Fidelity Institutional Investors Trust
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-43529) UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [x]
and
REGISTRATION STATEMENT (No. 811-6448) UNDER THE INVESTMENT COMPANY ACT OF
1940
Amendment No. 14 [x]
Fidelity Institutional Investors Trust
(Exact Name of Registrant as Specified in Trust Instrument)
1201 N. Market Street, P.O. Box 1347
Wilmington, DE 19899-1347
(Address Of Principal Executive Office)
Registrant's Telephone Number: (617) 570-7000
Siobhan Perkins
Morris, Nichols, Arsht & Tunnell
1201 N. Market Street, P.O. Box 1347
Wilmington, DE 19899-1347
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b)
( ) on (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( x ) on August 23, 1996 pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule on or before January 29 1997.
FIDELITY INSTITUTIONAL INVESTORS TRUST
FIDELITY FREEDOM FUNDS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; Who May Want to Invest
3 a .............................. *
b .............................. *
c, d .............................. *
4 a i............................. Charter
ii........................... Investment Principles and Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Charter; Doing Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Charter
f .............................. Expenses; Breakdown of Expenses
g i............................. Charter
.
ii............................ *
..
5 A .............................. *
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
h .............................. *
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Cover Page; Charter
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
SUBJECT TO COMPLETION, DATED JUNE 4, 1996
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 August 23, 1996.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy, write to:
Fidelity Freedom Funds(trademark)
300 Puritan Way
MM3K
Marlborough, MA 01752-3078
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 OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FF-pro-0896
FIDELITY
FREEDOM FUNDS(trademark)
PROSPECTUS
Funds of Fidelity Institutional Investors Trust
Fidelity Freedom 2000 Fund(trademark), Fidelity Freedom 2010
Fund(trademark), Fidelity Freedom 2020 Fund(trademark), and Fidelity
Freedom 2030 Fund(trademark)each seek high total return. Fidelity Freedom
Income Fund(trademark) seeks high current income and, as a secondary
objective, capital appreciation. Each fund seeks to achieve its objective
by allocating its assets among Fidelity mutual funds, and, with the
exception of Fidelity Freedom Income Fund(trademark), by adopting a more
conservative target asset allocation over time.
FIDELITY FREEDOM INCOME FUND(trademark)
FIDELITY FREEDOM 2000 FUND(trademark)
FIDELITY FREEDOM 2010 FUND(trademark)
FIDELITY FREEDOM 2020 FUND(trademark)
FIDELITY FREEDOM 2030 FUND(trademark)
PROSPECTUS
AUGUST 23, 1996
(FIDELITY_LOGO_GRAPHIC)
82 DEVONSHIRE STREET, BOSTON, MA 02109
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This Prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such state.
CONTENTS
KEY FACTS 3 WHO MAY WANT TO INVEST
5 EXPENSES Each fund's yearly operating expenses.
6 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 17 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, AND TAXES
ACCOUNT POLICIES
TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
WHO MAY WANT TO INVEST
Each of Fidelity Freedom 2000 Fund(trademark) ("Freedom 2000"), Fidelity
Freedom 2010 Fund(trademark) ("Freedom 2010"), Fidelity Freedom 2020
Fund(trademark) ("Freedom 2020"), and Fidelity Freedom 2030 Fund(trademark)
("Freedom 2030") (or collectively the "Freedom Funds with target retirement
dates") is designed for long-term investors who expect that their financial
needs will call for an increasingly conservative investment strategy over
time.
Freedom Income Fund is designed for retired investors seeking high current
income and capital appreciation.
Each Freedom Fund invests in Fidelity mutual funds ("Underlying Fidelity
Funds") for which Fidelity Management & Research Company (FMR) or any of
its affiliates now or in the future acts as investment manager.
Each Freedom Fund with a target retirement date gradually adjusts to a more
conservative target asset allocation as it approaches its target retirement
date. This strategy is common for investors progressing through their work
and retirement years but may not be appropriate for all investors.
Unlike the Freedom Funds with target retirement dates, Freedom Income Fund
maintains a target asset allocation from year to year.
Because each Freedom Fund owns different types of mutual funds, its
performance is affected by a variety of factors. The value of each Freedom
Fund and the value of the Underlying Fidelity Funds in which it invests
will vary from day to day, and generally reflect interest rates, market
conditions, and other company, political, and economic news. Because the
assets of each Freedom Fund are mainly invested in Underlying Fidelity
Funds, each Freedom Fund's investment performance is directly related to
the investment performance of Underlying Fidelity Funds. While each
Freedom Fund invests in a number of Underlying Fidelity Funds, no one
Freedom Fund can provide an appropriate balanced investment plan for all
investors. When you sell your Freedom Fund shares, they may be worth more
or less than what you paid for them.
INVESTMENT PROGRAM
The Underlying Fidelity Funds fall into three broad investment categories
as follows: equity funds, fixed-income funds, and money market funds. For
each Freedom Fund with a target retirement date, the percentage of assets
invested in each of these categories depends on the number of years
remaining to that fund's target retirement year. For example, Freedom
2030, whose target retirement year is more than 30 years away, will start
with an aggressive target asset allocation with substantial investment in
equity funds and modest investment in fixed-income funds. By contrast,
Freedom 2000, whose target retirement year is fewer than five years away,
will start with a more conservative target asset allocation investing less
than half its assets in equity funds and the majority in fixed-income and
money market funds.
The following charts illustrate the initial target asset allocation of each
Freedom Fund as of August __, 1996:
FIDELITY FREEDOM 2000 FUND(TRADEMARK)
Equity
Funds 45%
Fixed-Income
Funds 45%
Row: 1, Col: 1, Value: 10.0
Row: 1, Col: 2, Value: 45.0
Row: 1, Col: 3, Value: 45.0
Money Market
Funds 10%
FIDELITY FREEDOM 2010 FUND(TRADEMARK)
Equity
Funds 70%
Fixed-Income
Funds 30%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 82.5
Row: 1, Col: 3, Value: 30.0
Money Market
Funds 0%
FIDELITY FREEDOM 2020 FUND(TRADEMARK)
Equity
Funds 82.5%
Fixed-Income
Funds 17.5%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 82.5
Row: 1, Col: 3, Value: 17.5
Money Market
Funds 0%
FIDELITY FREEDOM 2030 FUND(TRADEMARK)
Equity
Funds 85%
Fixed-Income
Funds 15%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 85.0
Row: 1, Col: 3, Value: 15.0
Money Market
Funds 0%
Five to ten years after a Freedom Fund with a target retirement date
reaches its target retirement year, its target asset allocation is expected
to be identical to that of Freedom Income Fund and its assets will be
transferred into Freedom Income Fund.
FIDELITY FREEDOM INCOME FUND(TRADEMARK)
Equity
Funds 20%
Fixed-Income
Funds 40%
Row: 1, Col: 1, Value: 40.0
Row: 1, Col: 2, Value: 20.0
Row: 1, Col: 3, Value: 40.0
Money Market
Funds 40%
For additional information about the Underlying Fidelity Funds in which the
Freedom Funds may invest, refer to "Securities and Investment Practices"
beginning on page ___.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
exchange, or hold shares of a Freedom Fund.
Maximum sales charge on purchases and None
reinvested distributions
Maximum deferred sales charge None
Redemption fee None
Exchange fee None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL OPERATING EXPENSES are paid out of each Freedom Fund's assets. Each
Freedom Fund pays a management fee to Strategic Advisers, Inc. (Strategic
Advisers), an affiliate of FMR. Strategic Advisers is responsible for the
payment of all other Freedom Fund expenses with certain limited exceptions.
Each Freedom Fund's expenses are factored into its share price or dividends
and are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ____).
The following are projections based on estimated expenses and are
calculated as a percentage of average net assets of each Freedom Fund.
FIDELITY FREEDOM INCOME FUND(TRADEMARK)
Management fee 0.10%
12b-1 fee (Distribution Fee) None
Other expenses None
Total operating expenses 0.10%
FIDELITY FREEDOM 2000 FUND(TRADEMARK)
Management fee 0.10%
12b-1 fee (Distribution Fee) None
Other expenses None
Total operating expenses 0.10%
FIDELITY FREEDOM 2010 FUND(TRADEMARK)
Management fee 0.10%
12b-1 fee (Distribution Fee) None
Other expenses None
Total operating expenses 0.10%
FIDELITY FREEDOM 2020 FUND(TRADEMARK)
Management fee 0.10%
12b-1 fee (Distribution Fee) None
Other expenses None
Total operating expenses 0.10%
FIDELITY FREEDOM 2030 FUND(TRADEMARK)
Management fee 0.10%
12b-1 fee (Distribution Fee) None
Other expenses None
Total operating expenses 0.10%
Each Freedom Fund will invest in the Underlying Fidelity Funds without
incurring any sales charges.
Each Freedom Fund will also indirectly bear its pro rata share of the fees
and expenses incurred by the Underlying Fidelity Funds, and each Freedom
Fund's investment return will be net of Underlying Fidelity Fund expenses.
The following chart provides the expense ratios for each of the Underlying
Fidelity Funds in which the Freedom Funds may invest. These expense ratios
represent each Underlying Fidelity Fund's most recent fiscal year-end
historical expenses as a percentage of average net assets.
Underlying Fidelity Funds Expense Ratio
Fidelity Blue Chip Growth Fund %
Fidelity Capital & Income Fund %
Fidelity Disciplined Equity Fund %
Fidelity Diversified International %
Fund
Fidelity Equity Income Fund %
Fidelity Europe Fund %
Fidelity Fund %
Fidelity Government Securities %
Fund
Fidelity Growth Company Fund %
Fidelity Growth & Income Portfolio %
Fidelity Investment Grade Bond %
Fund
Fidelity Japan Fund %
Fidelity Magellan(registered trademark) Fund %
Fidelity OTC Portfolio %
Fidelity Overseas Fund %
Fidelity Retirement Money Market %
Portfolio
Fidelity Southeast Asia Fund %
Based on the weighted average expense ratios of the Underlying Fidelity
Funds in which each Freedom Fund is currently expected to invest, the
expense ratios of the Freedom Funds are estimated to be as follows:
Freedom Income ___, Freedom 2000 ___; Freedom 2010 ___; Freedom 2020 ___;
and Freedom 2030 ___.
EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment, assuming a 5% annual return and full redemption at the end of
each time period:
1 3
Year Years
Freedom Income $ $
Freedom 2000 $ $
Freedom 2010 $ $
Freedom 2020 $ $
Freedom 2030 $ $
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
Each Freedom Fund may quote its adjusted net asset value including all
distributions paid. This value may be averaged over specified periods and
may be used to calculate a Freedom Fund's moving average.
Historical performance for each Underlying Fidelity Fund is included in the
Freedom Funds' SAI. Twice a year, you will receive a report detailing each
Freedom Fund's recent strategies, performance, holdings, and target asset
allocation for the coming fiscal year.
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 Freedom Fund is a diversified
fund of Fidelity Institutional Investors Trust, an open-end management
investment company organized as a Delaware business trust on January 29,
1992.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the Freedom Funds'
activities, review contractual arrangements with companies that provide
services to the funds, and review the funds' performance. The majority of
trustees are not otherwise affiliated with Fidelity, although they do serve
as trustees of other Fidelity funds, including the Underlying Fidelity
Funds.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
The transfer agent will mail proxy materials in advance, including a voting
card and information about the proposals to be voted on. The number of
votes you are entitled to is based upon the dollar value of your
investment.
STRATEGIC ADVISERS AND ITS AFFILIATES
The Freedom Funds are managed by Strategic Advisers, which administers the
asset allocation program for each fund and handles its business affairs.
Strategic Advisers has its principal address at 82 Devonshire Street,
Boston, Massachusetts 02109.
Strategic Advisers has five distinct divisions and also markets a financial
software product. Three of these divisions provide discretionary investment
supervisory services to specific types of investors. A fourth, Fidelity
Publishing Group, offers a variety of publications concerning investments
and personal finance. A fifth is responsible for managing the Fidelity
Freedom Funds. Strategic Advisers has no previous experience managing
mutual funds.
The Underlying Fidelity Funds are managed by FMR, which chooses their
investments and handles their business affairs.
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The Freedom Funds employ various Fidelity
companies to perform activities required for their operation.
As of ______, 1996, Strategic Advisers advised assets with a total value of
more than $____.
As of ______, 1996, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
Ren Cheng is co-portfolio manager of the Freedom Funds which he has managed
since August 1996. He is also portfolio manager of structured investments
for Fidelity Management Trust Company, which he has managed since 1994. He
joined Fidelity in 1994. Previously, Mr. Cheng was a senior portfolio
manager for Putnam Investments from 1985 to 1993.
Scott Stewart is co-portfolio manager of the Freedom Funds which he has
managed since August 1996, and is manager of Fidelity Fifty, which he has
managed since 1993. He is also group leader of Fidelity's Structured
Investments. Mr. Stewart joined Fidelity in 1987.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Investments Institutional Operations Company
(FIIOC), 82 Devonshire Street, Boston, MA 02109 performs transfer agent
servicing functions for shares of each Freedom Fund.
FMR Corp. is the ultimate parent company of Strategic Advisers and FMR.
