SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-43529)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 20 [X]
and
REGISTRATION STATEMENT (No. 811-6440)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 20 [X]
Fidelity Aberdeen Street Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(X) on May 21, 1998 pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on (date) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date
for a previously filed
post-effective amendment.
FIDELITY ABERDEEN STREET 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 .............................. FINANCIAL HIGHLIGHTS
B .............................. *
C, D .............................. PERFORMANCE
4 A I............................. CHARTER
II........................... INVESTMENT PRINCIPLES AND RISKS
B .............................. INVESTMENT PRINCIPLES AND RISKS; SECURITIES AND
INVESTMENT PRACTICES
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 .............................. PERFORMANCE
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
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' most recent financial report and portfolio listing
or a copy of the funds' Statement of Additional Information (SAI)
dated May 21, 1998 . The SAI has been filed with the Securities
and Exchange Commission (SEC) and is available along with other
related materials on the SEC's Internet Web site (http://www.sec.gov).
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
FIDELITY FREEDOM 2000 FUND
SM
FIDELITY
FREEDOM
FUNDS
SM
(fund number 370, trading symbol FFFBX)
FIDELITY FREEDOM 2010 FUND
SM
(fund number 371, trading symbol FFFCX)
FIDELITY FREEDOM 2020 FUND
SM
(fund number 372, trading symbol FFFDX)
FIDELITY FREEDOM 2030 FUND
SM
(fund number 373, trading symbol FFFEX)
each seeks high total return.
FIDELITY FREEDOM INCOME FUND
SM
(fund number 369, trading symbol FFFAX)
seeks high current income and, as a secondary objective, capital
appreciation.
Each Freedom Fund seeks to achieve its objective by allocating its
assets among other Fidelity mutual funds, and, with the exception of
Fidelity Freedom Income Fund, by adopting a more conservative target
asset allocation over time.
PROSPECTUS
MAY 21, 1998 (FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET,
BOSTON, MA 02109
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
FF-PRO-05 98
702545
CONTENTS
KEY FACTS 4 WHO MAY WANT TO INVEST
7 EXPENSES EACH FREEDOM FUND'S YEARLY
OPERATING EXPENSES.
9 FINANCIAL HIGHLIGHTS A SUMMARY OF
EACH FREEDOM FUND'S FINANCIAL DATA.
14 PERFORMANCE HOW EACH FREEDOM FUND
HAS DONE OVER TIME.
THE FUNDS IN DETAIL 16 CHARTER HOW EACH FREEDOM FUND IS
ORGANIZED.
17 INVESTMENT PRINCIPLES AND RISKS EACH
FREEDOM FUND'S OVERALL APPROACH TO
INVESTING.
25 BREAKDOWN OF EXPENSES HOW
OPERATING COSTS ARE CALCULATED AND WHAT
THEY INCLUDE.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS DIFFERENT WAYS TO
SET UP YOUR ACCOUNT, INCLUDING
TAX-ADVANTAGED 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 ACCOUNT 37 COMBINATION WITH FREEDOM
POLICIES INCOME FUND
37 DIVIDENDS, CAPITAL GAINS, AND TAXES
37 TRANSACTION DETAILS SHARE PRICE
CALCULATIONS AND THE TIMING OF PURCHASES
AND REDEMPTIONS.
38 EXCHANGE RESTRICTIONS
KEY FACTS
WHO MAY WANT TO INVEST
Fidelity Freedom 2000 Fund (Freedom 2000), Fidelity Freedom 2010 Fund
(Freedom 2010), Fidelity Freedom 2020 Fund (Freedom 2020), and
Fidelity Freedom 2030 Fund (Freedom 2030) are referred to collectively
as the "Freedom Funds with target retirement dates." Each of these
funds is designed for long-term investors seeking high total return
through a single investment with an asset allocation strategy that
becomes increasingly conservative over time, reflecting an investor's
changing financial needs as he or she becomes older. Each fund's name
refers to the approximate retirement year of the investors for whom
the fund's asset allocation strategy is designed. That is, Freedom
2000 is designed for investors planning to retire around the year 2000
(approximately two years from now); Freedom 2010 is designed
for investors planning to retire around the year 2010 (approximately
12 years from now); and so on.
