SPARTAN(registered trademark)
INDEX
FUNDS
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 funds' Statement of Additional Information (SAI) dated
September 6, 1997 (revised October 24, 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 call
Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SIF-pro-0997-02
Each fund seeks a total return that corresponds to that of a specific
index.
SPARTAN TOTAL MARKET INDEX FUND seeks a total return that corresponds
to that of the Wilshire 5000 Equity Index (Wilshire 5000).
(fund number 397)
SPARTAN EXTENDED MARKET INDEX FUND seeks a total return that
corresponds to that of the Wilshire 4500 Equity Index (Wilshire 4500).
(fund number 398)
SPARTAN INTERNATIONAL INDEX FUND seeks a total return that corresponds
to that of the Morgan Stanley Capital International Europe,
Australasia, Far-East (EAFE(registered trademark)) Index.
(fund number 399)
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109SEPTEMBER 6, 1997
REVISED OCTOBER 24, 1997
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly operating
expenses.
PERFORMANCE
THE FUNDS IN DETAIL CHARTER How each fund is organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and what
they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different ways to
set up your account, including
tax-sheltered retirement plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money out
and closing your account.
INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
APPENDIX
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946
and is now America's largest mutual fund manager. Bankers Trust
Company (BT) is a wholly-owned subsidiary of Bankers Trust New York
Corporation, the seventh largest bank holding company in the United
States. BT currently serves as sub-adviser to each fund and manages
each Fund's portfolio.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
SPARTAN TOTAL MARKET INDEX
GOAL: Total return that corresponds to that of the Wilshire 5000
Equity Index.
STRATEGY: Invests in equity securities included in the Wilshire 5000.
SPARTAN EXTENDED MARKET INDEX
GOAL: Total return that corresponds to that of the Wilshire 4500
Equity Index.
STRATEGY: Invests in equity securities included in the Wilshire 4500.
SPARTAN INTERNATIONAL INDEX
GOAL: Total return that corresponds to that of the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE) Index.
STRATEGY: Invests in international equity securities included in the
EAFE.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who are willing to ride
out stock market fluctuations in pursuit of potentially high long-term
returns. The funds are designed for those who want to pursue growth of
capital through portfolios of securities that broadly represent a
specific market or markets. Spartan Total Market Index attempts to
replicate the broad U.S. market by investing in securities of
companies in the Wilshire 5000. Spartan Extended Market Index attempts
to replicate the small- to mid-capitalization market by investing in
securities of companies in the Wilshire 4500. Spartan International
Index attempts to replicate the international markets by investing in
securities of companies in the EAFE. The funds seek to keep expenses
low as they attempt to match the return of their indices.
Because the funds seek to track, rather than beat, the performance of
a specific market index, they are not managed in the same way as other
mutual funds. BT's approach to investing emphasizes broad
diversification and low portfolio turnover. BT generally will not
judge the merits of any particular stock as an investment. Therefore,
you should not expect to achieve the potentially greater results that
could be obtained by funds that aggressively seek growth or funds that
attempt to limit losses in a falling market.
The value of the funds' investments will vary from day to day, and
generally reflect market conditions, interest rates, and other
company, political, or economic news both here and abroad. In the
short term, stock prices can fluctuate dramatically in response to
these factors. The securities of small, less well-known companies may
be more volatile than those of larger companies. Over time, however,
stocks have shown greater growth potential than other types of
securities. Investments in foreign securities may involve risks in
addition to those of U.S. investments, including increased political
and economic risk, as well as exposure to currency fluctuations. When
you sell your shares, they may be worth more or less than what you
paid for them. By themselves, the funds do not constitute a balanced
investment plan.
THE SPECTRUM OF
FIDELITY FUNDS
BROAD CATEGORIES OF FIDELITY
FUNDS ARE PRESENTED HERE IN
ORDER OF ASCENDING RISK.
GENERALLY, INVESTORS SEEKING TO
MAXIMIZE RETURN MUST ASSUME
GREATER RISK. THE FUNDS IN THIS
PROSPECTUS ARE IN THE GROWTH
CATEGORY.
(SOLID BULLET) MONEY MARKET SEEKS
INCOME AND STABILITY BY
INVESTING IN HIGH-QUALITY,
SHORT-TERM INVESTMENTS.
(SOLID BULLET) INCOME SEEKS INCOME BY
INVESTING IN BONDS.
(SOLID BULLET) GROWTH AND INCOME SEEKS
LONG-TERM GROWTH AND INCOME
BY INVESTING IN STOCKS AND
BONDS.
(RIGHT ARROW) GROWTH SEEKS LONG-TERM
GROWTH BY INVESTING MAINLY IN
STOCKS.
(CHECKMARK)
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
index account fee if your account balance falls below $ 10,000 .
See "Transaction Details," page , for an explanation of how and when
these charges apply.
Maximum sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Exchange fee None
Redemption fee None
Purchase fee (as a % of the offering price)
Spartan Total Market Index 0.50%
Spartan Extended Market Index 0.75%
Spartan International Index 1.00%
Annual index account fee (for accounts $10.00
under $10,000)
The purchase fee is paid to the fund, not Fidelity or BT, and is not a
sales charge.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays management fees to FMR and BT. It also incurs other
expenses for services such as maintaining shareholder records and
furnishing shareholder statements and financial reports. A fund's
expenses are factored into its share price or dividends and are not
charged directly to shareholder accounts (see "Breakdown of Expenses"
page ).
The following figures are based on estimated expenses of each fund and
are calculated as a percentage of average net assets of each fund.
SPARTAN TOTAL MARKET INDEX
Management fee 0.25%
12b-1 fee None
Other expenses (after reimbursement) 0.01%
Total fund operating expenses 0.26%
(after reimbursement)
SPARTAN EXTENDED MARKET INDEX
Management fee 0.25%
12b-1 fee None
Other expenses (after reimbursement) 0.01%
Total fund operating expenses 0.26%
(after reimbursement)
SPARTAN INTERNATIONAL INDEX
Management fee 0.40%
12b-1 fee None
Other expenses (after reimbursement) 0.01%
Total fund operating expenses 0.41%
(after reimbursement)
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
As an investor, you pay some
of these costs directly (for
example, each fund's index
account fee). Other costs are
paid from the fund's assets;
their effect is already factored
into any quoted share price or
return.
(checkmark)
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that its operating expenses are exactly as just described. For
every $1,000 you invested, here's how much you would pay in total
expenses if you close your account after the number of years
indicated:
SPARTAN TOTAL MARKET INDEX
After 1 year $ 8
After 3 years $ 13
SPARTAN EXTENDED MARKET INDEX
After 1 year $ 10
After 3 years $ 16
SPARTAN INTERNATIONAL INDEX
After 1 year $ 14
After 3 years $ 23
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 Spartan Total Market Index,
Spartan Extended Market Index, and Spartan International Index, to the
extent that total operating expenses (with the exceptions noted below)
exceed 0.25%, 0.25% and 0.35%, respectively, of its average net assets
through December 31, 1999. If these agreements were not in effect, the
management fee, other expenses and total operating expenses, as a
percentage of average net assets of each fund, based on estimated
expenses, would be the following amounts: 0.25%, 0.35% and 0.60% for
Spartan Total Market Index; 0.25%, 0.37% and 0.62% for Spartan
Extended Market Index; and 0.40%, 0.38%, and 0.78% for Spartan
International Index. Expenses eligible for reimbursement do not
include interest, taxes, brokerage commissions and other transaction
costs, or extraordinary expenses. In addition, sub-advisory fees paid
by the fund associated with securities lending are not eligible for
reimbursement.
PERFORMANCE
Mutual fund performance is commonly measured as total return. This
section would normally show how each fund has performed over time.
Because each fund was new when this prospectus was printed, their
performance is not included. Twice a year, you will receive a report
detailing each fund's recent strategies, performance, and holdings.
For current performance call 1-800-544-8888.
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.
UNDERSTANDING
PERFORMANCE
Because these funds invest in
stocks, their performance is
related to that of the segments
of the stock market in which
they invest. Historically, stock
market performance has been
characterized by volatility in
the short run and growth in the
long run. Investing in foreign
markets means assuming
greater risks than investing in
the United States due to factors
like changes in a country's
financial markets, its local,
political, and economic climate,
and the value of its currency.
(checkmark)
STANDARD & POOR'S 500 INDEX (S&P 500(registered trademark)) is a
widely recognized, unmanaged index of common stocks.
WILSHIRE 5000 is an unmanaged, market capitalization-weighted index of
approximately 7,000 U.S. equity securities.
WILSHIRE 4500 is an unmanaged, market capitalization-weighted index of
approximately 6,500 U.S. equity securities. The Wilshire 4500 includes
all the stocks in the Wilshire 5000 except for stocks included in the
S&P 500.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST
(EAFE) INDEX is an unmanaged index of over 1,000 foreign equity
securities.
The charts on the following page present calendar year performance of
the Wilshire 5000, Wilshire 4500, and the MSCI EAFE. The charts
illustrate the volatility of the returns of the Wilshire 5000,
Wilshire 4500 and the EAFE. The charts measure total return based on
the period's change in price, dividends paid on stocks in the index,
and for the MSCI EAFE Index, the effect of reinvesting dividends after
adjustments for dividend withholdings by foreign governments or tax
credits.