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.
A broker-dealer may use a portion of the commissions paid by each fund to
reduce custodian or transfer agent fees for the funds. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
a fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EACH FUND'S INVESTMENT APPROACH
Each Freedom Fund with a target retirement date seeks high total return. In
seeking its investment objective, each of these funds will employ a more
conservative target asset allocation among equity, fixed-income and money
market Underlying Fidelity Funds over time. Freedom Income Fund seeks high
current income and, as a secondary objective, capital appreciation. In
seeking its investment objective, Freedom Income Fund will invest mainly in
fixed-income and money market Underlying Fidelity Funds according to a set
asset allocation schedule which also includes equity Underlying Fidelity
Funds.
For each Freedom Fund with a target retirement date, Strategic Advisers
allocates the Fund's assets among Underlying Fidelity Funds according to a
target asset allocation schedule. Each schedule is designed to provide
opportunities for long-term growth while managing the risks inherent in
long-term investing. The target asset allocation schedules constitute an
approach to asset allocation that is neither aggressive nor overly
conservative. Strategic Advisers reserves the right to modify the target
asset allocation schedule for any Freedom Fund with a target retirement
date and to modify the selection of Underlying Fidelity Funds for any
Freedom Fund if it believes that doing so will benefit the fund.
The Funds are managed with long-term goals in mind. In general, Strategic
Advisers intends to manage each Fund to remain close to its target asset
allocation schedule, and does not intend to trade actively among Underlying
Fidelity Funds or attempt to capture short-term market opportunities.
However, the ability of each Freedom Fund to meet its investment objective
is directly related to its target asset allocation among the Underlying
Fidelity Funds and the ability of those Underlying Fidelity Funds to meet
their investment objectives. Although the Underlying Fidelity Funds are
categorized generally as equity, fixed-income and money market funds, many
of the Underlying Fidelity Funds may themselves invest in a mix of stocks,
bonds, and other securities.
The table below illustrates the selection of Underlying Fidelity Funds in
which each Freedom Fund may invest and the target allocation weighting in
each Underlying Fidelity Fund as of August __, 1996. For a brief
description of each Underlying Fidelity Fund, refer to "Description of
Underlying Fidelity Funds," beginning on page __.
A Freedom Fund may invest more than 5% of its assets in an Underlying
Fidelity Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fund Categories Freedom Freedom Freedom Freedom Freedom
Income 2000 2010 2020 2030
Equity Funds
Fidelity Blue Chip Growth Fund % % % % %
Fidelity Disciplined Equity Fund % % % % %
Fidelity Diversified International Fund % % % % %
Fidelity Equity Income Fund % % % % %
Fidelity Europe Fund % % % % %
Fidelity Fund % % % % %
Fidelity Growth Company Fund % % % % %
Fidelity Growth & Income Portfolio % % % % %
Fidelity Japan Fund % % % % %
Fidelity Magellan(registered trademark) Fund % % % % %
Fidelity OTC Portfolio % % % % %
Fidelity Overseas Fund % % % % %
Fidelity Southeast Asia Fund % % % % %
Fixed-Income Funds
Fidelity Capital & Income Fund % % % % %
Fidelity Government Securities Fund % % % % %
Fidelity Investment Grade Bond Fund % % % % %
Money Market Funds
Fidelity Retirement Money Market % % % % %
Portfolio
Total 100% 100% 100% 100% 100%
</TABLE>
Each Freedom Fund reserves the right to invest in money market instruments,
in a pooled account of repurchase agreements, and in a Fidelity money
market fund available only to Fidelity funds and accounts. Each Freedom
Fund also reserves the right to invest in futures contracts or other
derivatives as a way of managing its asset allocation on a temporary basis.
Strategic Advisers normally invests each Freedom Fund's assets according to
its target asset allocation schedule. Each Freedom Fund also reserves the
right to invest without limitation in Fidelity Retirement Money Market
Portfolio for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain a brief description of each Underlying Fidelity
Fund, strategies Strategic Advisers may employ in pursuit of each Freedom
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 Freedom Fund's limitations and more detailed
information about each Underlying Fidelity Fund's investments are contained
in the Freedom Funds' SAI. Policies and limitations are considered at the
time of purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
Strategic Advisers may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a Freedom
Fund's investment objective and policies and that doing so will help a
Freedom Fund achieve its goal. Fund holdings and investment strategies,
including the past year's and the upcoming year's target asset allocation,
are detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, write to:
_______
________________.
DESCRIPTION OF UNDERLYING FIDELITY FUNDS
For more information about an Underlying Fidelity Fund, write to:
_________________.
FIDELITY BLUE CHIP GROWTH FUND is an equity fund that seeks growth of
capital over the long term by investing primarily in a diversified
portfolio of common stocks of well-known and established companies. FMR
normally invests at least 65% of the fund's total assets in the common
stock of blue chip companies. FMR defines blue chip companies to include
those with a market capitalization of at least $200 million, if the
company's stock is included in the Standard & Poor's 500 Index (S&P 500) or
the Dow Jones Industrial Average, or $1 billion if not included in either
index. Blue chip companies typically have a large number of publicly held
shares and a high trading volume, resulting in a high degree of liquidity.
These tend to be quality companies with strong management organizations.
Companies that demonstrate the potential to become blue chip companies in
the future may also be selected by FMR for the fund's investments.
When choosing the fund's domestic or foreign investments, FMR seeks
companies that it expects will demonstrate greater long-term earnings
growth than the average company included in the S&P 500. This method of
selecting stocks is based on the belief that growth in a company's earnings
will eventually translate into growth in the price of its stock. FMR looks
at strong market sectors and then identifies those companies that offer the
most attractive values based on earnings prospects. The fund's sector
emphasis may shift based on changes in the sectors' earnings outlook.
FIDELITY CAPITAL & INCOME FUND is a fixed-income fund that seeks to provide
a combination of income and capital growth by investing primarily in debt
instruments and common and preferred stocks. The fund has broad
flexibility to pursue its goal by investing in instruments of any type or
quality, but FMR expects to invest the majority of the fund's assets in
debt instruments and convertible securities, with particular emphasis on
lower-quality securities. Many of these securities present the risk of
default or may be in default. The fund may also invest in futures
contracts and other derivatives to adjust its investment exposure. In
pursuit of its goal, the fund may invest in the equity and debt securities
of domestic and foreign companies whose financial condition is perceived to
be troubled or uncertain. These companies may be involved in bankruptcy
proceedings, reorganizations, or financial restructurings. These
investments may be considered speculative and may present substantial
potential for loss as well as gain. As a result, the fund's share price
may be particularly volatile.
FIDELITY DISCIPLINED EQUITY FUND is an equity fund that seeks capital
growth by investing primarily in a broadly diversified portfolio of common
stocks. FMR normally invests at least 65% of the fund's total assets in
these securities. The fund has the flexibility, however, to invest the
balance in all types of domestic and foreign issuers.
The fund invests in securities that FMR determines are undervalued compared
to industry norms. Using a highly disciplined approach to help identify
these instruments and focusing on domestic companies with market
capitalization of $100 million or more, FMR hopes to generate more capital
growth than that of the S&P 500 while maintaining similar industry
diversification.
The disciplined approach involves computer-aided, quantitative analysis
supported by fundamental research. FMR's computer model systematically
reviews thousands of stocks, using historical earnings, dividend yield,
earnings per share, and many other factors. Then, potential investments
are analyzed further using fundamental criteria, such as the company's
growth potential and estimates of current earnings.
FIDELITY DIVERSIFIED INTERNATIONAL FUND is an equity fund that seeks
capital growth by investing primarily in equity securities of companies
located anywhere outside the U.S. The fund normally invests in equity
securities of companies from at least three countries outside of the U.S.
The fund expects to invest most of its assets in equity securities, but may
also invest in debt securities of any quality.
The fund invests in securities that FMR determines are undervalued compared
to industry norms within their countries. Using a highly disciplined
approach to help identify these instruments and focusing on companies with
market capitalizations of $100 million or more, FMR hopes to generate more
capital growth than that of the Morgan Stanley Capital International
Europe, Australia, Far East Index (EAFE Index) (GDP-weighted). The
disciplined approach involves computer-aided, quantitative analysis
supported by fundamental research. FMR's computer model systematically
reviews thousands of stocks, using historical earnings, dividend yield,
earnings per share, and many other factors. Then, potential investments
are analyzed further using fundamental criteria, such as the company's
growth potential and estimates of current earnings.
FIDELITY EQUITY INCOME FUND is an equity fund that seeks reasonable income
by investing primarily in income-producing equity securities. In pursuing
this objective, the fund will also consider the potential for capital
appreciation. FMR normally invests at least 65% of the fund's total assets
in income-producing equity securities. The fund has the flexibility,
however, to invest the balance in all types of domestic and foreign
securities, including bonds. The fund seeks a yield for its shareholders
that exceeds the yield on the securities comprising the S&P 500. The fund
does not expect to invest in debt securities of companies that do not have
proven earnings or credit.
FIDELITY EUROPE FUND is an equity fund that seeks growth of capital over
the long term through investments in securities of issuers that have their
principal activities in Western Europe. FMR normally invests at least 65%
of the fund's total assets in these securities. Western European countries
include Austria, Belgium, Denmark, Germany, Finland, France, Greece,
Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, and the United Kingdom. The fund may also invest in
Eastern Europe. FMR expects that the fund will normally invest in at least
three different countries, although it may invest all of its assets in a
single country. The fund's performance is closely tied to economic and
political conditions within Europe and the European Economic Area (formerly
the Common Market). Some European countries, particularly those in Eastern
Europe, have less stable economies than those in Western Europe. Much of
Europe remains in a recession. The movement of many Eastern European
countries toward market economies, and the movement toward a unified common
market may significantly affect European economies and markets. Eastern
European countries are considered emerging markets.
FIDELITY FUND is an equity fund that seeks long-term capital growth. In
order to provide a reasonable current return to shareholders on their
capital, the fund to some extent limits the emphasis on the growth
objective by investing a portion of its assets in securities selected for
their current income characteristics. The fund invests primarily in common
stocks or securities convertible into common stocks. The fund, in seeking
to achieve a reasonable current return to shareholders, may from time to
time invest a portion of its assets in various types of debt securities.
During temporary periods when, in FMR's judgment, market conditions
warrant, adjustments favoring more defensive securities may be made.
FIDELITY GOVERNMENT SECURITIES FUND is a fixed-income fund that seeks as
high a level of current income as is consistent with preservation of
principal. FMR normally invests at least 65% of the fund's total assets in
securities issued or guaranteed by the U.S. government or its agencies, or
instrumentalities. The fund invests so that the interest from its security
holdings is free from state and local taxes. Although the fund can invest
in securities of any maturity, FMR seeks to manage the fund so that it
generally reacts to changes in interest rates similarly to government bonds
with maturities between five and twelve years. The fund intends to invest
exclusively in U.S. government securities, or in instruments that are
backed by or related to, government securities. The fund may also invest
in futures contracts and other derivatives to adjust its investment
exposure.
FIDELITY GROWTH COMPANY FUND is an equity fund that seeks capital
appreciation. It will seek to do so primarily by investments in the common
stock and securities convertible into common stock of companies that in
FMR's judgment are experiencing or have the potential to experience
above-average growth characteristics.
Growth may be measured by factors such as earnings or gross sales. In
selecting investments for the fund, FMR will tend to focus on smaller,
lesser known companies in new and emerging areas of the economy. However,
FMR may also pursue growth in larger or revitalized companies that hold a
strong position in the market. These may be found in mature or declining
industries.
FIDELITY GROWTH & INCOME PORTFOLIO is an equity fund that seeks high total
return through a combination of current income and capital appreciation.
The fund invests mainly in domestic and foreign stocks of companies that
pay current dividends and offer potential growth of earnings. The fund may
also invest in other types of equity securities and debt securities.
FIDELITY INVESTMENT GRADE BOND FUND is a fixed-income fund that seeks to
provide a high rate of income, consistent with reasonable risk, by
investing in a broad range of fixed-income securities. In addition, the
fund seeks to protect capital. Where appropriate, the fund will take
advantage of opportunities to realize capital appreciation.
FMR normally invests at least 65% of the fund's total assets in debt
securities of investment grade quality. The fund also considers
preservation of capital and, where appropriate, takes advantage of
opportunities to realize capital appreciation.
The fund invests in domestic and foreign investment-grade debt securities.
Although the fund can invest in securities of any maturity, FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to bonds with maturities between four and ten years. In
determining a security's maturity for purposes of calculating the fund's
average maturity, estimates of the expected time for its principal to be
paid may be used. This can be substantially shorter than its stated final
maturity. The fund may also invest in futures contracts and other
derivatives to adjust its investment exposure.
FIDELITY JAPAN FUND is an equity fund that seeks long term growth of
capital by investing in securities of Japanese issuers. FMR normally
invests at least 65% of the fund's total assets in these securities. The
balance, however, may be invested in securities of other Southeast Asian
issuers.