Fidelity Freedom Income Fund (Freedom Income) is designed for
investors seeking high current income and, secondarily, capital
appreciation during their retirement years.
Each Freedom Fund seeks to achieve its investment objective by
investing in a combination of Fidelity equity, fixed-income, and money
market funds (underlying Fidelity funds). The performance of each
Freedom Fund depends on the performance of the underlying Fidelity
funds in which it invests. The performance of the underlying Fidelity
funds, in turn, depends on the performance of the stock, bond, and
money markets in the U.S. and abroad. The value of each Freedom Fund
will vary from day to day, reflecting changes in these markets and in
the values of the underlying Fidelity funds. When you sell your
Freedom Fund shares, they may be worth more or less than what you paid
for them.
The Freedom Funds are designed to provide moderate asset allocation
programs for investors progressing through their work and retirement
years. No one fund, however, can provide an appropriate balanced
investment program for all investors and you should evaluate the
Freedom Funds in the context of your overall financial situation,
investment goals, and other retirement investments. If you consider
yourself an especially aggressive or conservative investor, you may
want to add other investments to your retirement portfolio to achieve
the balance that is best for you.
INVESTMENT PROGRAM
Each Freedom Fund seeks to achieve its investment objective by
allocating its assets among underlying Fidelity funds. The underlying
Fidelity funds fall into three broad investment categories: equity
(stock) funds, fixed-income (bond) funds, and money market funds.
There are two subcategories for the equity funds - domestic and
international, and two subcategories for the fixed-income funds -
investment grade and high yield. For additional information about the
underlying Fidelity funds, refer to "Securities and Investment
Practices" of the Freedom Funds beginning on page .
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 until that fund's target retirement year. For example,
Freedom 2030, whose target retirement year is more than 30 years away,
will start with a relatively aggressive target asset allocation, with
a substantial investment in equity funds and a modest investment in
fixed-income funds. By contrast, Freedom 2000, whose target retirement
year is less than two years away, will start with a relatively
conservative target asset allocation, investing less than half of its
assets in equity funds and the majority of its assets in fixed-income
and money market funds.
The Freedom Funds with target retirement dates do not mature or
terminate when they reach their target retirement years. Instead, each
of these funds continues to invest according to an asset allocation
strategy that becomes increasingly conservative over time until the
fund's target allocation matches Freedom Income's target allocation.
At that time, approximately five to ten years after a fund's target
retirement date, it is expected that the fund will be combined with
Freedom Income and the fund's shareholders will become shareholders of
Freedom Income. For additional information, refer to "Combination with
Freedom Income Fund" on page .
The charts on the right illustrate the target asset allocation of each
Freedom Fund as of March 31, 1998 .
FREEDOM INCOME