Unlike each fund's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
Illustrations of fund performance may show moving averages over
specified periods.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
MSCI EAFE 24.63% 28.27% 10.53% -23.45% 12.13% -12.17% 32.56% 7.78%
11.21% 6.05%
Percentage (%)
Row: 1, Col: 1, Value: 24.63
Row: 2, Col: 1, Value: 28.27
Row: 3, Col: 1, Value: 10.53
Row: 4, Col: 1, Value: -23.45
Row: 5, Col: 1, Value: 12.13
Row: 6, Col: 1, Value: -12.17
Row: 7, Col: 1, Value: 32.56
Row: 8, Col: 1, Value: 7.78
Row: 9, Col: 1, Value: 11.21
Row: 10, Col: 1, Value: 6.05
MSCI EAFE
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Wilshire 4500 -3.51% 20.54 23.94% -13.56% 43.45% 11.87% 14.57% -2.66%
33.48% 17.18%
Percentage (%)
Row: 1, Col: 1, Value: -3.51
Row: 2, Col: 1, Value: 20.54
Row: 3, Col: 1, Value: 23.94
Row: 4, Col: 1, Value: -13.56
Row: 5, Col: 1, Value: 43.45
Row: 6, Col: 1, Value: 11.87
Row: 7, Col: 1, Value: 14.57
Row: 8, Col: 1, Value: -2.66
Row: 9, Col: 1, Value: 33.48
Row: 10, Col: 1, Value: 17.18
Wilshire 4500
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Wilshire 5000 2.27% 17.94% 29.17% -6.18% 34.21% 8.97% 11.28% -0.06%
36.45% 21.21%
Percentage (%)
Row: 1, Col: 1, Value: 2.27
Row: 2, Col: 1, Value: 17.94
Row: 3, Col: 1, Value: 29.17
Row: 4, Col: 1, Value: -6.18
Row: 5, Col: 1, Value: 34.21
Row: 6, Col: 1, Value: 8.970000000000001
Row: 7, Col: 1, Value: 11.28
Row: 8, Col: 1, Value: -0.06000000000000001
Row: 9, Col: 1, Value: 36.45
Row: 10, Col: 1, Value: 21.21
Wilshire 5000
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Concord Street Trust, an open-end
management investment company organized as a Massachusetts business
trust on July 21, 1987.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity or BT.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which handles their business affairs.
BT, the funds' sub-adviser, chooses the funds' investments. FMR
supervises the sub-adviser and, in conjunction with the Board of
Trustees, reviews the performance of its duties.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services. Fidelity Service Company, Inc. (FSC)
performs transfer agent servicing functions for each fund.
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.
BT AND ITS AFFILIATES
BT is the sub-adviser of each fund, and acts as each fund's custodian.
BT, a New York banking corporation with principal offices at 130
Liberty Street, New York, New York 10006, is a wholly-owned subsidiary
of Bankers Trust New York Corporation.
BT, subject to the supervision and direction of the Board of Trustees
and FMR, makes investment decisions for each fund, places orders to
buy, sell and lend the funds' investments and manages each fund in
accordance with its investment objectives and policies. BT may utilize
the expertise of any of its worldwide subsidiaries and affiliates to
assist in its role as sub-adviser. BT places orders for portfolio
transactions with broker-dealers and other firms of its choosing,
which may include affiliates of BT or FMR.
BT investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
BT may use FMR and BT 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 values of the funds' domestic and foreign investments vary in
response to many factors. Stock values fluctuate in response to the
activities of individual companies, and general market and economic
conditions. 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.
Investments in small-capitalization stocks may involve greater risk
than investing in medium and large-capitalization stocks, since they
can be subject to more abrupt or erratic movements.
Small-capitalization companies may have more limited product lines,
markets or financial resources.
When you sell your shares of a fund, they may be worth more or less
than what you paid for them.
SPARTAN TOTAL MARKET INDEX FUND seeks to provide investment results
that correspond to the total return of a broad range of United States
stocks.
To achieve this objective, Spartan Total Market Index attempts to
match the total return of the Wilshire 5000. The Wilshire 5000 is a
capitalization-weighted index of approximately 7,000 common stocks of
companies headquartered in the United States.
The Wilshire 5000 comprises all stocks of companies headquartered in
the United States for which market prices are readily available. The
Wilshire 5000 includes all of the stocks in the S&P 500 except for a
small number of foreign stocks that represent approximately 4% of the
S&P 500. The domestic S&P 500 stocks account for approximately 70% of
the capitalization of the Wilshire 5000.
SPARTAN EXTENDED MARKET INDEX FUND seeks to provide investment results
that correspond to the total return of stocks of mid- to
small-capitalization United States companies.
To achieve this objective, Spartan Extended Market Index attempts to
match the total return of the Wilshire 4500. The Wilshire 4500 is a
capitalization-weighted index of over 6500 common stocks of companies
headquartered in the United States. The Wilshire 4500 includes all
stocks in the Wilshire 5000 except for the stocks included in the S&P
500. Although some of the companies in the Wilshire 4500 have large
market capitalizations, excluding the S&P 500 stocks makes the
Wilshire 4500, on average, more representative of medium- to
small-capitalization stocks.
SPARTAN INTERNATIONAL INDEX FUND seeks to provide investment results
that correspond to the total return of foreign stock markets.
To achieve this objective, Spartan International Index attempts to
match the total return of the EAFE. The EAFE is a
capitalization-weighted index that currently includes stocks of
companies located in 14 European countries (Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, the Netherlands, Norway,
Spain, Sweden, Switzerland, and the United Kingdom), Australia, New
Zealand, Hong Kong, Japan, Malaysia, and Singapore. The index returns,
for periods after January 1, 1997, are adjusted for tax withholding
rates applicable to U.S.-based mutual funds organized as Massachusetts
business trusts.
The EAFE is designed to be representative of developed countries only,
and does not include most emerging market stocks. It is also important
to note that Japan, as the largest-capitalization country outside the
U.S., currently represents approximately 30% of the EAFE and has
represented over 60% of the EAFE in the past.
EACH OF THE FUNDS invests in a mix of securities designed to match its
index's performance. Under normal conditions each fund seeks to invest
at least 80% of its assets in the stocks included in its index.
BT may use statistical sampling techniques to attempt to replicate the
returns of the indices using a smaller number of securities. These
statistical sampling techniques take into account such factors as
capitalization, industry exposures, dividend yield, price/earnings
ratio, price/book ratio, earnings growth and, for Spartan
International Index Fund, country weightings and the effect of foreign
taxes, and attempt to match the investment characteristics of the
indices and the funds.
The funds may not track their indices perfectly. Differences between
the index and a fund's portfolio may cause differences in performance.
In addition, the funds' ability to replicate their indices' returns
will depend to some extent on the size and frequency of cash flows
into and out of the funds. Transactions by fund investors may have a
greater impact on Spartan International Index because they are
effected at 4:00 p.m. Eastern time, when most foreign markets are
closed. As a result, the fund may not be able to place trades to
reflect shareholder transactions until foreign markets re-open.
Even if the funds' investments match their indices exactly, their
returns could differ on a day-to-day basis because of differences in
how the funds and the indices are valued. The funds normally value all
of their investments at 4:00 p.m. Eastern time. The indices are valued
by their sponsors, who may use different closing prices, currency
exchange rates or dividend reinvestment assumptions than the funds do.
Each fund seeks to achieve a 98% or better correlation between its
total return and the total return of its index. BT uses an indexing
technique to structure the funds' portfolios similarly to their
indices. FMR monitors correlation between the performance of the funds
and their indices on a monthly basis. Correlation is measured by
comparing the funds' monthly total returns to those of their indices
over the most recent 36-month period. In the unlikely event that a
fund cannot achieve a correlation of 98% or better, the Trustees will
consider alternative arrangements.
The funds may use various techniques, such as stock index futures, to
match the funds' performance to their indices.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies BT 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 a
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.
BT 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 1-800-544-8888.
EQUITY SECURITIES may include common stocks, preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.
RESTRICTIONS: With respect to 75% of total assets, each fund may not
purchase more than 10% of the outstanding voting securities of a
single issuer. This limitation does not apply to securities of other
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. All of these factors can make foreign
investments, especially those in developing countries, more volatile
than U.S. investments.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S.
repurchase agreements, and may be denominated in foreign currencies.
They also may involve greater risk of loss if the counterparty
defaults. Some counterparties in these transactions may be less
creditworthy than those in U.S. markets.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
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, and purchasing indexed
securities.
BT can use these practices in its efforts to track the returns of each
fund's index. If BT 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.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by BT, under the supervision of the Board of Trustees and FMR, to be
illiquid, which means that they may be difficult to sell promptly at
an acceptable price. The sale of some illiquid securities and some
other securities may be subject to legal restrictions. Difficulty in
selling securities may result in a loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
OTHER INSTRUMENTS may include securities of other investment
companies.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. The funds may also invest in similar money market funds
managed by BT or other investment managers. A major change in interest
rates or a default on a money market fund's investments could cause
its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry.
RESTRICTIONS: With respect to 75% of its total assets, each fund may
not purchase a security if, as a result, more than 5% would be
invested in the securities of any issuer. This limitation does not
apply to U.S. Government securities or to securities of other
investment companies.
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.
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. BT receives a portion of securities lending
income as a sub-advisory fee. Securities lending 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.
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.
SPARTAN TOTAL MARKET INDEX FUND seeks to provide investment results
that correspond to the total return of a broad range of United States
stocks.
SPARTAN EXTENDED MARKET INDEX FUND seeks to provide investment results
that correspond to the total return of stocks of mid-to
small-capitalization United States companies.
SPARTAN INTERNATIONAL INDEX FUND seeks to provide investment results
that correspond to the total return of foreign stock markets.
With respect to 75% of its total assets, each fund may not purchase a
security if, as a result, more than 5% would be invested in the
securities of any one issuer and may not purchase more than 10% of the
outstanding voting securities of a single issuer. These limitations do
not apply to U.S. Government securities or to securities of other
investment companies.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its
share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs. FMR and each fund pay sub-advisory fees to BT
for managing each fund's investments, administering its securities
lending program, and for custodial services. Each fund also pays OTHER
EXPENSES, which are explained on page .