Japan's economic growth has declined significantly since 1990. The general
government position has deteriorated as a result of weakening economic
growth and stimulative measures taken to support economic activity and to
restore financial stability. Although the decline in interest rates and
fiscal stimulus packages have helped to contain recessionary forces,
uncertainties remain. Japan is also heavily dependent upon international
trade, so its economy is especially sensitive to trade barriers. In
addition, Japan's banking industry is undergoing problems related to bad
loans and declining values of real estate.
FIDELITY MAGELLAN(registered trademark) FUND is an equity fund that seeks
capital appreciation through investments in securities of domestic,
foreign, and multinational issuers. The fund normally invests primarily in
common stock and securities convertible into common stock, but may also
invest in other types of securities in seeking its objective. The fund may
invest a portion of its assets in debt securities of all types, qualities,
and maturities issued by domestic and foreign issuers, if FMR believes that
doing so will result in capital appreciation. In selecting domestic
securities for the fund, FMR may examine U.S.-based corporations of all
sizes, industries, and geographical markets. In selecting foreign
securities, FMR will favor companies that are large and well-known,
although it may choose smaller firms that it believes offer unusual value,
even if they involve more risk.
The fund may buy securities, including domestic and foreign debt
securities, that pay dividends. However, no emphasis is placed on dividend
income, except when FMR believes this income will have a favorable
influence on the market value of the security.
FIDELITY OTC PORTFOLIO is an equity fund that seeks capital appreciation by
investing primarily in securities traded on the over-the-counter (OTC)
securities market.
FMR normally invests at least 65% of the fund's total assets in securities
principally traded on the OTC market. The fund focuses on common stock but
may invest in securities of all types.
In the OTC market, securities are traded through a telephone or computer
network that connects securities dealers. A security that trades solely on
the OTC market is not traded on the floor of an organized exchange.
Securities that begin to trade principally on an exchange after purchase
continue to be considered OTC securities for the purposes of the 65%
policy.
The fund does not place any emphasis on income, except when FMR believes
income will have a favorable influence on the security's market value.
Securities traded on the OTC market tend to be those of smaller companies,
which carry more risk than investing in larger companies. Their reliance
on limited product lines and markets, financial resources, or other factors
may make small companies more susceptible to set-backs or downturns. As a
result, their stock prices may be particularly volatile.
FIDELITY OVERSEAS FUND is an equity fund that seeks long-term growth of
capital primarily through investments in foreign securities. FMR normally
invests at least 65% of the fund's total assets in securities of issuers
from at least three different countries outside of North America (the U.S.,
Canada, Mexico, and Central America). The fund expects to invest a
majority of its assets in equity securities, but may also invest in debt
securities of any quality.
FIDELITY RETIREMENT MONEY MARKET PORTFOLIO is a money market fund that
seeks to obtain as high a level of current income as is consistent with the
preservation of capital and liquidity by investing in money market
instruments. The fund invests in high quality, U.S. dollar-denominated
money market instruments of domestic and foreign issuers. Under normal
conditions, the fund intends to invest more than 25% of its total assets in
obligations of institutions in the financial services industry.
When shares are sold, they should be worth the same amount as when
purchased. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. The fund follows industry-standard guidelines on
the quality and maturity of its investments, which are designed to help
maintain a stable $1.00 share price.
FIDELITY SOUTHEAST ASIA FUND is an equity fund that seeks capital
appreciation by investing in securities of Southeast Asian issuers. FMR
normally invests at least 65% of the fund's total assets in these
securities. Southeast Asia includes Hong Kong, Indonesia, South Korea,
Malaysia, the Philippines, the People's Republic of China, Singapore,
Taiwan, and Thailand, but the fund does not anticipate investing in Japan.
The balance, however, may be invested in securities of other Asian and
South Pacific issuers. In pursuit of its goal, the fund focuses on equity
securities, but it may also invest in other types of instruments, including
debt securities of any quality.
RISK CONSIDERATIONS OF THE UNDERLYING
FIDELITY FUNDS
The value of the Underlying Fidelity Funds' domestic and foreign
investments varies in response to many factors. Stock values fluctuate in
response to the activities of individual companies and general market and
economic conditions.
The value of the Underlying Fidelity Funds' investments in bonds fluctuates
based on changes in interest rates, market conditions, other economic and
political news, and on their quality and maturity. In general, bond prices
prices rise when interest rates fall, and vice versa. This effect is
usually more pronounced for longer-term securities. An Underlying Fidelity
Fund's investments in lower-quality securities (sometimes called "junk
bonds") offer higher yields, but also carry more risk.
An Underlying Fidelity Fund's 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.
Underlying Fidelity Funds with an international focus have increased
economic and political risks as they are exposed to events and factors in
the various world markets. This is especially true of an Underlying
Fidelity Fund that invests in emerging markets. Many investments in
emerging markets can be considered speculative, and therefore may offer
higher income and total return potential, but have significantly greater
risk. Also, to the extent that an Underlying Fidelity Fund's investments
are denominated in foreign currencies, changes in the value of foreign
currencies can significantly affect a fund's share price.
The Underlying Fidelity Funds can use various techniques to increase or
decrease its exposure to changing security prices, interest rates,
currencies, or other factors that affect security values. These techniques
may involve derivative transactions such as buying and selling options and
futures contracts, swap agreements, purchasing indexed securities, and
selling securities short. There is, however, no guarantee that any of these
techniques will work as FMR intends.
OTHER FREEDOM FUND INVESTMENTS
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. Government obligations, commercial paper
and other short-term corporate obligations, and certificates of deposit,
bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.
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.
ADJUSTING INVESTMENT EXPOSURE. Each fund reserves the right to invest in
futures contracts or other derivatives temporarily, as a way of remaining
fully invested, managing cash flows efficiently, or facilitating asset
allocation. Depending on how they are used, these investments may
effectively increase or decrease a fund's allocation to stocks or bonds.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry. Economic,
business, or political changes can affect all securities of a similar type.
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 one issuer. A fund may not invest more than 25% of its
total assets in any one industry. These limitations do not apply to U.S.
Government securities or securities of other investment companies.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a means of earning
income. This practice could result in a loss or a delay in recovering a
fund's securities. A fund may also lend money to other funds advised by
FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a fund's
total assets.
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.
Each Freedom Fund with a target retirement date seeks high total return.
Freedom Income Fund seeks high current income and, as a secondary
objective, capital appreciation.
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. Each fund may not invest more than 25% of its total
assets in any one industry. These limitations do not apply to U.S.
Government securities or securities of other investment companies.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of each fund's assets are reflected in that
fund's share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Strategic Advisers may, from time to time, agree to reimburse each fund for
expenses above a specified limit. Reimbursement arrangements, which may be
terminated at any time without notice, can decrease each fund's expenses
and boost its performance.
MANAGEMENT FEE
Each fund's management fee is calculated and paid to Strategic Advisers
every month. Strategic Advisers pays all of the expenses of each fund with
limited exceptions. The annual management fee for each fund is 0.10% of
each fund's average net assets.
OTHER EXPENSES
FIIOC performs the transfer agency, dividend disbursing and shareholder
servicing functions for each Freedom Fund. Fidelity Service Co. (FSC)
calculates the net asset value per share (NAV) and dividends for each fund
and maintains each fund's general accounting records. Pursuant to an
administration agreement between Strategic Advisers and FMR, FMR will bear
the cost of these services and will pay certain other expenses of the
Freedom Funds.
Each Freedom Fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each Plan
recognizes that Strategic Advisers or FMR may use its resources, including
management fees, to pay expenses associated with the sale of fund shares.
This may include reimbursing FDC for payments to third parties, such as
banks or broker-dealers, that provide shareholder support services or
engage in the sale of the funds' shares. The Board of Trustees of each fund
has authorized such payments.
Each fund also pays other expenses, such as interest on borrowings, taxes,
and the compensation of trustees who are not affiliated with Fidelity.
The portfolio turnover rate for each fund is not expected to exceed __% for
its first fiscal period ending November 30, 1996. These rates will 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, Fidelity Brokerage Services,
Inc. (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: ________.
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. [CORE
ACCOUNT FUNDS ONLY: You can choose Freedom Funds as your core account for
your Fidelity Ultra Service Account(registered trademark) or FidelityPlusSM
brokerage account.]
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in a fund.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers a fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL RETIREMENT 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)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 ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, NAV, is calculated every business day. Each fund's
shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4:00 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an account 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.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
These minimums may vary for investments through Fidelity Portfolio Advisory
Services. Refer to the program materials for details.
<TABLE>
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone ___________
(phone_graphic) (small solid bullet) Exchange from another
Fidelity fund (small solid bullet) Exchange from another Fidelity
account with the same registration, fund account with the same
including name, address, and registration, including name,
taxpayer ID number. address, and 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:
$50,000.
Mail (mail_graphic) (small solid bullet) Complete and sign the account (small solid bullet) Make your check payable the
application. Make your check complete name of the fund. Indicate
payable to the complete name of the your fund account number on your
fund of your choice. Mail to the check and mail to the address
address indicated on the application. printed on your account statement.
(small solid bullet) Exchange by mail: call 1-800-______
for instructions.
In Person
(hand_graphic) (small solid bullet) Bring your application and
check to a (small solid bullet) Bring your check to a Fidelity
Fidelity Investor Center. Call Investor Center. Call
1-800-______ for the center nearest 1-800-_________ for the center
you. nearest you.
Wire (wire_graphic) (small solid bullet) Call 1-800-________ to set
up your (small solid bullet) Not available for retirement
account and to arrange a wire accounts.
transaction. Not available for (small solid bullet) Wire to:
retirement accounts.
(small solid bullet) Wire within 24 hours to:
Specify the complete name of the
Specify the complete name of the fund and include your account
fund and include your new account number and your name.
number and your name.
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-__________ to add it.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-______
</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 4:00 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-________ for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open ($500 for retirement
accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(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. Mail your letter to: ___________
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
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Table Width is 178 characters.
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ACCOUNT TYPE SPECIAL REQUIREMENTS
Phone __________
(phone_graphic) All account types except retirement (small solid bullet) Maximum check request: $100,000.
(small solid bullet) For Money Line transfers to your
All account types bank account; minimum: $10;
maximum: $100,000.
(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
Sole Proprietorship, UGMA, UTMA signed by all persons required to
sign for transactions, exactly as
their names appear on the account.
Retirement account (small solid bullet) The account owner should complete
a retirement distribution form. Call
Trust 1-800-_______ to request one.
(small solid bullet) The trustee must sign the letter
indicating capacity as trustee. If the
trustee's name is not in the account
Business or Organization registration, provide a copy of the
trust document certified within the last
60 days.
(small solid bullet) At least one person authorized by
Executor, Administrator, Conservator, corporate resolution to act on the
Guardian account must sign the letter.
(small solid bullet) Include a corporate resolution with
corporate seal or a signature
guarantee.
(small solid bullet) Call 1-800-_______ for instructions.
Wire (wire_graphic) All account types except retirement (small solid bullet) You must sign up for the wire
feature before using it. To verify that
it is in place, call 1-800-_______.
Minimum wire: $5,000.
(small solid bullet) Your wire redemption request must
be received by Fidelity before 4
p.m. Eastern time for money to be
wired on the next business day.
Check
(check_graphic) All account types: (small solid bullet) Minimum check: $500.
(small solid bullet) All account owners must sign a
signature card to receive a
checkbook.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-____________
</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.
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)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-________
ACCOUNT BALANCES
1-800-________
ACCOUNT TRANSACTIONS
1-800-________
PRODUCT INFORMATION
1-800-________
QUOTES
1-800-________
RETIREMENT ACCOUNT
ASSISTANCE
1-800-________
AUTOMATED SERVICE
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 a fund. Call 1-800-________ 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-_______ 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
$100 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-________ for an
application.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-________ 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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<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay period (small solid bullet) Check the appropriate box on the fund application, or call
1-800-________ 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
<TABLE>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-________ after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-_______.
</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 for the
Freedom Funds with target retirement dates are distributed in
_____________. Income dividends for Freedom Income Fund are declared and
paid monthly. Capital gains are normally distributed in _____________.
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-________ 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
TAXES
As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, each fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
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
EACH FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity Service Co. normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
EACH FREEDOM 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.
The value of each Underlying Fidelity Fund will be its net asset value at
the time of computation. Each Freedom Fund's non-mutual fund assets are
valued primarily on the basis of market quotations or, if quotations are
not readily available or if the values have been materially affected by
events occurring after the closing of a foreign market, by a method that
the Board of Trustees believes accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page ___. Purchase orders may be refused if, in FMR's opinion, they
would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY 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 an investment professional, read your investment
professional's program materials for any additional service features or
fees that may apply. Certain features of the fund, such as the minimum
initial or subsequent investment amounts, may be modified.
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.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts (except non-prototype retirement
accounts), accounts using regular investment plans, or if total assets in
Fidelity funds exceed $50,000. Eligibility for the $50,000 waiver is
determined by aggregating Fidelity mutual fund accounts maintained by FSC
or FBSI which are registered under the same social security number or which
list the same social security number for the custodian of a Uniform
Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC 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, including each of the Fidelity Underlying
Funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) 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
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the funds or FDC. This Prospectus and the related SAI do not
constitute an offer by the funds or by FDC to sell or to buy shares of the
funds to any person to whom it is unlawful to make such offer.