DOMESTIC
EQUITY
FUNDS 20%
INTERNATIONAL
EQUITY FUNDS 0%
ROW: 1, COL: 1, VALUE: 40.0
ROW: 1, COL: 2, VALUE: 20.0
ROW: 1, COL: 3, VALUE: 0.0
ROW: 1, COL: 4, VALUE: 0.0
ROW: 1, COL: 5, VALUE: 40.0
INVESTMENT
GRADE FIXED-
INCOME
FUNDS 40%
HIGH YIELD
FIXED-INCOME
FUNDS 0%
MONEY MARKET
FUNDS 40%
FREEDOM 2000
DOMESTIC
EQUITY
FUNDS 37%
INTERNATIONAL
EQUITY FUNDS 4%
ROW: 1, COL: 1, VALUE: 40.0
ROW: 1, COL: 2, VALUE: 39.0
ROW: 1, COL: 3, VALUE: 4.0
ROW: 1, COL: 4, VALUE: 4.0
ROW: 1, COL: 5, VALUE: 13.0
INVESTMENT
GRADE FIXED-
INCOME
FUNDS 40%
HIGH YIELD
FIXED-INCOME
FUNDS 4%
MONEY MARKET
FUNDS 15%
FREEDOM 2010
DOMESTIC
EQUITY
FUNDS 56%
INTERNATIONAL
EQUITY FUNDS 9%
ROW: 1, COL: 1, VALUE: 5.0
ROW: 1, COL: 2, VALUE: 70.0
ROW: 1, COL: 3, VALUE: 15.0
ROW: 1, COL: 4, VALUE: 10.0
ROW: 1, COL: 5, VALUE: 0.0
INVESTMENT
GRADE FIXED-
INCOME
FUNDS 26%
HIGH YIELD
FIXED-INCOME
FUNDS 7%
MONEY MARKET
FUNDS 2%
FREEDOM 2020
DOMESTIC
EQUITY
FUNDS 68%
INTERNATIONAL
EQUITY FUNDS 12%
ROW: 1, COL: 1, VALUE: 11.0
ROW: 1, COL: 2, VALUE: 69.0
ROW: 1, COL: 3, VALUE: 12.0
ROW: 1, COL: 4, VALUE: 8.0
ROW: 1, COL: 5, VALUE: 0.0
INVESTMENT
GRADE FIXED-
INCOME
FUNDS 12%
HIGH YIELD
FIXED-INCOME
FUNDS 8%
MONEY MARKET
FUNDS 0%
FREEDOM 2030
DOMESTIC
EQUITY
FUNDS 70%
INTERNATIONAL
EQUITY FUNDS 14%
ROW: 1, COL: 1, VALUE: 5.0
ROW: 1, COL: 2, VALUE: 70.0
ROW: 1, COL: 3, VALUE: 15.0
ROW: 1, COL: 4, VALUE: 10.0
ROW: 1, COL: 5, VALUE: 0.0
INVESTMENT
GRADE FIXED-
INCOME
FUNDS 6%
HIGH YIELD
FIXED-INCOME
FUNDS 10%
MONEY MARKET
FUNDS 0%
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of a Freedom Fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page , for an explanation of
how and when these charges apply.
SALES CHARGE ON PURCHASES AND NONE
REINVESTED DISTRIBUTIONS
DEFERRED SALES CHARGE ON REDEMPTIONS 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 Fidelity Management &
Research Company (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 figures are based on historical expenses ,
adjusted to reflect current fees, of each fund and are calculated as a
percentage of average net assets of each Freedom Fund.
FREEDOM INCOME
MANAGEMENT FEE (AFTER REIMBURSEMENT) 0.08%
12B-1 FEE (DISTRIBUTION FEE) NONE
OTHER EXPENSES 0.00%
TOTAL OPERATING EXPENSES 0.08%
(AFTER REIMBURSEMENT)
FREEDOM 2000
MANAGEMENT FEE (AFTER REIMBURSEMENT) 0.08%
12B-1 FEE (DISTRIBUTION FEE) NONE
OTHER EXPENSES 0.00%
TOTAL OPERATING EXPENSES 0.08%
(AFTER REIMBURSEMENT)
FREEDOM 2010
MANAGEMENT FEE (AFTER REIMBURSEMENT) 0.08%
12B-1 FEE (DISTRIBUTION FEE) NONE
OTHER EXPENSES 0.00%
TOTAL OPERATING EXPENSES 0.08%
(AFTER REIMBURSEMENT)
FREEDOM 2020
MANAGEMENT FEE (AFTER REIMBURSEMENT) 0.08%
12B-1 FEE (DISTRIBUTION FEE) NONE
OTHER EXPENSES 0.00%
TOTAL OPERATING EXPENSES 0.08%
(AFTER REIMBURSEMENT)
FREEDOM 2030
MANAGEMENT FEE (AFTER REIMBURSEMENT) 0.08%
12B-1 FEE (DISTRIBUTION FEE) NONE
OTHER EXPENSES 0.00%
TOTAL OPERATING EXPENSES 0.08%
(AFTER REIMBURSEMENT)
Effective November 1, 1996 Strategic Advisers has voluntarily
agreed to reimburse each Freedom Fund to the extent that total
operating expenses ( excluding interest, taxes, brokerage
commissions and extraordinary expenses) exce ed 0.08% of its
average net assets. If these agreements were not in effect, the
management fee, other expenses, and total operating expenses, as a
percentage of average net assets, of each Freedom Fund would have been
0.10 %, 0.00 %, and 0.10 % , respectively .