FMR may, from time to time, agree to reimburse the funds 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 can decrease a fund's expenses and boost its performance.
MANAGEMENT AND SUB-ADVISORY FEES
Management and sub-advisory fees are calculated and paid every month
to FMR and BT, respectively. Spartan Total Market Index, Spartan
Extended Market Index and Spartan International Index pay fees at the
annual rates of 0.25%, 0.25% and 0.40%, respectively, of their average
net assets. These fees include management fees of 0.24%, 0.24% and
0.34%, respectively, payable to FMR, and estimated sub-advisory fees
of 0.01%, 0.01% and 0.06% payable to BT (representing 40% of net
income from securities lending).
FMR has voluntarily agreed to limit each fund's total operating
expenses (excluding sub-advisory fees associated with securities
lending, interest, taxes, brokerage commissions and other transaction
costs or extraordinary expenses) to an annual rate of 0.25%, 0.25%,
and 0.35% of average net assets for Spartan Total Market Index,
Spartan Extended Market Index and Spartan International Index,
respectively. These agreements will continue until December 31, 1999.
BT IS EACH FUND'S SUB-ADVISER under agreements with FMR and each fund.
BT is paid a sub-advisory fee for providing investment management,
securities lending and custodial services to each fund.
For investment management, securities lending and custodial services
to Spartan Total Market Index and Spartan Extended Market Index, FMR
pays BT fees at an annual rate of 0.0125% of the average net assets of
each fund. In addition, each fund pays BT fees equal to 40% of net
income from each fund's securities lending program. The remaining 60%
of net income from each fund's securities lending program goes to each
fund.
For investment management, securities lending and custodial services
to Spartan International Index, FMR pays BT fees at an annual rate of
0.0650% of the average net assets of the fund, plus fees of up to
$200,000 annually. In addition, the fund pays BT fees equal to 40% of
net income from the fund's securities lending program. The remaining
60% of net income from the fund's securities lending program goes to
the fund.
OTHER EXPENSES
While management and sub-advisory fees are a significant component of
the funds' annual operating costs, the funds have other expenses as
well.
The funds contract with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions
and valuing each fund's investments.
To offset shareholder service costs, FSC also collects each fund's
annual index account fee of $10.00 per account.
The funds also pay other expenses, such as legal and audit fees; in
some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. This 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 fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for each fund. The Board of
Trustees has authorized such payments.
The annualized portfolio turnover rate for each fund is not expected
to exceed 50% in its first fiscal period. These rates vary from year
to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax-sheltered retirement plans for individuals
investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 80 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table on page .
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the funds 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 Fidelity directly, as appropriate.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 236
(solid bullet) Assets in Fidelity mutual
funds: over $451 billion
(solid bullet) Number of shareholder
accounts: over 32 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 273
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of
legal age and under 70 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) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE
PENSION PLANS allow self-employed individuals or small business owners
(and their employees) to make tax-deductible contributions for
themselves and any eligible employees up to $30,000 per year.
(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) SIMPLE IRAS provide small business owners and those
with self-employed income (and their eligible employees) with many of
the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
most tax-exempt institutions, including schools, hospitals, and other
charitable organizations.
(solid bullet) 401(K) PROGRAMS allow employees of corporations of all
sizes to contribute a percentage of their wages on a tax-deferred
basis. These accounts need to be established by the trustee of the
plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
EVERY BUSINESS DAY, TWO SHARE PRICES ARE CALCULATED FOR EACH FUND: the
net asset value (NAV) and the offering price. Each fund's shares are
sold without a sales charge, but each fund charges a purchase fee.
Spartan Total Market Index, Spartan Extended Market Index and Spartan
International Index charge purchase fees of 0.50%, 0.75% and 1.00%,
respectively.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally
calculated at 4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by
exchange to another Fidelity fund, the payment may be delayed for up
to seven business days to ensure that your previous investment has
cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $ 15,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $ 15,000
TO ADD TO AN ACCOUNT $1,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $1,000
Through regular investment plans* $500
MINIMUM BALANCE $10,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $10,000
*FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
These minimums do not apply to assets held in employee benefit plans
(including Fidelity sponsored 403(b) arrangements but otherwise as
defined in the Employee Retirement Income Security Act of 1974,
excluding SIMPLE IRAs, SEP IRAs and The Fidelity Retirement Plan)
having more than 50 eligible employees or a minimum of $1,000,000 in
plan assets that have at least some portion of its assets invested in
mutual funds advised by FMR and which are marketed and distributed
directly to plan sponsors and participants without any assistance or
intervention from any intermediary distribution channel. In addition,
these minimums do not apply to assets held in a Fidelity Regular IRA
or Fidelity Rollover IRA purchased with the proceeds of a distribution
or transfer from an employee benefit plan as described above provided
that at the time of the distribution or transfer the employee benefit
plan satisfies the requirements described above.
These minimums may vary for investments through Fidelity Portfolio
Advisory Services. Refer to the program materials for details.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
SPARTAN TOTAL MARKET INDEX, SPARTAN EXTENDED MARKET INDEX, AND SPARTAN INTERNATIONAL INDEX
CHARGE PURCHASE FEES OF 0.50%, 0.75%, AND 1.00%, RESPECTIVELY.
PHONE 1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND (SMALL SOLID BULLET) EXCHANGE FROM
ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION, ACCOUNT WITH THE SAME REGISTRATION,
INCLUDING NAME, ADDRESS, AND INCLUDING NAME, ADDRESS, AND
TAXPAYER ID NUMBER. TAXPAYER ID NUMBER.
(SMALL SOLID BULLET) USE FIDELITY MONEY
LINE TO TRANSFER
FROM YOUR BANK ACCOUNT. CALL BEFORE
YOUR FIRST USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON YOUR ACCOUNT.
MAXIMUM MONEY LINE: UP TO
$100,000.
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MAIL
(MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND SIGN THE
APPLICATION. (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO THE
MAKE YOUR CHECK PAYABLE TO THE COMPLETE NAME OF THE FUND. INDICATE
COMPLETE NAME OF THE FUND OF YOUR YOUR FUND ACCOUNT NUMBER ON YOUR
CHOICE. MAIL TO THE ADDRESS INDICATED CHECK AND MAIL TO THE ADDRESS PRINTED
ON THE APPLICATION. ON YOUR ACCOUNT STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL
1-800-544-6666 FOR INSTRUCTIONS.
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IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR APPLICATION AND CHECK (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY
INVESTOR
TO A FIDELITY INVESTOR CENTER. CALL CENTER. CALL 1-800-544-9797 FOR THE
1-800-544-9797 FOR THE CENTER CENTER NEAREST YOU.
NEAREST YOU.
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WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL 1-800-544-7777 TO
SET UP YOUR (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT ACCOUNTS.
ACCOUNT AND TO ARRANGE A WIRE (SMALL SOLID BULLET) WIRE TO:
TRANSACTION. NOT AVAILABLE FOR BANKERS TRUST COMPANY,
RETIREMENT ACCOUNTS. BANK ROUTING #021001033,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO: ACCOUNT #00163053.
BANKERS TRUST COMPANY, SPECIFY THE COMPLETE NAME OF THE
BANK ROUTING #021001033, FUND AND INCLUDE YOUR ACCOUNT
ACCOUNT #00163053. NUMBER AND YOUR NAME.
SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR NEW ACCOUNT
NUMBER AND YOUR NAME.
</TABLE>
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AUTOMATICALLY
(AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER. SIGN UP FOR THIS SERVICE
WHEN OPENING YOUR ACCOUNT, OR CALL
1-800-544-6666 TO ADD IT.
</TABLE>
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</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 share price calculated after your order is received
and accepted. Share price is normally calculated at 4 p.m. Eastern
time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone or in writing. Call 1-800-544-6666 for a
retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$10,000 worth of shares in the account to keep it open (except
accounts not subject to the investment minimums).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(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, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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PHONE 1-800-544-777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MAY EXCHANGE TO OTHER FIDELITY FUNDS IF
BOTH ACCOUNTS ARE REGISTERED WITH THE SAME
NAME(S), ADDRESS, AND TAXPAYER ID NUMBER.
MAIL OR IN PERSON
(MAIL_GRAPHIC)
(HAND_GRAPHIC) INDIVIDUAL, JOINT TENANT, (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
SOLE PROPRIETORSHIP, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
UGMA, UTMA EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 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.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR, (SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
CONSERVATOR, GUARDIAN
WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
RETIREMENT USING IT. TO VERIFY THAT IT IS IN PLACE, CALL
1-800-544-6666. MINIMUM WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION REQUEST MUST BE RECEIVED
AND ACCEPTED BY FIDELITY BEFORE 4 P.M. EASTERN
TIME FOR MONEY TO BE WIRED ON THE NEXT
BUSINESS DAY.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone or in writing.
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 page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer
money by phone between your bank account and your fund account. Most
transfers are complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 FOR AN APPLICATION.
(SMALL SOLID BULLET) TO CHANGE THE AMOUNT OR FREQUENCY OF YOUR INVESTMENT, CALL
1-800-544-6666 AT LEAST THREE BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED INVESTMENT DATE.
</TABLE>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 FOR AN AUTHORIZATION FORM.
(SMALL SOLID BULLET) CHANGES REQUIRE A NEW AUTHORIZATION FORM.
</TABLE>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666.
</TABLE>
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net income and capital
gains to shareholders each year. Normally, dividends and capital gains
are distributed in April and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. Each fund
offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically
reinvested. When you are over 59 years old, you can receive
distributions in cash.