FIDELITY INSTITUTIONAL INVESTORS TRUST
FIDELITY FREEDOM FUNDS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION
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10, 11 ............................ Cover Page
12 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i............................ Strategic Advisers and FMR; Portfolio
Transactions
ii........................... Trustees and Officers
.
iii.......................... Management Contracts
.
b ............................ Management Contracts
c, d ............................ Contracts with FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase, Exchange, and Redemption
Information
b ............................ Additional Purchase, Exchange, and Redemption
Information; Valuation
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ *
</TABLE>
* Not Applicable
SUBJECT TO COMPLETION, DATED JUNE 4, 1996
FIDELITY FREEDOM FUNDS(trademark):
FIDELITY FREEDOM INCOME FUND(trademark)
FIDELITY FREEDOM 2000 FUND(trademark)
FIDELITY FREEDOM 2010 FUND(trademark)
FIDELITY FREEDOM 2020 FUND(trademark)
FIDELITY FREEDOM 2030 FUND(trademark)
FUNDS OF FIDELITY INSTITUTIONAL INVESTORS TRUST
STATEMENT OF ADDITIONAL INFORMATION
82 DEVONSHIRE STREET
BOSTON, MASSACHUSETTS 02109
AUGUST 23, 1996
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus (dated
August 23, 1996). Please retain this document for future reference. To
obtain an additional copy of the Prospectus, please write to: Fidelity
Freedom Funds(trademark), 300 Puritan Way, Marlborough, MA 01752-3078.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Investment Practices of Underlying Fidelity Funds 5
Portfolio Transactions 15
Valuation 16
Performance 17
Additional Purchase, Exchange, and Redemption Information 20
Distributions and Taxes 21
Strategic Advisers and FMR 22
Trustees and Officers 22
Management Contracts 25
Contracts with FMR Affiliates 25
Distribution and Service Plans 26
Description of the Trust 27
Appendix 28
INVESTMENT ADVISER
Strategic Advisers, Inc. (Strategic Advisers)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Investments Institutional Operations Company (FIIOC)
CUSTODIAN
The Bank of New York (BONY)
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES
NOT CONSTITUTE A PROSPECTUS.
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 Freedom 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 Freedom Fund's
acquisition of such security or other asset. Accordingly, any subsequent
change in values, net assets, or other circumstances will not be considered
when determining whether the investment complies with a fund's investment
policies and limitations.
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 (1940 Act))
of a fund. However, except for the fundamental investment limitations
listed below, the investment policies and limitations described in this SAI
are not fundamental and may be changed without shareholder approval.
THE FOLLOWING ARE THE FREEDOM FUNDS' FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. EACH FREEDOM FUND MAY NOT:
(1) With respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry (provided that investments in
other investment companies shall not be considered an investment in any
particular industry for purposes of this investment limitation);
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
(9) Each fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by Fidelity Management &
Research Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) Each 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) Each 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) Each 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)). None of the funds will
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. None of the funds will 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) Each 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) Each fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(iv) would exceed 10% of the fund's net assets.
(vi) Each fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) Each fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to (i) securities received as dividends, through
offers of exchange, or as a result of reorganization, consolidation, or
merger or (ii) to securities of other open-end investment companies managed
by FMR or its affiliates purchased pursuant to an exemptive order granted
by the SEC.
(viii) Each fund does not currently intend to invest all of its assets in
the securities of a single open-end management investment company managed
by Fidelity Management & Research Company or an affiliate or successor with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
Notwithstanding the foregoing investment restrictions, the Underlying
Fidelity Funds in which the Freedom Funds may invest have adopted certain
investment restrictions which may be more or less restrictive than those
listed above, thereby permitting a Freedom Fund to engage in investment
strategies indirectly that are prohibited under the investment restrictions
listed above. The investment restrictions of each Underlying Fidelity Fund
are set forth in its SAI.
In accordance with the Freedom Funds' investment program set forth in the
prospectus, each Freedom Fund may invest more than 25% of its assets in an
Underlying Fidelity Fund. However, each of the Underlying Fidelity Funds
in which each Freedom Fund will invest (other than Fidelity Retirement
Money Market Portfolio) will not concentrate more than 25% of its total
assets in any one industry. Fidelity Retirement Money Market Portfolio
will invest more than 25% of its total assets in the financial services
industry.
Each Freedom Fund's investments must be consistent with its investment
objective and policies. Accordingly, not all of the security types and
investment techniques discussed below are eligible investments for each
fund.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to direct or
administer the day-to-day operations of any company. A fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when Strategic Advisers 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. Strategic
Advisers 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.
On matters submitted for consideration by shareholders of an Underlying
Fidelity Fund, a Freedom Fund will vote its shares in proportion to the
vote of all other holders of shares of that Underlying Fidelity Fund or, in
certain limited instances, the Freedom Fund will vote its shares in the
manner indicated by a vote of its shareholders.
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) or the
Bond Buyer Municipal Bond Index. Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market is
available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
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, Strategic
Advisers determines the liquidity of a fund's investments and, through
reports from Strategic Advisers, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments,
Strategic Advisers may consider various factors, including (1) the
frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make
a market, (4) the nature of the security (including any demand or tender
features), and (5) the nature of the marketplace for trades (including the
ability to assign or offset the fund's rights and obligations relating to
the investment).
Investments currently considered by a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, Strategic
Advisers may determine some restricted securities, government-stripped
fixed-rate mortgage-backed securities, loans and other direct debt
instruments, emerging market securities, and swap agreements to be
illiquid. However, with respect to over-the-counter options a fund writes,
all or a portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and terms
of any agreement the fund may have to close out the option before
expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, a fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect a fund
from the risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to a fund in connection with bankruptcy
proceedings), it is each fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by Strategic Advisers.
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. However, in general, Retirement Money Market Portfolio
anticipates holding restricted securities to maturity or selling them in an
exempt transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. A fund will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by Strategic Advisers. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by Strategic Advisers to be of good standing.
Furthermore, they will only be made if, in Strategic Advisers' judgment,
the consideration to be earned from such loans would justify the risk.
Strategic Advisers 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).
SOURCES OF CREDIT OR LIQUIDITY SUPPORT Strategic Advisers may rely on its
evaluation of the credit of a bank or another entity in determining whether
to purchase a security supported by a letter of credit guarantee, insurance
or other source of credit or liquidity. In evaluating the credit of a
foreign bank or other foreign entities, Strategic Advisers will consider
whether adequate public information about the entity is available and
whether the entity may be subject to unfavorable political or economic
developments, currency controls, or other government restrictions that
might affect its ability to honor its commitment.
INVESTMENT PRACTICES OF UNDERLYING FIDELITY FUNDS
The following paragraphs describes the investment practices of the
Underlying Fidelity Funds in which the Freedom Funds may invest. Each
Underlying Fidelity Fund's investments must be consistent with its
investment objective and policies. Accordingly, not all of the security
types and investment techniques discussed below are eligible investments
for each of the Underlying Fidelity Funds.
For the Underlying Fidelity Funds' limitations on futures and options
transactions, see the section entitled "Limitations on Futures and Options
Transactions" on page __.
For the Underlying Fidelity Funds' policies on foreign investments, see the
section entitled "Exposure to Foreign Markets" on page __.
For Fidelity Fund Retirement Money Market Portfolio's policies on quality
and maturity, see the section entitled "Quality and Maturity" on page __.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in
pools of consumer loans (generally unrelated to mortgage loans) and most
often are structured as pass-through securities. Interest and principal
payments ultimately depend upon payment of the underlying loans by
individuals, although the securities may be supported by letters of credit
or other credit enhancements. The value of asset-backed securities may also
depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the
credit enhancement.
CLOSED-END INVESTMENT COMPANIES Each fund may purchase the shares of
closed-end investment companies to facilitate investment in certain
countries. Shares of closed-end investment companies may trade at a premium
or a discount to their net asset value.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. [The
funds / name of non-money market funds in mm combo] may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
DOMESTIC AND FOREIGN ISSUERS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit, and bankers'
acceptances of U.S. banks and their branches located outside of the United
States, U.S. branches and agencies of foreign banks, and foreign branches
of foreign banks. A fund may also invest in U.S. dollar-denominated
securities issued or guaranteed by other U.S. or foreign issuers, including
U.S. and foreign corporations or other business organizations, foreign
governments, foreign government agencies or instrumentalities, and U.S. and
foreign financial institutions, including savings and loan institutions,
insurance companies, mortgage bankers, and real estate investment trusts,
as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental
regulation. Payment of interest and principal on these obligations may also
be affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). In addition, evidence of
ownership of portfolio securities may be held outside of the United States
and a fund may be subject to the risks associated with the holding of such
property overseas. Various provisions of federal law governing the
establishment and operation of U.S. branches do not apply to foreign
branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
Obligations of foreign issuers involve certain additional risks. These
risks may include future unfavorable political and economic developments,
withholding taxes, seizures of foreign deposits, currency controls,
interest limitations, or other governmental restrictions that might affect
payment of principal or interest, or the ability to honor a credit
commitment. Additionally, there may be less public information available
about foreign entities. Foreign issuers may be subject to less governmental
regulation and supervision than U.S. issuers. Foreign issuers also
generally are not bound by uniform accounting, auditing, and financial
reporting requirements comparable to those applicable to U.S. issuers.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments,
and may be affected by actions of foreign governments adverse to the
interests of U.S. investors. Such actions may include the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
is no assurance that FMR will be able to anticipate these potential events
or counter their effects. These risks are magnified for investments in
developing countries, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that trade
a small number of securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. Foreign
markets may offer less protection to investors than U.S. markets. It is
anticipated that in most cases the best available market for foreign
securities will be on an exchange or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may result in increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer, and
may involve substantial delays. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions and custodial
costs, are generally higher than for U.S. investors. In general, there is
less overall governmental supervision and regulation of securities
exchanges, brokers, and listed companies than in the United States. It may
also be difficult to enforce legal rights in foreign countries. Foreign
issuers are generally not bound by uniform accounting, auditing, and
financial reporting requirements and standards of practice comparable to
those applicable to U.S. issuers.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depository Receipts (ADR's) as well as other "hybrid" forms of
ADRs including European Depository Receipts (EDRs) and Global Depository
Receipts (GDRs), are certificates evidencing ownership of shares of a
foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and
interest and corporate actions. ADRs are an alternative to directly
purchasing the underlying foreign securities in their national markets and
currencies. However, ADRs continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. A fund will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a fund at one rate, while offering a lesser rate
of exchange should the fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.
A fund may use currency forward contracts for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by a fund. A fund may also use swap agreements, indexed securities,
and options and futures contracts relating to foreign currencies for the
same purposes.
When a fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." A fund may also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
A fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if a fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, a fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
may substantially change a fund's investment exposure to changes in
currency exchange rates, and could result in losses to the fund if
currencies do not perform as FMR anticipates. For example, if a currency's
value rose at a time when FMR had hedged a fund by selling that currency in
exchange for dollars, the fund would be unable to participate in the
currency's appreciation. If FMR hedges currency exposure through proxy
hedges, a fund could realize currency losses from the hedge and the
security position at the same time if the two currencies do not move in
tandem. Similarly, if FMR increases a fund's exposure to a foreign
currency, and that currency's value declines, the fund will realize a loss.
There is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at an appropriate time.
FUNDS' RIGHTS AS SHAREHOLDERS. 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 FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that a fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that a fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against a fund and the risk of actual liability if a fund is involved in
litigation. No guarantee can be made, however, that litigation against a
fund will not be undertaken or liabilities incurred.
FUTURES AND OPTIONS. The following paragraphs pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures Margin
Payments, Limitations on Futures and Options Transactions, Liquidity of
Options and Futures Contracts, Options and Futures Relating to Foreign
Currencies, OTC Options, Purchasing Put and Call Options, and Writing Put
and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when 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) or the
Bond Buyer Municipal Bond Index. Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market is
available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund 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. Each fund intends to comply with
Rule 4.5 under the Commodity Exchange Act, which limits the extent to which
the fund can commit assets to initial margin deposits and option premiums.
In addition, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on each funds' investments in futures contracts and
options, and each fund's policies regarding futures contracts and options
discussed elsewhere in this SAI, may be changed as regulatory agencies
permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of the fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter (OTC) options (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows a
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains
the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. A fund may
terminate its position in a put option it has purchased by allowing it to
expire or by exercising the option. If the option is allowed to expire, the
fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by a fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, non-government stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR may
determine some restricted securities, government-stripped fixed-rate
mortgage-backed securities, loans and other direct debt instruments,
emerging market securities, and swap agreements to be illiquid. However,
with respect to over-the-counter options a fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, a fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
INDEXED SECURITIES. A fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. Gold-indexed securities, for example, typically
provide for a maturity value that depends on the price of gold, resulting
in a security whose price tends to rise and fall together with gold prices.
