Vice President of FMR.
Stephen P. Jonas Treasurer of FMR U.K., FMR, FMR (Far East) Inc.,
and FMR Texas Inc.; Vice President of FMR.
John D. Crumrine Assistant Treasurer of FMR U.K., FMR, FMR (Far
East) Inc., and FMR Texas Inc.; Vice President and
Treasurer of FMR Corp.
Francis V. Knox Compliance Officer of FMR U.K.; Vice President of
FMR.
Jay Freedman Clerk of FMR U.K., FMR (Far East) Inc., and FMR
Corp.; Assistant Clerk of FMR; Secretary of FMR
Texas Inc.
(3) FIDELITY MANAGEMENT & RESEARCH COMPANY (FAR EAST) INC. (FMR FAR EAST)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105, Japan
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The directors
and officers of the Sub-Adviser have held the following positions of a
substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR Far
East, FMR, FMR Corp., FMR Texas Inc., and
FMR (U.K.) Inc.; Chairman of the Executive
Committee of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of
the Board and Representative Director of
Fidelity Investments Japan Limited; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East, FMR
Texas Inc., FMR, and FMR (U.K.) Inc.;
Managing Director of FMR Corp.; Senior Vice
President and Trustee of funds advised by FMR.
William R. Ebsworth Vice President of FMR Far East; Director of
FIIA.
Bill Wilder Vice President of FMR Far East; President and
Representative Director of Fidelity Investments
Japan Limited.
Stephen P. Jonas Treasurer of FMR Far East, FMR, FMR (U.K.)
Inc., and FMR Texas Inc.; Vice President of
FMR.
John D. Crumrine Assistant Treasurer of FMR Far East, FMR,
FMR (U.K.) Inc., and FMR Texas Inc.; Vice
President and Treasurer of FMR Corp.
Jay Freedman Clerk of FMR Far East, FMR (U.K.) Inc., and
FMR Corp.; Assistant Clerk of FMR; Secretary
of FMR Texas Inc.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
Mark Peterson Director None
Neal Litvack President None
Arthur S. Loring Vice President and Clerk Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' respective
custodian: The Bank of New York, 110 Washington Street, New York, N.Y.,
The Chase Manhattan Bank, 1211 Avenue of the Americas, New York, N.Y., and
Brown Brothers Harriman & Co., 40 Water Street, Boston, MA.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of Fidelity Advisor Government Investment Fund,
Fidelity Advisor Growth Opportunities Fund, Fidelity Advisor High Yield
Fund, Fidelity Advisor Balanced Fund, and Fidelity Advisor Short
Fixed-Income Fund, provided the information required by Item 5A is
contained in the annual report, undertakes to furnish to each person to
whom a prospectus has been delivered, upon their request and without
charge, a copy of the Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 35 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and the Commonwealth of Massachusetts, on the 16th day of December
1996.
FIDELITY ADVISOR SERIES II
By /s/Edward C. Johnson 3d
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
/s/Edward C. Johnson 3d President and Trustee December 16, 1996
Edward C. Johnson 3d (Principal Executive Officer)
/s/Kenneth A. Rathgeber *** Treasurer December 16, 1996
Kenneth A. Rathgeber
/s/J. Gary Burkhead * Trustee December 16, 1996
J. Gary Burkhead
/s/Ralph F. Cox * Trustee December 16, 1996
Ralph F. Cox
/s/Phyllis Burke Davis ** Trustee December 16, 1996
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee December 16, 1996
Richard J. Flynn
/s/E. Bradley Jones ** Trustee December 16, 1996
E. Bradley Jones
/s/Donald J. Kirk * Trustee December 16, 1996
Donald J. Kirk
/s/Peter S. Lynch ** Trustee December 16, 1996
Peter S. Lynch
/s/Edward H. Malone * Trustee December 16, 1996
Edward H. Malone
/s/Marvin L. Mann * Trustee December 16, 1996
Marvin L. Mann
/s/Gerald C. McDonough* Trustee December 16, 1996
Gerald C. McDonough
/s/Thomas R. Williams * Trustee December 16, 1996
Thomas R. Williams
* Signatures affixed by Robert C. Hacker pursuant to a power of attorney
dated October 17, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
*** Signature affixed by John H. Costello pursuant to a power of attorney
dated October 17, 1996 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Djinis, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity Boston Street Trust Fidelity School Street Trust
Fidelity California Municipal Trust Fidelity Securities Fund
Fidelity Capital Trust Fidelity Select Portfolios
Fidelity Charles Street Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Commonwealth Trust Fidelity Summer Street Trust
Fidelity Congress Street Fund Fidelity Trend Fund
Fidelity Contrafund Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Corporate Trust Fidelity U.S. Investments-Government Securities
Fidelity Court Street Trust Fund, L.P.
Fidelity Covington Trust Fidelity Union Street Trust
Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P.
Portfolio, L.P. Variable Insurance Products Fund
Fidelity Devonshire Trust Variable Insurance Products Fund II
Fidelity Exchange Fund
Fidelity Financial Trust
Fidelity Fixed-Income Trust
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliate acts as investment adviser and for which the
undersigned individuals serve as Directors, Trustees, or General Partners
(collectively, the "Funds"), hereby severally constitute and appoint Arthur
J. Brown, Arthur C. Delibert, Stephanie A. Djinis, Robert C. Hacker, Thomas
M. Leahey, Richard M. Phillips and Dana L. Platt, each of them singly, our
true and lawful attorneys-in-fact, with full power of substitution, and
with full power to each of them, to sign for us and in our names in the
appropriate capacities, all Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said
Registration Statements on Form N-1A or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this seventeenth day of October, 1996.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead ____________________
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
Ralph F. Cox Gerald C. McDonough
___________________ /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
Richard J. Flynn Marvin L. Mann
___________________ /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
POWER OF ATTORNEY
I, the undersigned Treasurer and principal financial and accounting
officer of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series V Fidelity Municipal Trust
Fidelity Advisor Series VI Fidelity New York Municipal Trust
Fidelity Advisor Series VII Fidelity Puritan Trust
Fidelity Advisor Series VIII Fidelity School Street Trust
Fidelity Boston Street Trust Fidelity Securities Fund
Fidelity California Municipal Trust Fidelity Select Portfolios
Fidelity Capital Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Charles Street Trust Fidelity Summer Street Trust
Fidelity Commonwealth Trust Fidelity Trend Fund
Fidelity Congress Street Fund Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Corporate Trust Fund, L.P.
Fidelity Court Street Trust Fidelity Union Street Trust
Fidelity Covington Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Destiny Portfolios Variable Insurance Products Fund
Fidelity Deutsche Mark Performance Variable Insurance Products Fund II
Portfolio, L.P.
Fidelity Devonshire Trust
Fidelity Exchange Fund
Fidelity Financial Trust
Fidelity Fixed-Income Trust
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company or an affiliate acts as investment adviser and for which the
undersigned individuals serve as Treasurer and principal financial and
accounting officer (collectively, the "Funds"), hereby severally constitute
and appoint John H. Costello and John E. Ferris each of them singly, my
true and lawful attorneys-in-fact, with full power of substitution, and
with full power to each of them to sign for me and in my name in the
appropriate capacity, all Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said
Registration Statements on Form N-1A or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Kenneth A. Rathgeber October 17, 1996
Kenneth A. Rathgeber