When a fund deducts a distribution from its NAV, the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
EACH FUND EARNS DIVIDENDS
FROM STOCKS AND INTEREST FROM
BOND, MONEY MARKET, AND
OTHER INVESTMENTS. THESE ARE
PASSED ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND REALIZES
CAPITAL GAINS WHENEVER IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax-deferred retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary
income ; capital gain distributions are taxed as long-term capital
gains. Every January, Fidelity will send you and the IRS a statement
showing the tax characterization of distributions paid to you in the
previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but
not yet distributed income or capital gains, you will pay the full
price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
CURRENCY CONSIDERATIONS. If a fund's dividends exceed its taxable
income in any year, which is sometimes the result of currency-related
losses, all or a portion of the fund's dividends may be treated as a
return of capital to shareholders for tax purposes. To minimize the
risk of a return of capital, the funds may adjust their dividends to
take currency fluctuations into account, which may cause the dividends
to vary. Any return of capital will reduce the cost basis of your
shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. The statement you
receive in January will specify if any distributions included a return
of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce a
fund's distributions. However, if you meet certain holding period
requirements with respect to your fund shares , an offsetting tax
credit may be available to you. If you do not meet such holding
period requirements, you may still be entitled to a deduction for
certain foreign taxes. In either case, your tax statement will
show more taxable income or capital gains than were actually
distributed by the fund, but will also show the amount of the
available offsetting credit or deduction.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. Fidelity normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
Each fund's assets are valued primarily on the basis of market
quotations. Foreign securities are valued on the basis of quotations
from the primary market in which they are traded, and are translated
from the local currency into U.S. dollars using current exchange
rates. 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 another method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) is its NAV
adjusted to reflect the purchase fee. Each fund's REDEMPTION PRICE
(price to sell one share) is its NAV.
A PURCHASE FEE of 0.50% for Spartan Total Market Index, 0.75% for
Spartan Extended Market Index, and 1.00% for Spartan International
Index will be charged. The purchase fee is applied as a percentage of
the offering price. As an approximate percentage of the net amount
invested (after purchase fee), the fees are 0.50% for Spartan Total
Market Index, 0.76% for Spartan Extended Market Index, and 1.01% for
Spartan International Index. This fee is not a sales charge, and is
paid to the fund rather than Fidelity or BT. The purchase fee is
designed to help defray the transaction costs, such as brokerage
commissions and currency exchange costs, incurred by the funds in
purchasing securities.
The purchase fee is charged on exchanges into each fund, but it does
not apply to shares that are acquired through reinvestment of
dividends or distributions, or to shares purchased in kind.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does
not follow reasonable procedures designed to verify the identity of
the caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy
of your confirmation statements immediately after you receive them. If
you do not want the ability to redeem and exchange by telephone, call
Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. Each fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. See
"Exchange Restrictions" on page . Purchase orders may be refused if,
in FMR's opinion, they would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at
the next offering price calculated after your order is received and
accepted. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be cancelled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when a fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your request is received and accepted.
Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
EACH FUND CHARGES AN ANNUAL INDEX ACCOUNT FEE of $10.00 per account to
offset shareholder service costs if your account balance falls below
$ 10,000 at the time of the December distribution. The index
account fee does not apply to assets held in employee benefit plans
(including Fidelity sponsored 403(b) arrangements but otherwise as
defined in the Employee Retirement Income Security Act of 1974,
excluding SIMPLE IRAs, SEP IRAs and the Fidelity Retirement Plan)
having more than 50 eligible employees or a minimum of $1,000,000 in
plan assets that have at least some portion of its assets invested in
mutual funds advised by FMR and which are marketed and distributed
directly to plan sponsors and participants without any assistance or
intervention from any intermediary distribution channel. In addition,
this fee does not apply to assets held in Fidelity Regular IRA or
Fidelity Rollover IRA purchased with proceeds of a distribution or
transfer from an employee benefit plan as described above provided
that at the time of the distribution or transfer the employee benefit
plans satisfies the requirements described above.
FSC deducts $10.00 from each account at the time the December
distribution is credited to each account. If the amount of the
distribution is not sufficient to pay the fee, the index account fee
may be deducted directly from your account balance.
IF YOUR ACCOUNT BALANCE FALLS BELOW $10,000 you will be given 30 days'
notice to reestablish the minimum balance (except accounts not subject
to the investment minimums). If you do not increase your balance,
Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day
your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
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, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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 the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
fees of up to 1.00% on purchases, administrative fees of up to $7.50
and redemption fees of up to 1.50% on exchanges. Check each fund's
prospectus for details.
APPENDIX
The Wilshire 5000 and the Wilshire 4500 are compiled by Wilshire
Associates Incorporated, which is neither an affiliate nor a sponsor
of Spartan Total Market Index or Spartan Extended Market Index.
Spartan International Index Fund is not sponsored, endorsed, sold or
promoted by Morgan Stanley & Co. Incorporated (Morgan Stanley). Morgan
Stanley makes no representation warranty, express or implied, to the
owners of the fund or any member of the public regarding the
advisability of investing securities generally or in the fund
particularly or the ability of the EAFE(registered trademark) Index to
track general stock market performance. Morgan Stanley is the licensor
of certain trademarks, service marks and trade names of Morgan Stanley
and of the EAFE Index. Morgan Stanley has no obligation to take the
needs of the issuer of the fund or the owners of the fund into
consideration in determining, composing or calculating the EAFE Index.
Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the fund
to be issued or in the determination or calculation of the equation by
which the fund is redeemable for cash. Morgan Stanley has no
obligation or liability to owners of the fund in connection with the
administration, marketing or trading the fund.
ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSIONS IN OR
FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCES WHICH MORGAN
STANLEY CONSIDERS RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE
ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED
THEREIN. MORGAN STANLEY MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND
COUNTERPARTIES, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION
WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN
STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS)
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
Inclusion of a stock in an index does not imply that it is a good
investment.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN TOTAL MARKET INDEX FUND,
SPARTAN EXTENDED MARKET INDEX FUND, AND
SPARTAN INTERNATIONAL INDEX FUND
FUNDS OF FIDELITY CONCORD STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 6, 1997
REVISED OCTO BER 24 , 1997
This Statement is not a prospectus but should be read in conjunction
with the funds' current Prospectus (dated September 6, 1997, revised
Octo ber 24 , 1997). Please retain this document for
future reference. To obtain an additional copy of the Prospectus,
please call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
BT
Trustees and Officers
Management Contracts
Distribution and Service Plans
Contracts with FMR Affiliates
Contracts with BT Affiliates
Description of the Trust
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
Bankers Trust Company (BT)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
SIF-ptb-0997-02
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of a fund's assets that may
be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
The funds' fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the
funds. However, except for the fundamental investment limitations
listed below, the investment policies and limitations described in
this Statement of Additional Information are not fundamental and may
be changed without shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN TOTAL MARKET INDEX 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 that 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 limitations 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 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. (This
limitation does not apply to purchase of debt securities or to
repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
INVESTMENT LIMITATIONS OF SPARTAN EXTENDED MARKET INDEX 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 that 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 limitations 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 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. (This
limitation does not apply to purchase of debt securities or to
repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
INVESTMENT LIMITATIONS OF SPARTAN INTERNATIONAL INDEX 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 that 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 limitations 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
borrowing 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 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. (This
limitation does not apply to purchase of debt securities or to
repurchase agreements.)
(vi) The fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the funds' limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page . For purposes of the funds' limitation on concentration in a
single industry, the funds may use the industry categorizations as
defined by BARRA, Inc. (Spartan Market Index and Spartan Extended
Market Index) and Morgan Stanley Capital International (Spartan
International Index).
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies BT may employ in
pursuit of a fund's investment objective, and a summary of related
risks. BT 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 Investment Company Act of
1940. These transactions may include repurchase agreements with
custodian banks; short-term obligations of, and repurchase agreements
with, the 50 largest U.S. banks (measured by deposits); municipal
securities; U.S. government securities with affiliated financial
institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. In accordance with
exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
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 BT 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 an alternative to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by
entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge
a fee for such conversions, they do realize a profit based on the
difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency at one rate, while offering a lesser rate of exchange should
the counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange. 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.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by BT.
A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on BT's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as BT anticipates. For example, if a
currency's value rose at a time when BT had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If BT hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if BT 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 BT's use of currency management strategies will be
advantageous to a fund or that it will hedge at appropriate times.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may
include agreements to purchase and sell foreign securities in exchange
for fixed U.S. dollar amounts, or in exchange for specified amounts of
foreign currency. Unlike typical U.S. repurchase agreements, foreign
repurchase agreements may not be fully collateralized at all times.
The value of a security purchased by a fund may be more or less than
the price at which the counterparty has agreed to repurchase the
security. In the event of default by the counterparty, the fund may
suffer a loss if the value of the security purchased is less than the
agreed-upon repurchase price, or if the fund is unable to successfully
assert a claim to the collateral under foreign laws. As a result,
foreign repurchase agreements may involve higher credit risks than
repurchase agreements in U.S. markets, as well as risks associated
with currency fluctuations. In addition, as with other emerging market
investments, repurchase agreements with counterparties located in
emerging markets or relating to emerging markets may involve issuers
or counterparties with lower credit ratings than typical U.S.
repurchase agreements.
FUNDS' RIGHTS AS A SHAREHOLDER. The funds do not intend to direct or
administer the day-to-day operations of any company. Each 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 BT 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. BT will monitor
such activities with a view to mitigating, to the extent possible, the
risk of litigation against a fund and the risk of actual liability if
a fund is involved in litigation. No guarantee can be made, however,
that litigation against a fund will not be undertaken or liabilities
incurred.