A Freedom Fund will not incur any sales charges when it invests in
underlying Fidelity funds, but it may incur exchange or short-term
trading fees, if applicable. Such charges and fees may or may not
have been incurred if a shareholder had invested directly in the
underlying Fidelity funds.
In addition to the total operating expenses shown to the left ,
each Freedom Fund, as a shareholder in an underlying Fidelity fund,
will indirectly bear its pro rata share of the fees and expenses
incurred by the underlying Fidelity fund, and each Freedom Fund's
investment return will be net of underlying Fidelity fund expenses.
The following chart provides the total operating expense ratios for
the underlying Fidelity funds.
The following figures are based on historical expenses for each
underlying Fidelity fund's most recently reported fiscal year end and
are calculated as a percentage of average net assets of each
underlying Fidelity fund. Where appropriate, expense ratios are
adjusted to reflect current fees.
UNDERLYING FIDELITY FUNDS EXPENSE RATIO
FIDELITY BLUE CHIP GROWTH FUND 0.78 %
FIDELITY CAPITAL & INCOME FUND 0.84 %
FIDELITY DISCIPLINED EQUITY FUND 0.64 %
FIDELITY DIVERSIFIED INTERNATIONAL FUND 1.23 %
FIDELITY EQUITY-INCOME FUND 0.65 %
FIDELITY EUROPE FUND 1.18 %
FIDELITY FUND 0.84 %
FIDELITY GOVERNMENT SECURITIES FUND 0.72 %
FIDELITY GROWTH & INCOME PORTFOLIO 0.71 %
FIDELITY GROWTH COMPANY FUND 0.68 %
FIDELITY INTERMEDIATE BOND FUND 0.69 %
FIDELITY INVESTMENT GRADE BOND FUND 0.75 %
FIDELITY JAPAN FUND 1.40 %
FIDELITY MONEY MARKET TRUST: RETIREMENT MONEY MARKET PORTFOLIO 0.39 %
FIDELITY OTC PORTFOLIO 0.84 %
FIDELITY OVERSEAS FUND 1.20 %
FIDELITY SOUTHEAST ASIA FUND 1.32 %
The total expense ratios of each Freedom Fund (calculated as a
percentage of average net assets) are as follows: Freedom Income:
0.67 %; Freedom 2000: 0.78 %; Freedom 2010: 0.85 %;
Freedom 2020: 0.88 %; and Freedom 2030: 0.90 %. Each
Freedom Fund's total expense ratio is based on its total operating
expense ratio plus a weighted average of the expense ratios of the
underlying Fidelity funds (as described above) in which it was
invested as of March 31, 1998. These total expense ratios may
be higher or lower depending on the allocation of a Freedom Fund's
assets among the underlying Fidelity funds, and the actual expenses of
the underlying Fidelity funds.
EXPENSE TABLE EXAMPLE: Based on each Freedom Fund's total expenses
shown in the preceding paragraph, you would pay the following expenses
on a $1,000 investment in each Freedom Fund, assuming a 5% annual
return and full redemption at the end of each time period. Total
expenses shown below include any shareholder transaction expenses and
each Freedom Fund's annual operating expenses.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
FREEDOM INCOME $ 7 $ 21 $ 37 $ 84
FREEDOM 2000 $ 8 $ 25 $ 43 $ 97
FREEDOM 2010 $ 9 $ 27 $ 47 $ 105
FREEDOM 2020 $ 9 $ 28 $ 49 $ 108
FREEDOM 2030 $ 9 $ 29 $ 50 $ 110
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED EXPENSES OR RETURNS, ALL OF WHICH
MAY VARY.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for Freedom Income,
Freedom 2000, Freedom 2010, Freedom 2020, and Freedom 2030, have been
audited by Coopers & Lybrand L.L.P. , independent accountants.
The funds' financial highlights, financial statements, and reports of
the auditor are included in the funds' Annual Report, and are
incorporated by reference into (are legally a part of) the funds' SAI.