Currency-indexed securities typically are short-term to intermediate-term
debt securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies, and
may offer higher yields than U.S. dollar-denominated securities of
equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose
price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
United States and abroad. At the same time, indexed securities are subject
to the credit risks associated with the issuer of the security, and their
values may decline substantially if the issuer's creditworthiness
deteriorates. Recent issuers of indexed securities have included banks,
corporations, and certain U.S. Government agencies. Indexed securities may
be more volatile than the underlying instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to, and
borrow money from, other funds advised by FMR or its affiliates. Interfund
loans and borrowings normally extend overnight, but can have a maximum
duration of seven days. Loans may be called on one day's notice. Each fund
will lend through the program only when the returns are higher than those
available from other short-term instruments (such as repurchase
agreements), and will borrow through the program only when the costs are
equal to or lower than the cost of bank loans. A fund may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
ISSUER LOCATION (FIDELITY EUROPE FUND, FIDELITY JAPAN FUND, FIDELITY
SOUTHEAST ASIA FUND ONLY). FMR determines where an issuer or its principal
business activities are located by looking at such factors as its country
of organization, the primary trading market for its securities, and the
location of its assets, personnel, sales, and earnings. The issuer of a
security is considered to be located in a particular country if (1) the
security is issued or guaranteed by the government of the country or any of
its agencies, political subdivisions, or instrumentalities; (2) the
security has its primary trading market in that country; or (3) the issuer
is organized under the laws of that country, derives at least 50% of its
revenues or profits from goods sold, investments made, or services
performed in the country, or has at least 50% of its assets located in the
country.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If a fund does not receive scheduled interest or
principal payments on such indebtedness, the fund's share price and yield
could be adversely affected. Loans that are fully secured offer a fund more
protections than an unsecured loan in the event of non-payment of scheduled
interest or principal. However, there is no assurance that the liquidation
of collateral from a secured loan would satisfy the borrower's obligation,
or that the collateral could be liquidated. Indebtedness of borrowers whose
creditworthiness is poor involves substantially greater risks and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may
never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a
risk that the governmental entities responsible for the repayment of the
debt may be unable, or unwilling, to pay interest and repay principal when
due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to a fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, a fund relies on FMR's research
in an attempt to avoid situations where fraud or misrepresentation could
adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, a fund has direct recourse against the borrower, it may
have to rely on the agent to apply appropriate credit remedies against a
borrower. If assets held by the agent for the benefit of a fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by a fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
A fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations (ii) and
(4). For purposes of these limitations, a fund generally will treat the
borrower as the "issuer" of indebtedness held by the fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between a fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict a fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980s brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-quality debt
securities and a fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by a fund. In considering investments
for a fund, FMR will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
Each fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of the fund's shareholders.
MONEY MARKET SECURITIES are high-quality, short-term obligations. Some
money market securities employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets. For
example, put features can be used to modify the maturity of a security, or
interest rate adjustment features can be used to enhance price stability.
If the structure does not perform as intended, adverse tax or investment
consequences may result. Neither the Internal Revenue Service (IRS) nor any
other regulatory authority has ruled definitively on certain legal issues
presented by structured securities. Future tax or other regulatory
determinations could adversely affect the value, liquidity, or tax
treatment of the income received from these securities or the nature and
timing of distributions made by a fund.
MORTGAGE-BACKED SECURITIES . A fund may purchase mortgage-backed securities
issued by government and non-government entities such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security is an
obligation of the issuer backed by a mortgage or pool of mortgages or a
direct interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations (CMOs), make
payments of both principal and interest at a variety of intervals; others
make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities are
based on different types of mortgages including those on commercial real
estate or residential properties. Other types of mortgage-backed securities
will likely be developed in the future, and a fund may invest in them if
FMR determines they are consistent with the funds' investment objective and
policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
MUNICIPAL SECURITIES are issued to raise money for a variety of public or
private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. The value of some or all municipal
securities may be affected by uncertainties in the municipal market related
to legislation or litigation involving the taxation of municipal securities
or the rights of municipal securities holders. A fund may own a municipal
security directly or through a participation interest.
PUT FEATURES entitle the holder to sell a security back to the issuer or a
third party at any time or at specified intervals. They are subject to the
risk that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on
demand by obtaining letters of credit or other guarantees from other
entities. Demand features, standby commitments, and tender options are
types of put features.
QUALITY AND MATURITY (RETIREMENT MONEY MARKET PORTFOLIO ONLY). Pursuant to
procedures adopted by the Board of Trustees, the fund may purchase only
high-quality securities that FMR believes present minimal credit risks. To
be considered high quality, a security must be rated in accordance with
applicable rules in one of the two highest categories for short-term
securities by at least two nationally recognized rating services (or by
one, if only one rating service has rated the security); or, if unrated,
judged to be of equivalent quality by FMR.
High-quality securities are divided into "first tier" and "second tier"
securities. First tier securities are those deemed to be in the highest
rating category (e.g., Standard & Poor's A-1), and second tier securities
are those deemed to be in the second highest rating category (e.g.,
Standard & Poor's A-2). Split-rated securities may be determined to be
either first tier or second tier based on applicable regulations.
The fund may not invest more than 5% of its total assets in second tier
securities. In addition, the fund may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the second tier securities
of a single issuer.
The fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, the fund may look to an interest rate reset or demand feature.
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 a fund
from the risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to a fund in connection with bankruptcy
proceedings), it is each fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, Retirement Money Market Portfolio
anticipates holding restricted securities to maturity or selling them in an
exempt transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. A fund will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of a fund's assets and may be
viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange
(NYSE) and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SHORT SALES "AGAINST THE BOX". A fund may sell securities short when it
owns or has the right to obtain securities equivalent in kind or amount to
the securities sold short. Short sales could be used to protect the net
asset value per share (NAV) of a fund in anticipation of increased interest
rates, without sacrificing the current yield of the securities sold short.
If a fund enters into a short sale against the box, it will be required to
set aside securities equivalent in kind and amount to the securities sold
short (or securities convertible or exchangeable into such securities) and
will be required to continue to hold such securities while the short sale
is outstanding. A fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining and closing short sales
against the box.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its evaluation of
the credit of a bank or another entity in determining whether to purchase a
security supported by a letter of credit guarantee, insurance or other
source of credit or liquidity. In evaluating the credit of a foreign bank
or other foreign entities, FMR will consider whether adequate public
information about the entity is available and whether the entity may be
subject to unfavorable political or economic developments, currency
controls, or other government restrictions that might affect its ability to
honor its commitment.
STRIPPED GOVERNMENT SECURITIES. Stripped securities are created by
separating the income and principal components of a debt instrument and
selling them separately. U.S. Treasury STRIPS (Separate Trading of
Registered Interest and Principal of Securities) are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury bond by the Federal Reserve Bank. Bonds issued by government
agencies also may be stripped in this fashion.
Privately stripped government securities are created when a dealer deposits
a Treasury security or federal agency security with a custodian for
safekeeping and then sells the coupon payments and principal payment that
will be generated by this security. Proprietary receipts, such as
Certificates of Accrual on Treasury Securities (CATS), Treasury Investment
Growth Receipts (TIGRS), and generic Treasury Receipts (TRs), are stripped
U.S. Treasury securities that are separated into their component parts
through trusts created by their broker sponsors. Bonds issued by government
agencies also may be stripped in this fashion.
Because of the SEC's views on privately stripped government securities, a
fund must evaluate them as it would non-government securities pursuant to
regulatory guidelines applicable to all money market funds. A fund
currently intends to purchase only those privately stripped government
securities that have either received the highest ranking from two
nationally recognized rating services (or one, if only one has rated the
security) or, if unrated, have been judged to be of equivalent quality by
FMR pursuant to procedures adopted by the Board of Trustees.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of investments or market
factors. Depending on their structure, swap agreements may increase or
decrease a fund's exposure to long- or short-term interest rates (in the
United States or abroad), foreign currency values, mortgage securities,
corporate borrowing rates, or other factors such as security prices or
inflation rates. Swap agreements can take many different forms and are
known by a variety of names. A fund is not limited to any particular form
of swap agreement if FMR determines it is consistent with a fund's
investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of a fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. A fund expects to be able to eliminate its
exposure under swap agreements either by assignment or other disposition,
or by entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
A fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If a fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit a fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The funds consider variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs they
purchase. The IRS has not ruled whether the interest on Participating VRDOs
is tax-exempt, and, accordingly, the funds intend to purchase these
instruments based on opinions of bond counsel. The funds may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
ZERO COUPON BONDS do not make regular interest payments; instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its dividends, a fund takes into account as income a portion of
the difference between a zero coupon bond's purchase price and its face
value.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. ORIGINAL ISSUE ZEROS are zero coupon securities
originally issued by the U.S. Government, a government agency, or a
corporation in zero coupon form.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by Strategic Advisers pursuant to authority contained
in the management contract. Strategic Advisers 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, Strategic Advisers considers various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on a
continuing basis; the reasonableness of any commissions; and arrangements
for payment of fund expenses.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which Strategic Advisers or its affiliates exercise investment discretion.
Such services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; and the
availability of securities or the purchasers or sellers of securities. In
addition, such broker-dealers may furnish analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and performance of accounts; effect securities transactions, and
perform functions incidental thereto (such as clearance and settlement).
The selection of such broker-dealers generally is made by Strategic
Advisers (to the extent possible consistent with execution considerations)
in accordance with a ranking of broker-dealers determined periodically by
Strategic Advisers' investment staff (for equity funds), and is based upon
the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to Strategic Advisers 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 Strategic Advisers clients may be
useful to Strategic Advisers in carrying out its obligations to the funds.
The receipt of such research has not reduced Strategic Advisers' normal
independent research activities; however, it enables Strategic Advisers to
avoid the additional expenses that could be incurred if Strategic Advisers
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, Strategic Advisers 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 Strategic
Advisers' overall responsibilities to the fund and its other clients. In
reaching this determination, Strategic Advisers 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.
Strategic Advisers is authorized to use research services provided by and
to place non-mutual fund 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. Strategic
Advisers may use research services provided by and place agency
transactions with Fidelity Brokerage Services, Inc. (FBSI) and Fidelity
Brokerage Services (FBS), subsidiaries of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. From September 1992 through
December 1994, FBS operated under the name Fidelity Brokerage Services
Limited, Inc. (FBSL). As of January 1995, FBSL was converted to an
unlimited liability company and assumed the name FBS.
Strategic Advisers may allocate brokerage transactions to broker-dealers
who have entered into arrangements with Strategic Advisers under which the
broker-dealer allocates a portion of the commissions paid by each fund
toward payment of that fund's expenses, such as transfer agent fees or
custodian fees. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review Strategic Advisers' 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 ___%. The portfolio turnover rate for each Underlying
Fidelity Fund has ranged from 38% to 391% during their most recent fiscal
years. There can be no assurance that the turnover rates of these funds
will remain within this range during subsequent fiscal years. Higher
turnover rates may result in higher expenses being incurred by the
Underlying Fidelity Funds.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining Strategic
Advisers as investment adviser to each fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company(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.
The value of each Underlying Fidelity Fund will be its net asset value at
the time of computation.
VALUATION OF UNDERLYING FIDELITY FUND PORTFOLIO SECURITIES: Portfolio
securities are valued by various methods depending on the primary market or
exchange on which they trade. Most equity securities for which the primary
market is the United States are valued at last sale price or, if no sale
has occurred, at the closing bid price. Most equity securities for which
the primary market is outside the United States are valued using the
official closing price or the last sale price in the principal market in
which they are traded. If the last sale price (on the local exchange) is
unavailable, the last evaluated quote or last bid price normally is used.
Fixed-income securities and other assets for which market quotations are
readily available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal market is
an exchange) in the principal market in which they normally are traded, as
furnished by recognized dealers in such securities or assets. Fixed-income
securities and convertible securities may also be valued on the basis of
information furnished by a pricing service that uses a valuation matrix
which incorporates both dealer-supplied valuations and electronic data
processing techniques. Use of pricing services has been approved by the
Board of Trustees. A number of pricing services are available, and the
Trustees, on the basis of an evaluation of these services, may use various
pricing services or discontinue the use of any pricing service.
Short-term securities are valued either at amortized cost or at original
cost plus accrued interest, both of which approximate current value.
Futures contracts and options are valued on the basis of market quotations,
if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the close of
the NYSE using the last quoted price on the local currency and then
translates the value of foreign securities from their local currencies into
U.S. dollars Any changes in the value of forward contracts due to exchange
rate fluctuations and days to maturity are included in the calculation of
NAV. If an extraordinary event that is expected to materially affect the
value of a portfolio security occurs after the close of an exchange on
which that security is traded, then that security will be valued as
determined in good faith by a committee appointed by the Board of Trustees.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
PERFORMANCE
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.
YIELD CALCULATIONS. Yields for a fund are computed by dividing the fund's
interest and dividend income, if any, for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the fund's
NAV at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate.
Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Dividends from
equity investments are treated as if they were accrued on a daily basis,
solely for the purposes of yield calculations. In general, interest income
is reduced with respect to bonds trading at a premium over their par value
by subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. For a fund's investments
denominated in foreign currencies, income and expenses are calculated first
in their respective currencies, and are then converted to U.S. dollars,
either when they are actually converted or at the end of the 30-day or one
month period, whichever is earlier. Capital gains and losses generally are
excluded from the calculation as are gains and losses from currency
exchange rate fluctuations.