FUTURES AND OPTIONS. The following sections pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures
Margin Payments, Limitations on Futures and Options Transactions,
Liquidity of Options and Futures Contracts, Options and Futures
Relating to Foreign Currencies, OTC Options, Purchasing Put and Call
Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the Securities and Exchange
Commission with respect to coverage of options and futures strategies
by mutual funds, and if the guidelines so require will set aside
appropriate liquid assets in a segregated custodial account in the
amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they
are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of a fund's assets
could impede portfolio management or the fund's ability to meet
redemption requests or other current obligations.
COMBINED POSITIONS. A fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the
overall position. For example, a fund may purchase a put option and
write a call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined
position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match a fund's
current or anticipated investments exactly. The funds may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which they typically invest, which involves a risk that the options or
futures position will not track the performance of a fund's other
investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in a fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future
date. When a fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which
the purchase and sale will take place is fixed when the fund enters
into the contract. Some currently available futures contracts are
based on specific securities, such as U.S. Treasury bonds or notes,
and some are based on indices of securities prices, such as the
Standard & Poor's 500 Index (S&P 500). Futures can be held until their
delivery dates, or can be closed out before then if a liquid secondary
market is available.
The funds may invest in futures on stock indexes other than the
indexes they seek to track. For example, Spartan Total Market Index
and Spartan Extended Market Index may invest in futures on such
indexes as the S&P 500, the Russell 2000 Index, or the S&P MidCap
Index. Spartan International Index may invest in futures based on such
indexes as the CAC 40 (France), DAX 30 (Germany), EuroTop 100
(Europe), IBEX (Spain), FTSE 100 (United Kingdom), All Ordinary
(Australia), Hang Seng (Hong Kong), and Nikkei 225, Nikkei 300 and
TOPIX (Japan).
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a fund, the fund may be entitled to
return of margin owed to it only in proportion to the amount received
by the FCM's other customers, potentially resulting in losses to the
fund.
Although futures exchanges generally operate similarly in the U.S. and
abroad, foreign futures exchanges may follow different trading,
settlement and margin procedures than U.S. exchanges do. Futures
contracts traded outside the U.S. may involve greater risk of loss
than U.S.-traded contracts, including potentially greater risks of
losses due to insolvency of a futures broker, exchange member or other
party that may owe initial or variation margin to a fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund intends to
file a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets, before engaging in any purchases or
sales of futures contracts or options on futures contracts. The funds
intend to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the funds can commit assets to initial
margin deposits and option premiums.
BT also intends to follow certain other limitations on the funds'
futures and option activities. Each fund will not purchase any option
if, as a result, more than 5% of its total assets would be invested in
option premiums. Under normal conditions, a fund will not enter into
any futures contract or option if, as a result, the sum of (i) the
current value of assets hedged in the case of strategies involving the
sale of securities, and (ii) the current value of the indices or other
instruments underlying the fund's other futures or options positions,
would exceed 35% of the fund's total assets. These limitations do not
apply to options attached to, or acquired or traded together with,
their underlying securities, and do not apply to securities that
incorporate features similar to options.
The above limitations on the funds' investments in futures contracts
and options, and the funds' policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible 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. The funds may purchase and sell currency futures and may
purchase and write currency options to increase or decrease their
exposure to different foreign currencies. A fund may also purchase and
write currency options in conjunction with each other or with currency
futures or forward contracts. Currency futures and options values can
be expected to correlate with exchange rates, but may not reflect
other factors that affect the value of a fund's investments. A
currency hedge, for example, should protect a Yen-denominated security
from a decline in the Yen, but will not protect a fund against a price
decline resulting from deterioration in the issuer's creditworthiness.
Because the value of a fund's foreign-denominated investments changes
in response to many factors other than exchange rates, it may not be
possible to match the amount of currency options and futures to the
value of the fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the funds greater flexibility to tailor an
option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing
organization of the exchanges where they are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund
obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this
right, the fund pays the current market price for the option (known as
the option premium). Options have various types of underlying
instruments, including specific securities, indices of securities
prices, and futures contracts. The fund may terminate its position in
a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the fund
will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the
strike price. A fund may also terminate a put option position by
closing it out in the secondary market at its current price, if a
liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium paid, plus related transaction
costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it
takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the fund assumes the
obligation to pay the strike price for the option's underlying
instrument if the other party to the option chooses to exercise it.
When writing an option on a futures contract, the fund will be
required to make margin payments to an FCM as described above for
futures contracts. A fund may seek to terminate its position in a put
option it writes before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not
liquid for a put option the fund has written, however, the fund must
continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise
of the option. The characteristics of writing call options are similar
to those of writing put options, except that writing calls generally
is a profitable strategy if prices remain the same or fall. Through
receipt of the option premium, a call writer mitigates the effects of
a price decline. At the same time, because a call writer must be
prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up
some ability to participate in security price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees
and FMR, BT determines the liquidity of a fund's investments and,
through reports from FMR and/or BT, the Board monitors investments in
illiquid instruments. In determining the liquidity of a fund's
investments, BT may consider various factors, including (1) the
frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to
make a market, (4) the nature of the security (including any demand or
tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by the funds to be illiquid include
repurchase agreements not entitling the holder to payment of principal
and interest within seven days and over-the-counter options. Also, BT
may determine some restricted securities, 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% of
its net assets was invested in illiquid securities, it would seek to
take appropriate steps to protect liquidity.
INDEXED SECURITIES. Indexed securities include commercial paper,
certificates of deposit, and other fixed-income securities whose
values at maturity or coupon interest rates are determined by
reference to the returns of the S&P 500, the Wilshire 5000, the
Wilshire 4500, the EAFE or comparable stock indices. Indexed
securities can be affected by changes in interest rates and the
creditworthiness of their issuers as well as stock prices, and may not
track the indices as accurately as direct investments in the indices.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, each fund has received permission to lend
money to, and borrow money from, other funds advised by FMR or its
affiliates. Interfund loans and borrowings normally extend overnight,
but can have a maximum duration of seven days. Loans may be called on
one day's notice. A fund will lend through the program only when the
returns are higher than those available from an investment in
repurchase agreements, and will borrow through the program only when
the costs are equal to or lower than the cost of bank loans. 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.
OTHER INVESTMENT COMPANIES. The funds may purchase the shares of other
investment companies.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors
such as real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the
management skill and creditworthiness of the issuer. Real
estate-related instruments may also be affected by tax and regulatory
requirements, such as those relating to the environment.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. To
protect the fund from the risk that the original seller will not
fulfill its obligation, the securities are held in an account of the
fund at a bank, marked-to-market daily, and maintained at a value at
least equal to the sale price plus the accrued incremental amount.
While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility that the value
of the underlying security will be less than the resale price, as well
as delays and costs to a fund in connection with bankruptcy
proceedings), it is each fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by BT or, under certain circumstances,
by FMR or an FMR-affiliate.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, a fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the
instrument at a particular price and time. While a reverse repurchase
agreement is outstanding, the fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. A fund will enter into reverse repurchase agreements
only with parties whose creditworthiness has been found satisfactory
by BT or, under certain circumstances, by FMR or an FMR affiliate.
Such transactions may increase fluctuations in the market value of the
fund's assets and may be viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp. A fund will not lend
securities to BT or its affiliates. BT receives a portion of
securities lending income earned by each fund.
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 BT (or, under certain
circumstances, FMR or an FMR affiliate) to be of good standing.
Furthermore, they will only be made if, in BT's judgment, the
consideration to be earned from such loans would justify the risk.
BT 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). If a fund cannot
recover the loaned securities on termination, a fund may sell the
collateral and purchase a replacement investment in the market.
SHORT SALES "AGAINST THE BOX." If a fund enters into a short sale
against the box, it will be required to set aside securities
equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.
SWAP AGREEMENTS. Under a typical equity swap agreement, a counterparty
such as a bank or broker-dealer agrees to pay a fund a return equal to
the dividend payments and increase in value, if any, of an index or
group of stocks and the fund agrees in return to pay a fixed or
floating rate of interest, plus any declines in value of the index.
Swap agreements can also have features providing for maximum or
minimum exposure to the designated index. Swap agreements can take
many different forms and are known by a variety of names. The fund is
not limited to any particular form of swap agreement if BT determines
it is consistent with the fund's investment objective and policies.
In order to track the return of the designated index effectively, a
fund would generally have to own other assets returning approximately
the same amount as the interest rate payable by the fund under the
swap agreement. In addition, if the counterparty's creditworthiness
declined, the swap would be likely to decline in value relative to the
designated index, impairing the fund's correlation with its applicable
index. A fund expects to be able to eliminate its exposure under swap
agreements either by assignment or other disposition of the swap
agreement, or by entering into an offsetting swap agreement with the
same party or a similarly creditworthy party.
The funds will maintain appropriate liquid assets in a segregated
custodial account to cover their obligations under swap agreements. If
the funds enter into swap agreements on a net basis, they will
segregate assets with a daily value at least equal to the excess, if
any, of the funds' accrued obligations under the swap agreements over
the accrued amount the funds are entitled to receive under the
agreements. If the funds enter into swap agreements on other than a
net basis, they will segregate assets with a value equal to the full
amount of the funds' accrued obligations under the agreements.
WARRANTS. 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 if the issuing company. Also, the value of the warrant
does not necessarily change with the value of the underlying
securities and a warrant ceases to have value if it is not exercised
prior to expiration date. These factors can make warrants more
speculative than other types of investments.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of each fund by BT pursuant to authority contained in the
management contract and sub-advisory agreement. BT 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, BT 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; and the
reasonableness of any commissions. 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 that
provide research and execution services to the funds or other accounts
over which FMR or BT or their 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 BT (to the extent possible
consistent with execution considerations) in accordance with a ranking
of broker-dealers determined periodically by BT's investment staff
based primarily upon the quality of execution services provided.