Contact Fidelity for a free copy of the Annual Report or the SAI.
FIDELITY FREEDOM INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED MARCH 31 1998 1997G
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOMED .50 .22
NET REALIZED AND UNREALIZED GAIN (LOSS) .96 (.02)E
TOTAL FROM INVESTMENT OPERATIONS 1.46 .20
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.51) (.14)
FROM NET REALIZED GAIN (.06) --
TOTAL DISTRIBUTIONS (.57) (.14)
NET ASSET VALUE, END OF PERIOD $ 10.95 $ 10.06
TOTAL RETURNB,C 14.88% 1.99%
RATIOS AND SUPPLEMENTAL DATA
(AMOUNTS DO NOT INCLUDE THE ACTIVITY OF
UNDERLYING FUNDS)
NET ASSETS, END OF PERIOD (000 OMITTED) $ 55,472 $ 9,427
RATIO OF EXPENSES TO AVERAGE NET ASSETS .08%F .08%A,F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 4.71% 4.95%A
PORTFOLIO TURNOVER RATE 33% 32%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F STRATEGIC ADVISERS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S
EXPENSE RATIO WOULD HAVE BEEN HIGHER.
G FOR THE PERIOD OCTOBER 17, 1996 (COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 1997.
FIDELITY FREEDOM 2000 FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED MARCH 31 1998 1997G
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOMED .60 .18
NET REALIZED AND UNREALIZED GAIN (LOSS) 1.71 .03E
TOTAL FROM INVESTMENT OPERATIONS 2.31 .21
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.33) (.09)
FROM NET REALIZED GAIN (.12) --
TOTAL DISTRIBUTIONS (.45) (.09)
NET ASSET VALUE, END OF PERIOD $ 11.98 $ 10.12
TOTAL RETURNB,C 23.25% 2.09%
RATIOS AND SUPPLEMENTAL DATA
(AMOUNTS DO NOT INCLUDE THE ACTIVITY OF
UNDERLYING FUNDS)
NET ASSETS, END OF PERIOD (000 OMITTED) $ 325,126 $ 15,946
RATIO OF EXPENSES TO AVERAGE NET ASSETS .08%F .08%A,F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 3.72% 4.00%A
PORTFOLIO TURNOVER RATE 24% 19%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F STRATEGIC ADVISERS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S
EXPENSE RATIO WOULD HAVE BEEN HIGHER.
G FOR THE PERIOD OCTOBER 17, 1996 (COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 1997.
FIDELITY FREEDOM 2010 FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED MARCH 31 1998 1997G
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOMED .30 .11
NET REALIZED AND UNREALIZED GAIN (LOSS) 2.82 .15E
TOTAL FROM INVESTMENT OPERATIONS 3.12 .26
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.37) (.11)
FROM NET REALIZED GAIN (.09) --
TOTAL DISTRIBUTIONS (.46) (.11)
NET ASSET VALUE, END OF PERIOD $ 12.81 $ 10.15
TOTAL RETURNB,C 31.31% 2.59%
RATIOS AND SUPPLEMENTAL DATA
(AMOUNTS DO NOT INCLUDE THE ACTIVITY OF
UNDERLYING FUNDS)
NET ASSETS, END OF PERIOD (000 OMITTED) $ 647,356 $ 23,600
RATIO OF EXPENSES TO AVERAGE NET ASSETS .08%F .08%A,F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 2.54% 2.56%A
PORTFOLIO TURNOVER RATE 20% 3%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F STRATEGIC ADVISERS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S
EXPENSE RATIO WOULD HAVE BEEN HIGHER.
G FOR THE PERIOD OCTOBER 17, 1996 (COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 1997.