Income calculated for the purposes of calculating a fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
In calculating the fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates a
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
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. 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 NAVs, adjusted NAVs, 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 growth or growth and income fund may illustrate
performance using moving averages. A long-term moving average is the
average of each week's adjusted closing NAV for a specified period. A
short-term moving average is the average of each day's adjusted closing NAV
for a specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving averages
for a specified period to produce indicators showing when an NAV has
crossed, stayed above, or stayed below its moving average.
Each fund may compare its performance to the record of the S&P 500, the Dow
Jones Industrial Average (DJIA), and the cost of living (measured by the
Consumer Price Index, or CPI) over the same period. The S&P 500 and the
DJIA comparisons would show how the fund's total return compared to the
record of a broad average of common stock prices and a narrower set of
stocks of major industrial companies, respectively, over the same period.
Of course, since bond funds invest in fixed-income securities, common
stocks represent a different type of investment from bond funds. Common
stocks generally offer greater growth potential than bond funds, but
generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investment such as bond funds. Each fund has the
ability to invest in securities not included in either index, and its
investment portfolio may or may not be similar in composition to the
indices. Figures for the S&P 500 and DJIA are based on the prices of
unmanaged groups of stocks and, unlike the fund's returns, do not include
the effect of paying brokerage commissions and other costs of investing.
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. Lipper may also rank bond funds based
on yield. In addition to the mutual fund rankings, a fund's performance
may be compared to stock, bond, and money market mutual fund performance
indices prepared by Lipper or other organizations. When comparing these
indices, it is important to remember the risk and return characteristics of
each type of investment. For example, while stock mutual funds may offer
higher potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability of
principal, but generally do not offer the higher potential returns
available from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A bond fund may compare its performance or the performance of securities in
which that bond fund may invest to averages published by IBC USA
(Publications), Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. The IBC/Donoghue's MONEY FUND
AVERAGES(trademark)/All Taxable, which is reported in the MONEY FUND
REPORT(registered trademark), covers over ___ all taxable money market
funds. The Bond Fund Report AverageS(trademark)/All Taxable, which is
reported in the BOND FUND REPORT(registered trademark), covers over ___ all
taxable bond funds. When evaluating comparisons to money market funds,
investors should consider the relevant differences in investment objectives
and policies. Specifically, money market funds invest in short-term,
high-quality instruments and seek to maintain a stable $1.00 share price.
Bond funds, however, invest in longer-term instruments and their share
prices change daily in response to a variety of factors.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include other Fidelity funds; retirement investing;
brokerage products and services; model portfolios or allocations; saving
for college or other goals; charitable giving; and the Fidelity credit
card. In addition, Fidelity may quote or reprint financial or business
publications and periodicals as they relate to current economic and
political conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a particular
mutual fund, and Fidelity services and products. Fidelity may also reprint,
and use as advertising and sales literature, articles from Fidelity Focus,
a quarterly magazine provided free of charge to Fidelity fund shareholders.
The funds may also reference, illustrate or discuss the performance of the
Underlying Fidelity Funds.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager(s).
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. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
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 _________, 1996, Strategic Advisers advised over $__ in assets.
As of _________, 1996, FMR advised over $__ billion in tax-free fund
assets, $__ billion in money market fund assets, $___ billion in equity
fund assets, $__ billion in international fund assets, and $___ billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain
a worldwide information and communications network for the purpose of
researching and managing investments abroad.
In addition to performance rankings, each bond fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
PERFORMANCE OF UNDERLYING FIDELITY FUNDS. The following tables show the
money market fund's 7-day yield, the bond funds' 30-day yields, and total
returns for each of the Underlying Fidelity Funds in which the Freedom
Funds are currently expected to invest for each fund's fiscal year end.
Total returns include the effect of each fund's maximum front-end sales
charge of __%, but does not include the effect of the funds' redemption
fee, if applicable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Ten Ten
30-day/ Years/ Years/
Fiscal 7-day One Five Life of One Five Life of
Year Yield Year Years Fund* Year Years Fund*
End
Fidelity Blue Chip Growth Fund % % % % % % %
Fidelity Capital & Income Fund
Fidelity Disciplined Equity Fund
Fidelity Diversified International
Fund
Fidelity Equity Income Fund
Fidelity Europe Fund
Fidelity Fund
Fidelity Government Securities Fund
Fidelity Growth Company Fund
Fidelity Growth & Income Portfolio
Fidelity Investment Grade Bond Fund
Fidelity Japan Fund
Fidelity Magellan Fund
Fidelity OTC Portfolio
Fidelity Overseas Fund
Fidelity Retirement Money Market
Portfolio
Fidelity Southeast Asia Fund
</TABLE>
*Fidelity Blue Chip Growth Fund commenced operations on December 31, 1987.
Fidelity Disciplined Equity Fund commenced operations on December 28,
1988.
Fidelity Diversified International Fund commenced operations on December
27, 1991.
Fidelity Europe Fund commenced operations on October 1, 1986.
Fidelity Growth & Income Portfolio commenced operations on December 30,
1985.
Fidelity Japan Fund commenced operations on September 15, 1992.
Fidelity Retirement Money Market Portfolio commenced operations on
December 2, 1988.
Fidelity Southeast Asia Fund commenced operations on April 19, 1993.
**If FMR had not reimbursed certain fund expenses during these periods,
returns would have been lower.
The performance data relating to the Underlying Fidelity Funds set forth
above is not indicative of future performance of either the Underlying
Fidelity Funds or the Freedom Funds. The performance reflects the impact of
sales charges that will not be incurred by the Freedom Funds as they
purchase shares of the Underlying Fidelity Funds.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Each fund is open for business and its NAV is calculated each day the NYSE
is open for trading. The NYSE has designated the following holiday closings
for 1996: New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Although
Strategic Advisers expects the same holiday schedule to be observed in the
future, the NYSE may modify its holiday schedule at any time.
FSC normally determines each 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 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 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 Strategic Advisers' judgment, the fund would be
unable to invest effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of each fund's income, including amounts attributable
to an Underlying Fidelity Fund's income distributions, may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the fund's income is derived from qualifying dividends. For
those Underlying Fidelity Funds that may earn other types of income, such
as interest, income from securities loans, non-qualifying dividends, and
short-term capital gains, the percentage of dividends that qualify for the
deduction will generally be less than 100%. For those Underlying Fidelity
Funds whose income is primarily derived from interest, dividends will not
qualify for the dividends-received deduction available to corporate
shareholders. Each fund will notify corporate shareholders annually of the
percentage of fund dividends that qualifies for the dividends-received
deduction. A portion of each fund's dividends derived from certain U.S.
Government obligations, including amounts attributable to an Underlying
Fidelity Fund's income distributions, may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and, therefore, will increase
(decrease) dividend distributions. If a fund's dividend distributions
exceed its net investment income during a taxable year, all or a portion of
the distributions made in the same taxable year would be recharacterized as
a return of capital to shareholders, thereby reducing each shareholder's
cost basis in his or her fund.
Short-term capital gains, including amounts attributable to an Underlying
Fidelity Fund's short-term capital gains distributed as ordinary income, or
short-term capital gains earned on the sale of Underlying Fidelity Fund
shares or other securities, are distributed as dividend income, but do not
qualify for the dividends-received deduction. These gains will be taxed as
ordinary income.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each fund,
including amounts attributable to an Underlying Fidelity Fund's long-term
capital gain distributions as well as capital gains earned on the sale of
Underlying Fidelity Fund shares or of other securities and distributed to
shareholders, are federally taxable as long-term capital gains, regardless
of the length of time shareholders have held their shares. If a shareholder
receives a long-term capital gain distribution on shares of a fund, and
such shares are held six months or less and are sold at a loss, the portion
of the loss equal to the amount of the long-term capital gain distribution
will be considered a long-term loss for tax purposes. Short-term capital
gains distributed by each fund are taxable to shareholders as dividends,
not as capital gains.
Each fund will send each of its shareholders a notice in January describing
the tax status of dividends and capital gain distributions, if any, for the
prior year.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a "
regulated investment company" for tax purposes, so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and realized capital gains within each calendar year as well as on a
fiscal year basis. Each fund also intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities including shares of mutual funds
held for less than three months constitute less than 30% of the fund's
gross income for each fiscal year. Gains from some forward currency
contracts, futures contracts, and options are included in this 30%
calculation, which may limit a fund's investments in such instruments.
Each fund is treated as a separate regulated investment company from each
of the other funds of Fidelity Institutional Investors Trust for tax
purposes.
Each Freedom Fund with a target retirement date may engage in a
reorganization transaction under certain circumstances. Five to ten years
after a Freedom Fund with a target retirement date reaches its target
retirement year, its assets are expected to be allocated like those of
Freedom Income Fund. At such time, the assets of the Freedom Fund that has
passed its target retirement year will be transferred into Freedom Income
Fund. The Trustees reserve the right to engage in such transactions in the
best interests of the funds, taking into account then-existent laws and
regulations. The trust's Trust Instrument empowers the trustees to take
these actions with or without seeking shareholder approval.
Each Underlying Fidelity Fund intends to qualify each year as a "regulated
investment company" for federal tax purposes. A regulated investment
company which holds at least 50% of its assets in municipal bonds at the
end of each quarter or in foreign securities at the end of its fiscal year
may elect to pass through exempt-interest income or foreign source income
and foreign taxes paid, respectively. Although an Underlying Fidelity Fund
may qualify to pass through these tax attributes directly to its
shareholders, shareholders of Freedom Funds which invest in Underlying
Fidelity Funds may not be eligible to obtain such benefits.
If a fund purchases shares in certain foreign investment entities, defined
as passive foreign investment companies (PFICs) in the Internal Revenue
Code, it may be subject to U.S. federal income tax on a portion of any
excess distribution or gain from the disposition of such shares. Interest
charges may also be imposed on the fund with respect to deferred taxes
arising from such distributions or gains. Generally, a fund will elect to
mark-to-market any PFIC shares. Unrealized gains will be recognized as
income for tax purposes and must be distributed to shareholders as
dividends.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of a fund may be subject to
state and local taxes on fund distributions, and shares may also be subject
to state and local personal property taxes. Investors should consult their
tax advisers to determine whether a fund is suitable for their particular
tax situation.
STRATEGIC ADVISERS AND FMR
All of the stock of FMR and Strategic Advisers is owned by FMR Corp., their
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 three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
FIIOC, which performs shareholder servicing functions for institutional
customers and funds sold through intermediaries; and Fidelity Investments
Retail Marketing Company, which provides marketing services to various
companies within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR, including
the Underlying Fidelity Funds. If the interests of a Freedom Fund and an
Underlying Fidelity Fund were to diverge, a conflict of interest could
arise and affect how the Trustees fulfill their fiduciary duties to the
affected funds. Strategic Advisers has structured the Freedom Funds to
avoid these potential conflicts, although there may be situations where a
conflict of interest is unavoidable. In such instances, Strategic Advisers
and the Trustees would take reasonable steps to minimize, and, if possible,
eliminate the conflict.
The business address of each Trustee and officer who is an "interested
person" (as defined in the 1940 Act) is 82 Devonshire Street, Boston,
Massachusetts 02109, which is also the address of FMR. The business address
of all the other Trustees 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, Strategic Advisers, or
FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (_), 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 (_), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (_), Trustee (1991), is a consultant to Western Mining
Corporation (1994). Prior to February 1994, he was President of Greenhill
Petroleum Corporation (petroleum exploration and production). Until March
1990, Mr. Cox was President and Chief Operating Officer of Union Pacific
Resources Company (exploration and production). He is a Director of
Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he serves on the Board of Directors of the
Texas State Chamber of Commerce, and he is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (_), 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.
RICHARD J. FLYNN (_), Trustee and Chairman of the non-interested Trustees,
is a financial consultant. Prior to September 1986, Mr. Flynn was Vice
Chairman and a Director of the Norton Company (manufacturer of industrial
devices). He is currently a Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc., and he previously served as a Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES (_), Trustee. Prior to his retirement in 1984, Mr. Jones
was Chairman and Chief Executive Officer of LTV Steel Company. He is a
Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products), and
he previously served as a Director of NACCO Industries, Inc. (mining and
marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc. (1985-1995).
In addition, he serves as a Trustee of First Union Real Estate Investments,
a Trustee and member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (_), 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, Vice 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 (_), Trustee (1990) is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice President
of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing
Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity
Investments Corporate Services (1991-1992). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
GERALD C. McDONOUGH (_), Trustee and Vice-Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Prior to his retirement in July 1988, he was Chairman and Chief
Executive Officer of Leaseway Transportation Corp. (physical distribution
services). Mr. McDonough is a Director of ACME-Cleveland Corp. (metal
working, telecommunications and electronic products), Brush-Wellman Inc.
(metal refining), York International Corp. (air conditioning and
refrigeration), Commercial Intertech Corp. (water treatment equipment,
1992), and Associated Estates Realty Corporation (a real estate investment
trust, 1993).