The receipt of research from broker-dealers that execute transactions
on behalf of the funds may be useful to BT 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 BT clients may be useful to BT in carrying
out its obligations to the funds. The receipt of such research has not
reduced BT's normal independent research activities; however, it
enables BT to avoid the additional expenses that could be incurred if
BT tried to develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that
are in excess of the amount of commissions charged by other
broker-dealers in recognition of their research and execution
services. In order to cause each fund to pay such higher commissions,
BT 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 BT's overall responsibilities to the funds
and its other clients. In reaching this determination, BT 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.
BT 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. BT may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC) and Fidelity Brokerage
Services (FBS), indirect subsidiaries of FMR Corp., and BT Brokerage
Corporation, BT Alex-Brown Incorporated or BT Futures Corporation,
indirect subsidiaries of Bankers Trust New York Corporation, if the
commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
Each fund's Trustees periodically review BT'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.
Each fund's annualized turnover rate for its first fiscal period is
not expected to exceed 50%.
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 by BT and are independent from those of other funds
managed by FMR or BT or accounts managed by FMR or BT affiliates. It
sometimes happens that the same security is held in the portfolio of
more than one of BT-managed 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 manager and BT as
sub-adviser to each fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines each fund'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 fund's NAV.
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Most equity securities
for which the primary market is the United States are valued at last
sale price or, if no sale has occurred, at the closing bid price. Most
equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale
price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated
quote or last bid price normally is used. Securities of other open-end
investment companies are valued at their respective NAVs.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may
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 quotations services which express the value of securities
in their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value. In addition, securities and other assets for which
there is no readily available market value may be valued in good faith
by a committee appointed by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities
owned by a fund if, in the opinion of a committee appointed by the
Board of Trustees, some other method would more accurately reflect the
fair market value of such securities.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. Each fund's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of fund shares when redeemed may be more
or less than their original cost.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the fund's
NAV over a stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had
been constant over the period. For example, a cumulative total return
of 100% over ten years would produce an average annual 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 fund's total return for the period, extending that
return for a full year (assuming that return remains constant over the
year), and quoting the result as an annual return. While average
annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a fund's performance is
not constant over time, but changes from year to year, and that
average annual total returns represent averaged figures as opposed to
the actual year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis and may be quoted with or without taking the fund's
purchase fee into account. Total returns, yields, and other
performance information may be quoted numerically or in a table,
graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by a fund and reflects all elements of its return. Unless otherwise
indicated, a fund's adjusted NAVs are not adjusted for sales charges,
if any.
MOVING AVERAGES. A fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving
average is the average of each day's adjusted closing NAV for a
specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving
averages for a specified period to produce indicators showing when an
NAV has crossed, stayed above, or stayed below its moving average.
INDEX RESULTS. The following table shows the record of the S&P 500,
the Wilshire 5000, the Wilshire 4500 and the EAFE over the ten years
ended July 31, 1997. The funds may not always hold the same securities
as their indices. BT may use statistical sampling techniques to
attempt to replicate the returns of the indices using a smaller number
of securities. Index values are based on the prices of unmanaged
groups of stocks and, unlike the fund's returns, do not include the
effect of brokerage commissions or other costs of investing.
S&P 500 Wilshire 5000 Wilshire 4500 EAFE
1997 52.14 47.20 35.06 18.26
1996 16.57 14.69 10.59 3.53
1995 26.11 26.11 25.42 6.95
1994 5.16 4.21 3.47 14.13
1993 8.73 11.61 17.97 27.76
1992 12.79 13.23 14.65 (7.72)
1991 12.75 13.14 13.48 (8.48)
1990 6.51 3.50 (2.82) (6.97)
1989 31.92 29.84 24.76 19.53
1988 (11.77) (10.60) (8.38) 7.51
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. 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. In addition to the mutual
fund rankings, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability
of principal, but generally do not offer the higher potential returns
available from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and
periodicals. For example, the fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising.
A fund's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest.
The total return of a benchmark index reflects reinvestment of all
dividends and capital gains paid by securities included in the index.
Unlike a 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.
Spartan Total Market Index, Spartan Extended Market Index and Spartan
International Index may compare their performance to that of their
respective indices (the Wilshire 5000 for Spartan Total Market Index,
the Wilshire 4500 for Spartan Extended Market Index and the EAFE for
Spartan International Index) and the Standard & Poor's 500 Index. The
index returns for the EAFE for the periods after January 1, 1997, may
be adjusted for tax withholding rates applicable to U.S.-based mutual
funds organized as Massachusetts business trusts. The performance of
these indices over any period since their inception may be quoted in
fund advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the Consumer Price Index), and combinations of various capital
markets. The performance of these capital markets is based on the
returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals;
charitable giving; and the Fidelity credit card. In addition, Fidelity
may quote or reprint financial or business publications and
periodicals as they relate to current economic and political
conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a
particular mutual fund, and Fidelity services and products. Fidelity
may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus(registered trademark), a quarterly
magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare the fund's historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All
measures of volatility and correlation are calculated using averages
of historical data.
MOMENTUM INDICATORS indicate a fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
fund's percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which
may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of June 30, 1997, FMR advised over $28 billion in tax-free fund
assets, $94 billion in money market fund assets, $354 billion in
equity fund assets and $72 billion in international fund assets. The
funds may reference the growth and variety of money market mutual
funds and the adviser's innovation and participation in the industry.
The equity funds under management figure represents the largest amount
of equity fund assets under management by a mutual fund investment
adviser in the United States, making FMR America's leading equity
(stock) fund manager. FMR, its subsidiaries, and affiliates maintain a
worldwide information and communications network for the purpose of
researching and managing investments abroad.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its NAV 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,
Presidents' Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Although FMR expects the same holiday schedule to be observed in the
future, the NYSE may modify its holiday schedule at any time. In
addition, the funds will not process wire purchases and redemptions on
days when the Federal Reserve Wire System is closed.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
Securities and Exchange Commission (SEC). To the extent that portfolio
securities are traded in other markets on days when the NYSE is
closed, a fund's NAV may be affected on days when investors do not
have access to the fund to purchase or redeem shares. In addition,
trading in some of 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 Investment Company Act of 1940 (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.
Each fund, in its discretion, may determine to issue its shares "in
kind" in exchange for securities held by the purchaser having a value,
determined in accordance with the fund's policies for valuation of
portfolio securities, equal to the purchase price of the fund shares
issued. A fund will accept for in kind purchases only securities or
other instruments that are appropriate under its investment objective
and policies. In addition, a fund generally will not accept securities
of any issuer unless they are liquid, have a readily ascertainable
market value, and are not subject to restrictions on resale. All
dividends, distributions, and subscription or other rights associated
with the securities become the property of the fund, along with the
securities. Shares purchased in exchange for securities in kind
generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle. Purchases of shares
of a fund through an in-kind exchange are not subject to the fund's
purchase fee.
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 of Spartan Total Market Index Fund and
Spartan Extended Market Index 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. Because each fund may earn other types of income, such as
interest, income from securities loans, non-qualifying dividends, and
short-term capital gains, the percentage of dividends from the fund
that qualifies for the deduction generally will be less than 100%.
Because Spartan International Index invests significantly in foreign
securities, corporate shareholders of this fund should not expect fund
dividends to qualify for the dividends-received deduction. Gains
(losses) attributable to foreign currency fluctuations are generally
taxable as ordinary income, and therefore will increase (decrease)
dividend distributions.
Short-term capital gains are distributed as dividend income, but do
not qualify for the dividends-received deduction. Each fund will
notify corporate shareholders annually of the percentage of fund
dividends that qualify for the dividends-received deduction. Each fund
will send each shareholder a notice in January describing the tax
status of dividend and capital gain distributions for the prior year.
A portion of each fund's dividends derived from certain U.S.
Government obligations may be exempt from state and local taxation.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder
receives a capital gain distribution on shares of a fund, and such
shares are held six months or less and are sold at a loss, the portion
of the loss equal to the amount of the capital gain distribution will
be considered a long-term loss for tax purposes. Short-term
capital gains distributed by each fund are taxable to shareholders as
dividends, not as capital gains.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to
foreign securities. If, at the close of its fiscal year, more than 50%
of Spartan International Market Index's total assets are invested in
securities of foreign issuers, the fund may elect to pass through
foreign taxes paid and thereby allow shareholders to take a credit or
deduction on their individual tax returns.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies.
If a fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the
Internal Revenue Code, it may be subject to U.S. federal income tax on
a portion of any excess distribution or gain from the disposition of
such shares. Interest charges may also be imposed on a fund with
respect to deferred taxes arising from such distributions or gains.
Generally, each fund will elect to mark-to-market any PFIC shares.
Unrealized gains will be recognized as income for tax purposes and
must be distributed to shareholders as dividends.
Each fund is treated as a separate entity from the other funds of
Fidelity Concord Street 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 may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
BT
BT, a New York banking corporation with principal offices at 130
Liberty Street, New York, New York 10006, is a wholly owned subsidiary
of Bankers Trust New York Corporation, whose principal offices are
also at 130 Liberty Street, New York, New York 10006. BT was founded
in 1903. As of December 31, 1996 Bankers Trust New York Corporation
was the seventh largest bank holding company in the United States with
total assets of approximately $120 billion. BT is a worldwide merchant
bank that conducts a variety of general banking and trust activities
and is a major wholesale supplier of financial services to the
international and domestic institutional markets. Investment
management is a core business of BT with approximately $227 billion in
assets under management globally. Of that total, approximately $82
billion are in U.S. equity index assets. When bond and international
funds are included, BT manages over $94 billion in total index assets.
