SUPPLEMENT TO THE SPARTAN(registered trademark) INDEX FUNDS
SEPTEMBER 6, 1997
REVISED OCTOBER 24, 1997
STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOR SPARTAN
TOTAL MARKET INDEX FUND FOUND IN THE "INVESTMENT POLICIES AND
LIMITATIONS" SECTION ON PAGE 2.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOR SPARTAN
EXTENDED MARKET INDEX FUND FOUND IN THE "INVESTMENT POLICIES AND
LIMITATIONS" SECTION ON PAGE 3.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOR SPARTAN
INTERNATIONAL INDEX FUND FOUND IN THE "INVESTMENT POLICIES AND
LIMITATIONS" SECTION ON PAGE 4.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
SUPPLEMENT TO THE SPARTAN(registered trademark) U.S. EQUITY INDEX FUND
APRIL 29, 1997
STATEMENT OF ADDITIONAL INFORMATION
THE FOLLOWING INFORMATION REPLACES THE SIMILAR INFORMATION FOUND IN
THE "INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 2.
(iii) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
Pursuant to approval of shareholders of Spartan U.S. Equity Index Fund
at a shareholder meeting held on November 19, 1997, effective December
5, 1997 Bankers Trust Company (BT) has been appointed as the fund's
sub-adviser.
THE FOLLOWING NEW HEADINGS SUPPLEMENT INFORMATION FOUND IN THE "TABLE
OF CONTENTS" ON THE COVER PAGE.
BT 15
Contracts with BT Affiliates 20
THE FOLLOWING INFORMATION SUPPLEMENTS INFORMATION FOUND ON THE COVER
PAGE.
INVESTMENT SUB-ADVISER
Bankers Trust Company (BT)
CUSTODIAN
BT
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND UNDER
"INVESTMENT POLICIES AND LIMITATIONS" BEGINNING ON PAGE 2.
For the fund's limitation on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 5. For purposes of the fund's limitation on
concentration in a single industry, the fund may use the industry
categorizations as defined by BARRA, Inc.
THE FOLLOWING INFORMATION HAS BEEN ELIMINATED FROM THE "INVESTMENT
POLICIES AND LIMITATIONS" SECTION ON PAGE 3.
CLOSED-END INVESTMENT COMPANIES. The fund may purchase the shares of
closed-end investment companies to facilitate investment in certain
countries. Shares of closed-end companies may trade at a premium or a
discount to their net asset value.
EACH USE OF THE TERM "FMR" UNDER THE HEADINGS "EXPOSURE TO FOREIGN
MARKETS," "FOREIGN CURRENCY TRANSACTIONS," "FUND'S RIGHTS AS A
SHAREHOLDER," AND "LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS" IN
THE "INVESTMENT POLICIES AND LIMITATIONS" SECTION BEGINNING ON PAGE 2
IS REPLACED WITH THE TERM "BT."
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 7.
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 the fund's investments and,
through reports from FMR and/or BT, the Board monitors investments in
illiquid instruments. In determining the liquidity of the 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 investments).
Investments currently considered by the fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal
and interest within seven days, OTC options, and non-government
stripped fixed-rate mortgage-backed securities. Also, BT may determine
some restricted securities, government-stripped fixed-rate
mortgage-backed securities, loans, and other direct debt instruments,
emerging market securities, and swap agreements to be illiquid.
However, with respect to OTC options the 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.
THE FOLLOWING INFORMATION SUPPLEMENTS INFORMATION FOUND IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 7.
OTHER INVESTMENT COMPANIES. The fund may purchase the shares of other
investment companies.
EACH USE OF THE TERM "FMR" UNDER THE HEADINGS "REPURCHASE AGREEMENTS"
AND "REVERSE REPURCHASE AGREEMENTS" IN THE "INVESTMENT POLICIES AND
LIMITATIONS" SECTION BEGINNING ON PAGE 7 IS REPLACED WITH THE PHRASE
"BT OR, UNDER CERTAIN CIRCUMSTANCES, BY FMR OR AN FMR AFFILIATE."
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 8.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealer or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp. The fund will not lend securities
to BT or its affiliates. BT receives a portion of securities lending
income earned by the fund.
Securities lending allows the fund to retain ownership of the
securities loaned and, at the same time, to earn additional income.
Since there may be delays in 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 risk.
BT understands that it is the current view of the SEC Staff that the
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 the 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 the
fund cannot recover the loaned securities on termination, the fund may
sell the collateral and purchase a replacement investment in the
markets.
THE USE OF THE TERM "FMR" UNDER THE HEADING "SWAP AGREEMENTS" IN THE
"INVESTMENT POLICIES AND LIMITATIONS" SECTION ON PAGE 8 IS REPLACED
WITH THE TERM "BT."