EDWARD H. MALONE (_), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of the Naples
Philharmonic Center for the Arts and Rensselaer Polytechnic Institute, and
he is a member of the Advisory Boards of Butler Capital Corporation Funds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (_), Trustee (1993) is Chairman of the Board, President, and
Chief Executive Officer of Lexmark International, Inc. (office machines,
1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign
Vice Chairman of the Tri-State United Way (1993) and is a member of the
University of Alabama President's Cabinet.
THOMAS R. WILLIAMS (_), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
WILLIAM J. HAYES (_), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ROBERT H. MORRISON (_), Manager of Security Transactions of Fidelity's
equity funds is Vice President of FMR.
FRED L. HENNING, JR. (_), Vice President, is Vice President of Fidelity's
money market (1994) and fixed-income (1995) funds and Senior Vice President
of FMR Texas Inc.
ARTHUR S. LORING (_), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (_), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
JOHN H. COSTELLO (_), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (_), 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 current trustee of each fund for his or her services as trustee for
the fiscal year ended _________, __1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPENSATION TABLE
Aggregate Compensation
J. Gary Ralph F. Phyllis Richard Edward C. E. Donald Peter S. Gerald C. Edward Marvin L. Thomas
Burkhead** Cox Burke J. Flynn Johnson 3d** Bradley J. Kirk Lynch** McDonough H. Mann R.
Davis Jones Malone Williams
Freedom $ $ $ $ $ $ $ $ $ $ $ $
Income[+]
Freedom
2000[+]
Freedom
2010[+]
Freedom
2020[+]
Freedom
2030[+]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trustees Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead** $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 128,000
Phyllis Burke Davis 5,200 52,000 125,000
Richard J. Flynn 0 52,000 160,500
Edward C. Johnson 3d** 0 0 0
E. Bradley Jones 5,200 49,400 128,000
Donald J. Kirk 5,200 52,000 129,500
Peter S. Lynch** 0 0 0
Gerald C. McDonough 5,200 52,000 128,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 128,000
Thomas R. Williams 5,200 52,000 125,000
</TABLE>
(dagger) For the fiscal year ended __________, 1996, certain of the
non-interested trustees accrued deferred compensation as follows:
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of each fund are compensated by Strategic Advisers.
+ Estimated
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
Each fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
On _______ ___, 199__, Strategic Advisers owned the majority of the
outstanding shares of each fund.
On ______ ___, 1996, the Trustees and officers of the fund owned, in the
aggregate, less than 1% of each fund's outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs Strategic Advisers to furnish investment advisory and
other services. Under its management contract with each fund, Strategic
Advisers acts as investment adviser and, subject to the supervision of the
Board of Trustees, directs the investments of each fund in accordance with
its investment objective, policies, and limitations. Strategic Advisers
also provides the fund with all necessary office facilities and personnel
for servicing the fund's investments, compensates all officers of the fund
and all Trustees who are "interested persons" of the trust or of Strategic
Advisers, and all personnel of the fund or Strategic Advisers performing
services relating to research, statistical, and investment activities.
Strategic Advisers pays all expenses of each fund with the following
exceptions: fees and expenses of all Trustees of the trust who are not
"interested persons" of the trust, Strategic Advisers, or FMR (the
non-interested Trustees); interest on borrowings; taxes; brokerage
commissions (if any); and such nonrecurring expenses as may arise,
including costs of any litigation to which a fund may be a party, and any
obligation it may have to indemnify the officers and Trustees with respect
to litigation.
Strategic Advisers is each fund's manager pursuant to management contracts
dated _______ , 1996 which were approved by Strategic Advisers, as the then
sole shareholder on _____, 1996. The management fee paid to Strategic
Advisers is reduced by an amount equal to the fees and expenses of the
non-interested Trustees.
For the services of Strategic Advisers under each contract, each fund pays
Strategic Advisers a monthly management fee at the annual rate of 0.10% of
average net assets throughout the month.
Strategic Advisers may, from time to time, voluntarily reimburse all or a
portion of each fund's operating expenses (exclusive of interest, taxes,
brokerage commissions, and extraordinary expenses). Strategic Advisers
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 Strategic Advisers will increase each
fund's total returns and yield and repayment of the reimbursement by each
fund will lower its total returns and yield.
CONTRACTS WITH FMR AFFILIATES
Pursuant to an Administration Agreement between Strategic Advisers and FMR,
FMR provides the administrative services necessary for the operation of
each fund. These services include providing facilities for maintaining each
fund's organization; supervising relations with custodians, transfer and
pricing agents, accountants, underwriters, and other persons dealing with
each fund; preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the registration
of each fund's shares under federal and state laws; developing management
and shareholder services for each fund; and furnishing reports,
evaluations, and analyses on a variety of subjects to the funds' Trustees.
FMR is responsible for the payment of all expenses of each fund with
certain exceptions as described above. Specific expenses payable by FMR
include, without limitation, expenses for the typesetting, printing, and
mailing proxy materials to shareholders; legal expenses, and the fees of
the custodian, auditor and interested Trustees; costs of typesetting,
printing, and mailing prospectuses and statements of additional
information, notices and reports to shareholders; each fund's proportionate
share of insurance premiums [and Investment Company Institute dues]. FMR
also provides for transfer agent and dividend disbursing services through
FIIOC, and portfolio and general accounting record maintenance through FSC.
FIIOC, an affiliate of Strategic Advisers and FMR, is the transfer,
dividend disbursing, and shareholder servicing agent for shares of each
fund.
Under this arrangement FIIOC 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, FIIOC 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 change. The
asset-based fees of Freedom 2000, Freedom 2010, Freedom 2020, and Freedom
2030 are subject to adjustment if the year-to-date total return of the
Standard & Poor's Composite Index of 500 Stocks exceeds positive or
negative 15%.
FIIOC bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements. Also,
FIIOC pays out-of-pocket expenses associated with transfer agent services.
FSC, an affiliate of Strategic Advisers and FMR, performs the calculations
necessary to determine the NAV and dividends for shares of each fund,
maintains each fund's accounting records, and administers each fund's
securities lending program. For pricing and bookkeeping services, FSC
receives a fee based on each fund's average net assets. FSC also receives
fees for administering each fund's securities lending program.
FMR must bear the cost of transfer, dividend disbursing, shareholder
servicing and pricing and bookkeeping services pursuant to its
administration agreement with Strategic Advisers.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements call
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at NAV. Promotional and administrative expenses in connection with
the offer and sale of shares are paid by Strategic Advisers or FMR.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved a Distribution and Service Plan on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the Rule).
The Rule provides in substance that a mutual fund may not engage directly
or indirectly in financing any activity that is primarily intended to
result in the sale of shares of 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, Strategic Advisers, 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
Strategic Advisers is deemed to be indirect financing by the funds of the
distribution of their shares, such payment is authorized by the Plans. Each
Plan specifically recognizes that Strategic Advisers or FMR may use its
resources, including management fees, to pay expenses associated with the
sale of fund shares. This may include reimbursing FDC for payments to third
parties such as banks or broker-dealers that provide shareholder support
services or engage in the sale of fund shares.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of each Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
each fund and its shareholders. In particular, the Trustees noted that each
Plan does not authorize payments by each fund other than those made to
Strategic Advisers under its management contract with the fund. To the
extent that each Plan gives Strategic Advisers, 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 Plans were approved by Strategic Advisers as the then sole shareholder
of each fund on ______, 1996.
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 interpretation of federal law expressed
herein, and banks and other financial institutions may be required to
register as dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The funds are funds of Fidelity Institutional
Investors Trust, an open-end management investment company organized as a
Delaware business trust on January 29, 1992. Currently, there are five
funds of Fidelity Institutional Investors Trust: Freedom Income, Freedom
2000, Freedom 2010, Freedom 2020, and Freedom 2030. The Trust Instrument
permits the Trustees to create additional funds.
In the event that Strategic Advisers ceases to be the investment adviser to
the trust or a fund, the right of the trust or fund to use the identifying
name "Fidelity" may be withdrawn. There is a remote possibility that one
fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
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 a business trust organized
under Delaware law. Delaware law provides that shareholders shall be
entitled to the same limitations of personal liability extended to
stockholders of private corporations for profit. The courts of some states,
however, may decline to apply Delaware law on this point. The Trust
Instrument contains an express disclaimer of shareholder liability for the
debts, liabilities, obligations, and expenses of the trust and requires
that a disclaimer be given in each contract entered into or executed by the
trust or the Trustees. The Trust Instrument provides for indemnification
out of each fund's property of any shareholder or former shareholder held
personally liable for the obligations of the fund. The Trust Instrument
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 Delaware law does not apply, no contractual
limitation of liability was in effect, and the fund is unable to meet its
obligations. Strategic Advisers believes that, in view of the above, the
risk of personal liability to shareholders is extremely remote.
The Trust Instrument further provides that the Trustees, if they have
exercised reasonable care, shall not be personally liable to any person
other than the trust or its shareholders; moreover, the Trustees shall not
be liable for any conduct whatsoever, provided that Trustees are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. The shares have no preemptive or conversion rights; the voting
and dividend rights, the right of redemption, and the privilege of exchange
are described in the Prospectus. Shares are fully paid and nonassessable,
except as set forth under the heading "Shareholder and Trustee Liability"
above. Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Trust Instrument, call meetings of the trust or fund for
any purpose related to the trust or fund, as the case may be, including, in
the case of a meeting of 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, or
merger with, another open-end management investment company or series
thereof, or upon liquidation and distribution of its assets. Generally such
terminations must be approved by vote of the holders of a majority of the
outstanding shares of the trust or the fund; however, the Trustees may,
without prior shareholder approval, (i) authorize a transfer of all assets
of a Freedom Fund with a target retirement date into Freedom Income Fund,
or any successor thereto, or (ii) change the form of organization of the
trust by merger, consolidation, or incorporation. If not so terminated or
reorganized, the trust and its funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the trust to merge or consolidate into one or more trusts,
partnerships, or corporations, or cause the trust to be incorporated under
Delaware law, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the trust registration
statement. Each fund may invest all of its assets in another investment
company.
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, New York, is
custodian of the assets of the funds. The custodian is responsible for the
safekeeping of a fund's assets and the appointment of the subcustodian
banks and clearing agencies. The custodian takes no part in determining the
investment policies of a fund or in deciding which securities are purchased
or sold by a fund. However, a fund may invest in obligations of the
custodian and may purchase securities from or sell securities to the
custodian. Chemical Bank, headquartered in New York, also may serve as a
special purpose custodian of certain assets in connection with pooled
repurchase agreement transactions.
Strategic Advisers, 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.
AUDITOR. __________________, serves as the trust's independent accountant.
The auditor examines financial statements for the funds and provides other
audit, tax, and related services.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities, including
collateralized mortgage obligations, and some asset-backed securities are
determined on a weighted average life basis, which is the average time for
principal to be repaid. For a mortgage security, this average time is
calculated by estimating the timing of principal payments, including
unscheduled prepayments, during the life of the mortgage. The weighted
average life of these securities is likely to be substantially shorter than
their stated final maturity.
The descriptions that follow are examples of eligible ratings for each
fund. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds which are rated C are the lowest-rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating will also
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics:
(medium solid bullet) All of your purchases must be made in U.S. dollars
and checks must be drawn on U.S. banks.
(medium solid bullet) Leading market positions in well established
industries.
(medium solid bullet) High rates of return on funds employed.
(medium solid bullet) Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
(medium solid bullet) Broad margins in earnings coverage of fixed financial
charges and with high internal cash generation.
(medium solid bullet) Well established access to a range of financial
markets and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS:
A - Issuers assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2, and 3 to indicate the relative degree of
safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation.
A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
PART C. OTHER INFORMATION
Item 24.
(a) Financial Statements and Financial Highlights for Institutional
Investors Trust on behalf of Fidelity Freedom Fund 2000, Fidelity Freedom
Fund 2010, Fidelity Freedom Fund 2020, Fidelity Freedom Fund 2030, and
Fidelity Freedom Income Fund (the "Fidelity Freedom Funds") will be filed
by subsequent amendment.
(b) Exhibits:
(1) Trust Instrument dated June 20, 1991 was electronically filed and is
incorporated herein by reference as Exhibit 1 to post effective amendment #
9.
(2) By-Laws of the Trust effective May 19, 1994, were electronically
filed and are incorporated herein by reference to Exhibit 2 to Union Street
Trust's post effective amendment #87.
(3) None.
(4) None.
(5)(a) Management Contract between Income Portfolios II: State and Local
Asset Management Series: Government Money Market Portfolio and Fidelity
Management & Research Company was electronically filed and is incorporated
herein by reference to Exhibit 5(a) to post effective amendment #12.
(b) Sub-Advisory Agreement between Fidelity Management & Research Company
and FMR Texas Inc. on behalf of Income Portfolios II: State and Local
Asset Management Series: Government Money Market Portfolio was
electronically filed and is incorporated herein by reference as Exhibit
5(b) to post effective amendment #9.
(6) General Distribution Agreement between Income Portfolios II: State
and Local Asset Management Series: Government Money Market Portfolio was
electronically filed and is incorporated herein by reference as Exhibit 6
to post effective amendment # 12.
(7)(a) Retirement Plan for Non-Interested Person, Trustees, Directors or
General Partners, effective November 1, 1989, was electronically field and
is incorporated herein by reference to Exhibit 7 to Union Street Trust's
Post-Effective Amendment No. 87.