This makes BT one of the nation's leading managers in index funds.
BT has been advised by counsel that BT currently may perform the
services for each fund described herein without violation of the
Glass-Steagall Act or other applicable banking laws or regulations.
State laws on this issue may differ from the interpretation of
relevant federal law and banks and financial institutions may be
required to register as dealers pursuant to state securities law.
BT investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Members of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (6 7 ), 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; and
Chairman and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East)
Inc.
J. GARY BURKHEAD (5 6 ), Member of the Advisory Board (1997), is
Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President and Chief Executive Officer of the Fidelity
Institutional Group (1997), Previously, Mr. Burkhead served as
President of Fidelity Management & Research Company.
RALPH F. COX (6 5 ), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (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),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (53), Trustee (1997). Consultant, author, and lecturer
(1993). Mr. Gates was Director of the Central Intelligence Agency
(CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as Assistant
to the President of the United States and Deputy National Security
Advisor. Mr. Gates is currently a Trustee for the Forum For
International Policy, a Board Member for the Virginia Neurological
Institute, and a Senior Advisor of the Harvard Journal of World
Affairs. In addition, Mr. Gates also serves as a member of the
corporate board for Lucas Varity PLC (automotive components and diesel
engines), Charles Stark Draper Laboratory (non-profit), NACCO
Industries, Inc. (mining and manufacturing), and TRW Inc. (original
equipment and replacement products).
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), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995) and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (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 Governor of the National Association of Securities Dealers,
Inc. (1996).
*PETER S. LYNCH (54), 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). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.
WILLIAM O. McCOY (63), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan-Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (6 8 ), Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory 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 and
Brush-Wellman Inc. (metal refining) from 1983-1997 .
MARVIN L. MANN (6 4 ), 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), Imation Corp. (imaging and information storage, 1997), 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.
*ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of FMR Texas Inc. (1997), Fidelity Management & Research
(U.K.) Inc. (1997), and Fidelity Management & Research (Far East) Inc.
(1997). Previously, Mr. Pozen served as General Counsel, Managing
Director, and Senior Vice President of FMR Corp.
THOMAS R. WILLIAMS (6 9 ), Trustee, is President of The Wales
Group, Inc. (management and financial advisory services). Prior to
retiring in 1987, Mr. Williams served as Chairman of the Board of
First Wachovia Corporation (bank holding company), and Chairman and
Chief Executive Officer of The First National Bank of Atlanta and
First Atlanta Corporation (bank holding company). He is currently a
Director of ConAgra, Inc. (agricultural products), Georgia Power
Company (electric utility), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants,
1992).
WILLIAM J. HAYES (6 3 ), Vice President (1994), is Vice President
of Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ARTHUR S. LORING ( 50 ), Secretary, is Senior Vice President
(1993) and General Counsel of FMR, Vice President-Legal of FMR Corp.,
and Vice President and Clerk of FDC.
RICHARD A. SILVER (5 1 ), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President. Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
ROBERT H. MORRISON (5 7 ), Manager of Security Transactions of
Fidelity's equity funds is Vice President of FMR.
JOHN H. COSTELLO (5 1 ), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (51), Assistant Treasurer (1994), is an employee of
FMR (1994). Prior to becoming Assistant Treasurer of the Fidelity
funds, Mr. Rush was Chief Compliance Officer of FMR Corp. (1993-1994)
and Chief Financial Officer of Fidelity Brokerage Services, Inc.
(1990-1993).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended February 28, 1998, or
calendar year ended December 31, 1996, as applicable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees and Members of the Aggregate Aggregate Aggregate Total
Advisory Board Compensation Compensation Compensation Compensation
from Spartan Total from Spartan from Spartan from the Fund
Market IndexB,+ Extended International Complex*,A
Market IndexB,+ IndexB,+
J. Gary Burkhead** $ 0 $ 0 $ 0 $ 0
Ralph F. Cox 60 40 40 137,700
Phyllis Burke Davis 60 40 40 134,700
Richard J. Flynn*** 0 0 0 168,000
Robert M. Gates**** 60 40 40 0
Edward C. Johnson 3d** 0 0 0 0
E. Bradley Jones 60 40 40 134,700
Donald J. Kirk 60 40 40 136,200
Peter S. Lynch** 0 0 0 0
William O. McCoy***** 60 40 40 85,333
Gerald C. McDonough 75 50 50 136,200
Edward H. Malone*** 0 0 0 136,200
Marvin L. Mann 60 40 40 134,700
Robert C. Pozen** 0 0 0 0
Thomas R. Williams 60 40 40 136,200
</TABLE>
* Information is for the calendar year ended December 31, 1996 for 235
funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
*** Richard J. Flynn and Edward H. Malone served on the Board of
Trustees through December 31, 1996.
**** Mr. Gates was elected to the Board of Trustees of Fidelity
Concord Street Trust on March 19, 1997 .
***** During the period from May 1, 1996 through December 31, 1996,
William O. McCoy served as a Member of the Advisory Board. Mr. McCoy
was elected to the Board of Trustees of Fidelity Concord Street Trust
on March 19, 1997.
+ Estimated
A Compensation figures include cash, a pro rata portion of benefits
accrued under the retirement program for the period ended December 30,
1996 and required to be deferred, and may include amounts deferred at
the election of Trustees.
B Compensation figures include cash.
Under a retirement program adopted in July 1988 and modified in
November 1995 and November 1996, each non-interested Trustee who
retired before December 30, 1996 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 became eligible to
participate in the program at the end of the calendar year in which he
or she reached age 72, provided that, at the time of retirement, he or
she had served as a Fidelity fund Trustee for at least five years.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are treated as though equivalent dollar amounts had been invested
in shares of a cross-section of Fidelity Funds including funds in each
major investment discipline and representing a majority of Fidelity's
assets under management (the Reference Funds). The amounts ultimately
received by the Trustees under the Plan will be directly linked to the
investment performance of the Reference Funds. Deferral of fees in
accordance with the Plan will have a negligible effect on a fund's
assets, liabilities, and net income per share, and will not obligate a
fund to retain the services of any Trustee or to pay any particular
level of compensation to the Trustee. A fund may invest in the
Reference Funds under the Plan without shareholder approval.
As of December 30, 1996, the non-interested Trustees terminated the
retirement program for Trustees who retire after such date. In
connection with the termination of the retirement program, each
then-existing non-interested Trustee received a credit to his or her
Plan account equal to the present value of the estimated benefits that
would have been payable under the retirement program. The amounts
credited to the non-interested Trustees' Plan accounts are subject to
vesting and are treated as though equivalent dollar amounts had been
invested in shares of the Reference Funds. The amounts ultimately
received by the Trustees in connection with the credits to their Plan
accounts will be directly linked to the investment performance of the
Reference Funds. The termination of the retirement program and related
crediting of estimated benefits to the Trustees' Plan accounts did not
result in a material cost to the funds.
As of July 31, 1997, FMR owned the majority of outstanding shares of
the funds. FMR Corp. is the ultimate parent company of FMR. By virtue
of his ownership interest in FMR Corp., as described in the "FMR"
section on page , Mr. Edward C. Johnson 3d, President and Trustee of
the 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 each fund's shares, the Trustees, Members of the Advisory
Board, and officers of the funds owned, in the aggregate, less than 1%
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.
MANAGEMENT CONTRACTS
FMR is each fund's manager pursuant to management contracts which were
approved by FMR, the then sole shareholder, on September 5, 1997.
MANAGEMENT AND SUB-ADVISORY SERVICES. Each fund employs FMR to furnish
investment advisory and other services. FMR 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 securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
BT is the sub-adviser of each fund and acts as each fund's custodian.
Under its management contract with each fund, FMR acts as investment
adviser. Under the sub-advisory agreement, and, subject to the
supervision of the Board of Trustees, BT directs the investments of
each fund in accordance with its investment objective, policies, and
limitations, administers the securities lending program of each fund
and provides custodial services to each fund.
MANAGEMENT-RELATED EXPENSES. In addition to the management fees
payable to FMR, the sub-advisory fees payable to BT and the fees
payable to FSC, 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 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, the trust, on behalf of each
fund, has entered into a revised transfer agent agreement with FSC
pursuant to which FSC bears the costs of providing these services to
existing shareholders. Other expenses paid by each fund include
interest, taxes, brokerage commissions, and each fund's proportionate
share of insurance premiums and Investment Company Institute dues.
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.
MANAGEMENT AND SUB-ADVISORY FEES. For the services of FMR under each
contract, Spartan Total Market Index Fund, Spartan Extended Market
Index Fund and Spartan International Index Fund pay FMR and BT monthly
management and sub-advisory fees at the annual rate of 0.25%, 0.25%
and 0.40% of average net assets throughout the month, respectively.
These fees include management fees of 0.24%, 0.24% and 0.34%,
respectively, payable to FMR, and estimated sub-advisory fees of
0.01%, 0.01%, and 0.06%, respectively, payable to BT (representing 40%
of net income from securities lending). FMR has voluntarily agreed,
subject to revision or termination, to reimburse Spartan Total Market
Index, Spartan Extended Market Index and Spartan International Index
if and to the extent that their aggregate operating expenses,
including management fees (but excluding sub-advisory fees associated
with securities lending, interest, taxes, brokerage commissions and
other transaction costs, or extraordinary expenses), are in excess of
annual rates of 0.25%, 0.25% and 0.35%, respectively, of average net
assets of the funds through December 31, 1999.
SUB-ADVISER. Each fund and FMR have entered into sub-advisory
agreements with BT. Pursuant to the sub-advisory agreements, FMR has
granted BT investment management authority as well as the authority to
buy and sell securities.