THE FOLLOWING INFORMATION REPLACES THE "PORTFOLIO TRANSACTIONS"
SECTION IN ITS ENTIRETY BEGINNING ON PAGE 8.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are place
on behalf of the fund by BT pursuant to authority contained in the
management contract and the 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.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other accounts
over which FMR or 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; 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 the
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 fund may be useful to BT in rendering investment
management services to the fund or its other clients, and conversely,
such research provided by broker-dealers who have executed
transactions ordered on behalf of other BT clients may be useful to BT
in carrying out its obligations to the fund. 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 the fund to pay such higher commissions,
BT must determine in good faith that such commissions are reasonable
in relation to the value of the broker and research services provided
by such executing broker-dealers, viewed in terms of a particular
transaction or BT's overall responsibilities of the fund 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 fund or shares of
other Fidelity funds to the extend 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 have authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees periodically review BT's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal years ended February 1997 and 1996, the fund's
portfolio turnover rates were 3% and 1% respectively.
For the fiscal years ended February 1997, 1996, and 1995, the fund
paid brokerage commissions of $103,000, $788,000, and $96,000,
respectively. The fund pays both commissions and spreads in connection
with the placement of portfolio transactions. NFSC is paid on a
commission basis. During the fiscal years ended February 1997, 1996
and 1995, the fund paid brokerage commissions of $4,000, $7,000 and
$10,000, respectively, to NFSC. During the fiscal year ending 1997,
this amounted to approximately 4.29% of the aggregate broker
commissions paid by the fund for transactions involving approximately
1.97% of the aggregate dollar amount of transactions for which the
fund paid brokerage commissions.
During the fiscal year ended February 1997, the fund paid $65,000 in
commissions to brokerage firms that provided research services
involving approximately $100,084,000 of transactions. The provision of
research services was not necessarily a factor in the placement of all
this business with such firms.
From time to time the Trustees will review whether the recapture for
the benefit of the fund of some portion of the brokerage commissions
or similar fees paid by the fund on portfolio transactions is legally
permissible and advisable. The fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the
same as those of other funds managed by FMR, investment decisions for
the 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 these 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 the fund is
concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment manager and BT as
sub-adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"DISTRIBUTIONS AND TAXES" SECTION BEGINNING ON PAGE 14.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund
on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a capital gain distribution on shares of the fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by the fund are taxable to shareholders as dividends, not
as capital gains.
THE FOLLOWING NEW SECTION SUPPLEMENTS INFORMATION FOUND ON PAGE 15.
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 the fund described herein without violation of the
Glass-Steagall Act or other applicable banking laws of relations.
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.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 15.
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON, 3d (67), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman
of the Board and of the Executive Committee of FMR; Chairman and a
Director of FMR Texas Inc., Fidelity Management & Research (U.K.)
Inc., and Fidelity Management & Research (Far East) Inc.
J. GARY BURKHEAD (56), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (65), 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.
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.
*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 Corporation 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.
GERALD C. McDONOUGH (68), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of New York International Corp.
(air conditioning and refrigeration), Commercial Iterteck 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 (64), 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
Informart (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.
THOMAS R. WILLIAMS (68), 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).
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION ON PAGE 16.
*ROBERT C. POZEN (5l), 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.
THE FOLLOWING INFORMATION HAS BEEN ELIMINATED FROM THE "TRUSTEES AND
OFFICERS" SECTION ON PAGE 16.
JENNIFER FARRELLY (33), Vice President and manager of the fund, which
she has managed since January 1994. She joined Fidelity in 1988 as a
portfolio manager.
THE FOLLOWING INFORMATION REPLACES THE BIOGRAPHICAL INFORMATION FOR
KENNETH A. RATHGEBER IN THE "TRUSTEES AND OFFICERS" SECTION ON PAGE
16.
RICHARD A. SILVER (50), 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).
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION ON PAGE 17.
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of the fund for his
or her services for the fiscal year ended February 28, 1997, or
calendar year ended December 31, 1996, as applicable.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"COMPENSATION TABLE" IN THE "TRUSTEES AND OFFICERS" SECTION ON PAGE
17.
** Interested Trustees of the fund and Mr. Burkhead are compensated by
FMR.
THE FOLLOWING INFORMATION REPLACES SIMILAR INFORMATION FOUND IN THE
"TRUSTEES AND OFFICERS" SECTION BEGINNING ON PAGE 17.
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 to the Trustees' Plan accounts did not result in a material
cost to the funds.
THE FOLLOWING INFORMATION REPLACES THE "MANAGEMENT CONTRACT" SECTION
IN ITS ENTIRETY ON PAGE 18.
MANAGEMENT CONTRACT
FMR is the fund's manager pursuant to a management contact dated
December 5, 1997 which was approved by shareholders on November 19,
1997.