(b) The Fee Deferral Plan for Non-Interested Person, Directors, and
Trustees of the Fidelity Funds, effective December 1, 1995, was
electronically filed and is incorporated herein by reference to Exhibit
7(b) to Fidelity School Street Trust's Post-Effective Amendment No. 47
(File No. 2-57167).
(8)(a) Custodian Agreement and Appendix C, dated December 1, 1994,
between The Bank of New York and Fidelity Institutional Investors Trust was
electronically filed and is incorporated herein by reference to Exhibit
8(a) to Fidelity Hereford Street Trust's Post-Effective Amendment No. 4
(File No. 33-52577).
(8)(b) Appendix A, dated September 14, 1995, to the Custodian
Agreement, dated December 1, 1994, between The Bank of New York and
Fidelity Institutional Investors Trust was electronically filed and is
incorporated herein by reference to Exhibit 8(d) to Fidelity Charles Street
Trust's Post-Effective Amendment No. 54 (File No. 2-73133).
(8)(c) Appendix B, dated September 14, 1995, to the Custodian
Agreement, dated December 1, 1994 between The Bank of New York and Fidelity
Institutional Investors Trust was electronically filed and is incorporated
herein by reference to Exhibit 8(e) to Fidelity Charles Street Trust's
Post-Effective Amendment No. 54 (File No. 2-73133).
(9) Not Applicable
(10) None.
(11) Consent of auditor will be electronically filed by subsequent
amendment.
(12) None.
(13) Not Applicable.
(14)(a) Retirement Plan for Fidelity Individual Retirement Accounts, as
currently in effect, was electronically filed and is incorporated herein
by reference to Exhibit 14(a) to Union Street Trust's Post-Effective
Amendment No. 87
(b) Retirement Plan for Portfolio Advisory Services Individual Retirement
Account, as currently in effect, was electronically filed and is
incorporated herein by reference as Exhibit 14(i) to Union Street Trust's
Post-Effective Amendment No. 87.
(c) Retirement Plan for NFSC Individual Retirement Account, as currently
in effect, was electronically filed and is incorporated herein by reference
to Exhibit 14(h) to Union Street Trust's Post-Effective Amendment No. 87.
(d) NFSC Defined Contribution Plan, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(k) to Union Street's Trust Post-Effective Amendment No. 87.
(e) Fidelity Institutional Individual Retirement Account Custodian
Agreement and Disclosure Statement, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(d) to Union Street Trust's Post-Effective Amendment No. 87.
(f) Fidelity 403(b)(7) Individual Custodial Agreement, as currently in
effect, was electronically filed and is incorporated herein by reference to
Exhibit 14(j) to Union Street Trust's Post-Effective Amendment No. 87.
(g) Fidelity 403(b) Custodial Agreement, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(e) to Union Street Trust's Post-Effective Amendment No. 87.
(h) The CORPORATE plan for Retirement Profit Sharing/401k Plan, as
currently in effect, was electronically filed and is incorporated herein by
reference to Exhibit 14(l) to Union Street Trust's Post-Effective Amendment
No. 87.
(i) The CORPORATE plan for Retirement Money Purchase Pension Plan, as
currently in effect, was electronically filed and is incorporated herein by
reference to Exhibit 14(m) to Union Street Trust's Post-Effective Amendment
No. 87.
(j) Fidelity Advisor Funds Individual Retirement Account Custodial
Agreement Disclosure Statement in effect as of January 1, 1994 was filed
electronically and is incorporated herein by reference to Exhibit 14(b) to
Advisor Series I Post-Effective Amendment No. 22.
(k) Plymouth Defined Contribution Plan, as currently in effect, was
electronically filed and is incorporated herein by reference to Exhibit
14(o) to Commonwealth Trust's Post-Effective Amendment No. 57.
(15)(a) Distribution and Service Plan pursuant to Rule 12b-1 for Income
Portfolios II: State and Local Asset Management Series: Government Money
Market Portfolio was electronically filed and is incorporated herein by
reference as Exhibit 15(a) to post effective amendment #9.
(16) A schedule for computation of performance for State and Local
Asset Management Series:
Government Money Market Portfolio was electronically filed and
is incorporated herein by reference
as Exhibit 16 to post effective amendment #11.
(17) Financial Data Schedules to be filed by subsequent amendment.
(18) None.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is the same as the Boards of other
Fidelity funds managed by Fidelity Management & Research Company. In
addition, the officers of these funds are substantially identical.
Nonetheless, Registrant takes the position that is not under common control
with these other funds since the power residing in the respective Boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
As of June 3, 1996
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
State and Local Asset Management Series:
Government Money Market Portfolio 194
Fidelity Freedom Fund 2000 0
Fidelity Freedom Fund 2010 0
Fidelity Freedom Fund 2020 0
Fidelity Freedom Fund 2030 0
Fidelity Freedom Income Fund 0
Item 27. Indemnification
Pursuant to Del. Code Ann. title 12 (sub-section) 3817, a Delaware
business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and call
claims and demands whatsoever. Article X, Section 10.02 of the Declaration
of Trust states that the Registrant shall indemnify any present trustee or
officer to the fullest extent permitted by law against liability, and all
expenses reasonably incurred by him or her in connection with any claim,
action, suit or proceeding in which he or she is involved by virtue of his
or her service as a trustee, officer, or both, and against any amount
incurred in settlement thereof. Indemnification will not be provided to a
person adjudged by a court or other adjudicatory body to be liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties (collectively,
"disabling conduct"), or not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Registrant.
In the event of a settlement, no indemnification may be provided unless
there has been a determination, as specified in the Declaration of Trust,
that the officer or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However,t he
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of their own
disabling conduct.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than
the Registrant, which names the Transfer Agent and/or the Registrant as a
party and is not based on and does not result from the Transfer Agent's
willful misfeasance, bad faith, negligence or reckless disregard of its
duties, and arises out of or in connection with the Transfer Agent's
performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) STRATEGIC ADVISERS, INC.
Strategic Advisers serves as investment adviser to the Fidelity Freedom
Funds and provides investment supervisory services to individuals, banks,
thrifts, pension and profit sharing plans, trusts, estates, charitable
organizations, corporations, other business organizations, and providing a
variety of publications on investment and personal finance. In addition to
the other offices in FMR Corp. affiliates, the directors and officers of
Strategic Advisers, have held, during the past two fiscal years, the
following positions of a substantial nature.
James C. Curvey Director and Chairman of the Board of Strategic
Advisers, Inc. (1990), Director and Senior Vice
President of FMR Corp. (1990).
Rodney R. Rohda Director and President of Strategic Advisers, Inc.
(1995); President - Premium Assets Group of Fidelity
Investments (1995); Managing Director of Fidelity
Capital (1993).
Stephanie Andrews Vice President - Charitable Advisory Services of
Strategic Advisers, Inc. (1996); Vice President -
Marketing of Fidelity Investments (1982).
Edward L. Martin Vice President of Strategic Advisers, Inc. (1996);
Director -Sales /Client Relations of Strategic
Advisers, Inc. (1995) and an employee of Strategic
Advisers, Inc. (1992).
John D. Crumrine Treasurer of Strategic Advisers, Inc. (1995); Vice
President and Treasurer of FMR Corp., (1993).
Gary Greenstein Assistant Treasurer of Strategic Advisers, Inc. (1993);
Vice President, Taxation FMR Corp. (1993).
Linda C. Holland Compliance Officer of Strategic Advisers, Inc. (1996);
Employee of Fidelity Investments (1979)
Jay Freedman Clerk of Strategic Advisers, Inc. (1995); Associate
General Counsel FMR Corp (1995); Senior Legal Counsel
(1987).
Susan Shields Assist Clerk of Strategic Advisers, Inc. (1996);
Employee of Fidelity Investments (1991).
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
Mark Peterson Director None
Neal Litvak President None
Caron Ketchum Treasurer None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company, Strategic Advisers,
Inc. or Fidelity Service Co., 82 Devonshire Street, Boston, MA 02109, or
the fund's custodian, The Bank of New York, 110 Washington Street, New
York, N.Y.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant, on behalf of State and Local Asset Management Series:
Government Money Market Portfolio, undertakes to deliver to each person who
has received the prospectus or annual or semiannual financial report for a
fund in an electronic format, upon their request and without charge, a
paper copy of the prospectus or annual or semiannual report for the fund.
. The Registrant, on behalf of Fidelity Freedom Fund 2000, Fidelity Freedom
Fund 2010, Fidelity Freedom Fund 2020, Fidelity Freedom Fund 2030, and
Fidelity Freedom Income Fund, provided the information required by Item 5A
is contained in the annual report, undertakes to furnish to each person to
whom a prospectus has been delivered, upon their request and without
charge, a copy of the Registrant's latest annual report to shareholders.
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Freedom Fund 2000, Fidelity Freedom Fund
2010, Fidelity Freedom Fund 2020, Fidelity Freedom Fund 2030, and Fidelity
Freedom Income Fund, which need not be certified, within six months of the
fund's effectiveness, unless permitted by the SEC to extend this period.
The Registrant undertakes for Fidelity Freedom Fund 2000, Fidelity
Freedom Fund 2010, Fidelity Freedom Fund 2020, Fidelity Freedom Fund 2030,
and Fidelity Freedom Income Fund: (1) to call a meeting of shareholders for
the purpose of voting upon the question of removal of a trustee or
trustees, when requested to do so by record holders of not less than 10% of
its outstanding shares; and (2) to assist in communications with other
shareholders pursuant to Section 16(c)(1) and (2), whenever shareholders
meeting the qualifications set forth in Section 16(c) seek the opportunity
to communicate with other shareholders with a view toward requesting a
meeting
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 14 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 3rd day of June 1996.
FIDELITY INSTITUTIONAL INVESTORS TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
(Signature) (Title) (Date)
/s/Edward C. Johnson 3d(dagger) President and Trustee June 3, 1996
Edward C. Johnson 3d (Principal Executive Officer)
/s/Kenneth A. Rathgeber Treasurer June 3, 1996
Kenneth A. Rathgeber
/s/J. Gary Burkhead Trustee June 3, 1996
J. Gary Burkhead
/s/Ralph F. Cox * Trustee June 3, 1996
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee June 3, 1996
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee June 3, 1996
Richard J. Flynn
/s/E. Bradley Jones * Trustee June 3, 1996
E. Bradley Jones
/s/Donald J. Kirk * Trustee June 3, 1996
Donald J. Kirk
/s/Peter S. Lynch * Trustee June 3, 1996
Peter S. Lynch
/s/Edward H. Malone * Trustee June 3, 1996
Edward H. Malone
/s/Marvin L. Mann * Trustee June 3, 1996
Marvin L. Mann
/s/Gerald C. McDonough* Trustee June 3, 1996
Gerald C. McDonough
/s/Thomas R. Williams * Trustee June 3, 1996
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity any
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Pre-Effective Amendments or
Post-Effective Amendments to said Registration Statements on Form N-1A or
any successor thereto, any Registration Statements on Form N-14, and any
supplements or other instruments in connection therewith, and generally to
do all such things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Director, Trustee or General Partner (collectively,
the "Funds"), hereby severally constitute and appoint Arthur J. Brown,
Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana L. Platt
and Stephanie A. Djinis, each of them singly, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
each of them, to sign for me and my name in the appropriate capacities any
Registration Statements of the Funds on Form N-1A or any successor thereto,
any and all subsequent Pre-Effective Amendments or Post-Effective
Amendments to said Registration Statements on Form N-1A or any successor
thereto, any Registration Statements on Form N-14, and any supplements or
other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorneys-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact
or their substitutes may do or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
POWER OF ATTORNEY
I, the undersigned Treasurer and principal financial and accounting
officer of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as Treasurer and principal financial and accounting
officer (collectively, the "Funds"), hereby constitute and appoint John H.
Costello, my true and lawful attorney-in-fact, with full power of
substitution, and with full power to him to sign for me and in my name, in
the appropriate capacity any Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Pre-Effective Amendments or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorney-in-fact deems necessary or
appropriate, to comply with the provisions of the Securities Act of 1933
and the Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission. I hereby ratify and confirm all that
said attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof.
WITNESS my hand on the date set forth below.
/s/Stephen P. Jonas March 1, 1995
Stephen P. Jonas
POWER OF ATTORNEY
I, the undersigned Treasurer and principal financial and accounting
officer of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as Treasurer and principal financial and accounting
officer (collectively, the "Funds"), hereby constitute and appoint John H.
Costello, my true and lawful attorney-in-fact, with full power of
substitution, and with full power to him to sign for me and in my name, in
the appropriate capacity any Registration Statements of the Funds on Form
N-1A, Form N-8A or any successor thereto, any and all subsequent
Pre-Effective Amendments or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name and
behalf in connection therewith as said attorney-in-fact deems necessary or
appropriate, to comply with the provisions of the Securities Act of 1933
and the Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission. I hereby ratify and confirm all that
said attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof.
WITNESS my hand on the date set forth below.
/s/Kenneth A. Rathgeber July 1, 1995
Kenneth A. Rathgeber