Under the sub-advisory agreements, for providing investment
management, securities lending and custodial services to Spartan Total
Market Index and Spartan Extended Market Index, FMR pays BT fees at an
annual rate of 0.0125% of the average net assets of each fund. In
addition, as described above, under the sub-advisory agreements, for
such services each fund pays BT fees equal to 40% of net income from
each fund's securities lending program. The remaining 60% of net
income from each fund's securities lending program goes to each fund.
Under the sub-advisory agreement, for providing investment management,
securities lending and custodial services to Spartan International
Index, FMR pays BT fees at an annual rate of 0.0650% of the average
net assets of the fund, plus fees of $35 per portfolio transaction (up
to a maximum of $200,000 annually). In addition, as described above,
under the sub-advisory agreement, for such services the fund pays BT
fees equal to 40% of net income from the fund's securities lending
program. The remaining 60% of net income from the fund's securities
lending program goes to the fund.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
the funds (the Plans) pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the Rule). The Rule provides in substance that a
mutual fund may not engage directly or indirectly in financing any
activity that is primarily intended to result in the sale of shares of
a fund except pursuant to a plan approved on behalf of the fund under
the Rule. The Plans, as approved by the Trustees, allow the funds and
FMR to incur certain expenses that might be considered to constitute
indirect payment by the funds of distribution expenses.
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 Plan also
specifically recognizes that FMR, either directly or through FDC, may
use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of each fund. In
addition, each Plan provides that FMR may use its resources, including
its management fee revenues, to make payments to third parties that
assist in selling shares of each fund, or to third parties, including
banks, that render shareholder support services.
Currently, the Board of Trustees has authorized such payments.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and have
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that the Plans do not authorize payments by 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 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 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 financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plans. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each fund has entered into a transfer agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreements, FSC performs
transfer agency, dividend disbursing, and shareholder services for
each fund.
For providing transfer agency services, FSC receives 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, FSC receives 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 are subject to adjustment if the year-to-date
total return of the S&P 500 exceeds a positive or negative 15%.
FSC also collects each fund's $10.00 index account fee from certain
accounts with balances of less than $ 10,000 at the time of the
December distribution.
In addition, FSC receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in each Fidelity Freedom Fund,
a fund of funds managed by an FMR affiliate, according to the
percentage of the Freedom Fund's assets that is invested in a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with FSC.
Under the terms of the agreements, FSC calculates the NAV and
dividends for each fund, and maintains each fund's portfolio and
general accounting records.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
0.0600% (for Spartan Total Market Index Fund and Spartan Extended
Market Index Fund) and 0.0750% (for Spartan International
International Index Fund) of the first $500 million of average net
assets and 0.0300% (for Spartan Total Market Index Fund and Spartan
Extended Market Index Fund) and 0.0375% (for Spartan International
Index Fund) of 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.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
CONTRACTS WITH BT AFFILIATES
BT is custodian of the assets of each fund. The custodian is
responsible for the safekeeping of a fund's assets and the appointment
of any subcustodian banks and clearing agencies. However, a fund may
invest in obligations of its custodian. Bankers Trust New York
Corporation is included in the Wilshire 5000. The Chase Manhattan
Bank, headquartered in New York, also may serve as a special purpose
custodian of certain assets in connection with repurchase agreement
transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. In the judgment of FMR, the terms and conditions of
those transactions were not influenced by existing or potential
custodial or other fund relationships.
BT's fees for custodial services to each fund are included in the fees
payable under the sub-advisory agreements.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan Total Market Index Fund, Spartan Extended
Market Index Fund and Spartan International Index Fund are funds of
Fidelity Concord Street Trust, an open-end management investment
company organized as a Massachusetts business trust on July 21, 1987.
In April 1997, the trust's name was changed from Fidelity
Institutional Trust to Fidelity Concord Street Trust. Currently, there
are five funds of the trust: Spartan Total Market Index Fund, Spartan
Extended Market Index Fund, Spartan International Index Fund, Fidelity
U.S. Bond Index Fund (formerly known as as Fidelity U.S. Bond Index
Portfolio) and Spartan U.S. Equity Index Fund (formerly known as
Fidelity U.S. Equity Index Portfolio). The Declaration of Trust
permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying names
"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 the trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund are segregated on the books of account,
and are to be charged with the liabilities with respect to such fund
and with a share of the general expenses of the trust. Expenses with
respect to the trust are to be allocated in proportion to the asset
value of the respective funds, except where allocations of direct
expense can otherwise be fairly made. The officers of the trust,
subject to the general supervision of the Board of Trustees, have the
power to determine which expenses are allocable to a given fund, or
which are general or allocable to all of the funds. In the event of
the dissolution or liquidation of the trust, shareholders of each fund
are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be
held personally liable for the obligations of the trust. The
Declaration of Trust provides that the trust shall not have any claim
against shareholders except for the payment of the purchase price of
shares and requires that each agreement, obligation, or instrument
entered into or executed by the trust or the Trustees shall include a
provision limiting the obligations created thereby to the trust and
its assets. The Declaration of Trust provides for indemnification out
of each fund's property of any shareholders held personally liable for
the obligations of the fund. The Declaration of Trust also provides
that each fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the fund and
satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the
risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust 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.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the trust or a
fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose
of voting on removal of one or more Trustees. The trust or any fund
may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the
trust or the fund, as determined by the current value of each
shareholder's investment in the fund or trust. If not so terminated,
the trust and the funds will continue indefinitely. Each fund may
invest all of its assets in another investment company.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, serves as the independent accountant for Spartan Total
Market Index and Spartan Extended Market Index and Price Waterhouse
LLP, 160 Federal Street, Boston, Massachusetts, serves as the
independent accountant for Spartan International Index. The auditor
examines financial statements for the funds and provides other audit,
tax, and related services.
APPENDIX
THE WILSHIRE 5000 EQUITY INDEX (Wilshire 5000) measures the
performance of all equity securities of U.S. headquartered issuers
with readily available price data. Over 7,000 security returns are
used to adjust the Wilshire 5000 on the basis of weighted
capitalization.
THE WILSHIRE 4500 EQUITY INDEX (Wilshire 4500) is based on the same
securities on which the Wilshire 5000 is based, excluding securities
that are included in the Standard & Poor's 500 Index (S&P
500(registered trademark)). The S&P 500 includes common stocks of
companies representing a significant portion of the market value of
all common stocks publicly traded in the United States. Although some
of the companies in the Wilshire 4500 have large market
capitalizations, excluding the S&P 500 stocks makes the Wilshire 4500,
on average, more representative of medium-to-small-capitalization
stocks. The composition of the S&P 500 is determined by Standard &
Poor's and is based on such factors as the market capitalization and
trading activity of each stock and its adequacy as a representation of
stocks in a particular industry group. Standard & Poor's may change
the composition of the S&P 500 from time to time.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST
(EAFE(registered trademark)) INDEX is a market capitalization-weighted
index that tracks the daily price and total return performance of
common or ordinary shares in developed markets in Europe, Australia
and the Far East. Securities in the index are selected by Morgan
Stanley Capital International (MSCI), and are currently domiciled in
20 countries. To achieve a proper balance between a high level of
tracking, liquidity and restricted float considerations, MSCI aims to
capture 60% of each country's market capitalization, and to assure
that the index reflects the industry characteristics of each country's
overall market, MSCI aims to capture 60% of the capitalization of each
industry group, as defined by local practice. From the universe of
available stocks in each industry group, stocks are selected up to
approximately the 60% level, subject to liquidity, float and
cross-ownership considerations. In addition to market capitalization,
a stock's importance may be assessed by such measures as sales, net
income, and industry output. Maximization of liquidity is balanced by
the consideration of other factors such as overall industry
representation. Liquidity, measured by trading value as reported by
the local exchange, is assessed over time based on an absolute as well
as relative basis. While a hard-and-fast liquidity yardstick is not
utilized, trading values are monitored to establish a "normal" level
across short-term market peaks and troughs. Maximum float, or the
percentage of a company's shares that are freely tradable, is an
important optimization parameter but not a hard-and-fast rule for
stock selection. While some exceptions are made, index constituents
are included at 100% of market capitalization. A representative sample
of large, medium and small companies is included in the index.
Structural changes due to industry composition or regulations
generally take place every one year to 18 months. These are
implemented on the first business day in March, June, September and
December of each year and are announced at least two weeks in advance.
Companies may be deleted because they have diversified away from their
industry classification, because the industry has evolved in a
different direction from the company's thrust, or because a better
industry representative exists in the form of a new issue or existing
company. New issues generally undergo a "seasoning" period of one year
to 18 months prior to eligibility for inclusion in the index. New
issues due to an initial public offering of significant size that
change a country's market and industry profiles, and generate strong
investor interest likely to assure a high level of liquidity, may be
included in the index immediately. The market capitalization of
constituent companies is weighted on the basis of their full market
value, i.e., without adjustments for "long term holdings" or partial
foreign investment restrictions. To address the issue of restriction
on foreign ownership, an additional series of "Free" indices are
calculated for countries and markets with restrictions on foreign
ownership of shares. While some exceptions apply, the index is
computed using the last transaction price recorded on the dominant
stock exchange in each market. WM/Reuters Closing Spot Rates as of
4:00 p.m. London Time are used for currency conversions. MSCI
calculates the EAFE Index with and without giving effect to dividends
paid by index companies. To reflect the performance impact of
dividends paid by index companies, MSCI also estimates the total
return of the EAFE index by reinvesting one twelfth of the month end
dividend yield at every month end for periods after January 1, 1997,
the EAFE index returns are adjusted for tax withholding rates
applicable to U.S.-based mutual funds organized as Massachusetts
business trusts. Dividends are deemed to be received on the payment
date while the reinvestment of dividends occurs at the end of the
month in which the payment date falls.