Prior to December 5, 1997, FMR was the fund's manager pursuant to a
management contract dated January 13, 1988, which was approved by
shareholders on October 19, 1988.
MANAGEMENT AND SUB-ADVISORY SERVICES. The fund employs FMR to furnish
investment advisory and other services. FMR provides the fund with all
necessary office facilities and personnel for servicing the fund's
investments, compensates all officers of the fund and all Trustees who
are "interested persons" of the trust or of FMR, and all personnel of
the fund or FMR performing services relating to research, statistical,
and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provides the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the fund; and furnishing
records, evaluations, and analyses on a variety of subjects to the
Trustees.
BT is the sub-adviser of the fund and acts as the fund's custodian.
Under its management contract with the fund, FMR acts as investment
adviser. Under the sub-advisory agreement, and subject to the
supervision of the Board of Trustees, BT directs the investment of the
fund in accordance with its investment objective, policies, and
limitations, administers the securities lending program of the fund
and provides custodial services to the 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 FIIOC and FSC, the fund pays all its expenses, without
limitations, that are not assumed by those parties.
The fund pays for the typesetting, printing, and mailing of proxy
materials to shareholders, legal expenses, and the fees of the
auditor, and non-interested Trustees. Although the fund's current
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statement of additional
information notices, and reports to shareholders, the trust, on behalf
of the fund, has entered into a revised transfer agent agreement with
FIIOC pursuant to which FIIOC bears the cost of providing these
services to existing shareholders. Other expenses paid by the fund
include interest, taxes, brokerage commissions, and the fund's
proportionate share of insurance premiums and Investment Company
Institute dues. The fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation of which the
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 the
contract, the fund pays FMR and BT monthly management and sub-advisory
fees at the annual rate of 0.24% of average net assets throughout the
month. These fees include management fees of 0.24% payable to FMR, and
estimated sub-advisory fees of less than 0.01% payable to BT
(representing 40% of net income from securities lending). FMR has
voluntarily agreed to reimburse the fund if and to the extent that its
aggregate operating expenses, including management fees (but excluding
sub-advisory fees associated with securities lending, interest, taxes,
brokerage commissions, and extraordinary expenses), are in excess of
the annual rate of 0.19%, of average net assets of the fund through
December 31, 1999. FMR retains the ability to be repaid for these
expense reimbursements in the amount that expenses fall below the
limit prior to the end of the fiscal year. Expense reimbursements by
FMR will increase the fund's total returns and repayment of
reimbursement by the fund will lower its total returns.
For the fiscal years ended February 28, 1997, February 29, 1996, and
February 28, 1995, FMR received $373,000 (after reimbursement), $0
(after reimbursement), and $0 (after reimbursement), respectively.
SUB-ADVISER. The fund and FMR have entered into a sub-advisory
agreement with BT. Pursuant to the sub-advisory agreement, FMR has
granted BT investment management authority as well as the authority to
buy and sell securities.
Under the sub-advisory agreement, for providing investment management,
securities lending and custodial services to the fund, FMR pays BT
fees at an annual rate of 0.006% of the average net assets of the
fund. In addition, as described above, in the sub-advisory agreements,
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.
THE FOLLOWING INFORMATION REPLACES THE FIRST SENTENCE OF THE FOURTH
PARAGRAPH IN THE "CONTRACTS WITH FMR AFFILIATES" SECTION ON PAGE 19.
FSC, an affiliate of FMR, performs the calculations necessary to
determine NAV and dividends for the fund and maintains the fund's
accounting records.
THE FOLLOWING INFORMATION SUPPLEMENTS INFORMATION FOUND IN THE
"CONTRACTS WITH FMR AFFILIATES" SECTION BEGINNING ON PAGE 19.
Effective December 5, 1997, FSC no longer administers the fund's
securities lending program.
THE FOLLOWING NEW SECTION SUPPLEMENTS INFORMATION FOUND ON PAGE 20.
CONTRACTS WITH BT AFFILIATES
BT is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of a fund's assets and the appointment
of any subcustodian banks and clearing agencies. However, a fund may
invest in obligations of its custodian. Bankers Trust New York
Corporation is included in the S&P 500. The Chase Manhattan Bank and
The Bank of New York, each headquartered in New York, also may serve
as special purpose custodians of certain assets in connection with
repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
BT's fees for custodial services to the fund are included in the fees
payable under the sub-advisory agreement.
THE FOLLOWING INFORMATION SUPPLEMENTS INFORMATION FOUND UNDER THE
HEADING "CUSTODIAN" IN THE "DESCRIPTION OF THE TRUST" SECTION
BEGINNING ON PAGE 20.
Effective December 5, 1997, BT replaced State Street Bank and Trust
Company as custodian of the assets of the fund.