FIDELITY FREEDOM 2020 FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED MARCH 31 1998 1997G
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.21 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOMED .21 .08
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.33 .22E
TOTAL FROM INVESTMENT OPERATIONS 3.54 .30
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.34) (.09)
FROM NET REALIZED GAIN (.13) --
TOTAL DISTRIBUTIONS (.47) (.09)
NET ASSET VALUE, END OF PERIOD $ 13.28 $ 10.21
TOTAL RETURNB,C 35.36% 2.99%
RATIOS AND SUPPLEMENTAL DATA
(AMOUNTS DO NOT INCLUDE THE ACTIVITY OF
UNDERLYING FUNDS)
NET ASSETS, END OF PERIOD (000 OMITTED) $ 577,603 $ 14,958
RATIO OF EXPENSES TO AVERAGE NET ASSETS .08%F .08%A,F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.76% 1.75%A
PORTFOLIO TURNOVER RATE 15% 21%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F STRATEGIC ADVISERS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S
EXPENSE RATIO WOULD HAVE BEEN HIGHER.
G FOR THE PERIOD OCTOBER 17, 1996 (COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 1997.
FIDELITY FREEDOM 2030 FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
YEARS ENDED MARCH 31 1998 1997G
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.21 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOMED .22 .08
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.42 .22E
TOTAL FROM INVESTMENT OPERATIONS 3.64 .30
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.17) (.09)
IN EXCESS OF NET INVESTMENT INCOME (.14) --
FROM NET REALIZED GAIN (.12) --
TOTAL DISTRIBUTIONS (.43) (.09)
NET ASSET VALUE, END OF PERIOD $ 13.42 $ 10.21
TOTAL RETURNB,C 36.28% 2.99%
RATIOS AND SUPPLEMENTAL DATA
(AMOUNTS DO NOT INCLUDE THE ACTIVITY OF
UNDERLYING FUNDS)
NET ASSETS, END OF PERIOD (000 OMITTED) $ 115,072 $ 5,725
RATIO OF EXPENSES TO AVERAGE NET ASSETS .08%F .08%A,F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 1.78% 1.71%A
PORTFOLIO TURNOVER RATE 34% 19%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F STRATEGIC ADVISERS AGREED TO REIMBURSE A PORTION OF THE FUND'S
EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S
EXPENSE RATIO WOULD HAVE BEEN HIGHER.
G FOR THE PERIOD OCTOBER 17, 1996 (COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 1997.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN and/or
YIELD. The total returns that follow are based on historical fund
results and do not reflect the effect of taxes.
Each Freedom Fund's fiscal year runs from April 1 to March 31. The
tables below show each Freedom Fund's performance over past fiscal
years compared to their respective composite indices.
The chart on page presents calendar year performance for each
Freedom Fund.
AVERAGE ANNUAL TOTAL RETURNS
PAST 1 LIFE OF
YEAR FUND*
FREEDOM INCOME 14.88% 11.53%
FREEDOM INCOME COMPOSITE INDEX 15.88% 13.01%
FREEDOM 2000 23.25% 17.14%
FREEDOM 2000 COMPOSITE INDEX 24.60% 19.64%
FREEDOM 2010 31.31% 22.78%
FREEDOM 2010 COMPOSITE INDEX 32.94% 26.13%
FREEDOM 2020 35.36% 25.71%
FREEDOM 2020 COMPOSITE INDEX 37.39% 29.63%
FREEDOM 2030 36.28% 26.30%
FREEDOM 2030 COMPOSITE INDEX 37.87% 29.97%
CUMULATIVE TOTAL RETURNS
PAST 1 LIFE OF
YEAR FUND*
FREEDOM INCOME 14.88% 17.17%
FREEDOM INCOME COMPOSITE INDEX 15.88% 19.44%
FREEDOM 2000 23.25% 25.83%
FREEDOM 2000 COMPOSITE INDEX 24.60% 29.74%
FREEDOM 2010 31.31% 34.71%
FREEDOM 2010 COMPOSITE INDEX 32.94% 40.09%
FREEDOM 2020 35.36% 39.41%
FREEDOM 2020 COMPOSITE INDEX 37.39% 45.76%
FREEDOM 2030 36.28% 40.35%
FREEDOM 2030 COMPOSITE INDEX 37.87% 46.32%
* FROM OCTOBER 17, 1996 (COMMENCEMENT OF OPERATIONS).
If Strategic Advisers had not reimbursed certain fund expenses during
these periods, total returns would have been lower.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
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.
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1997
FREEDOM INCOME 10.91%
FREEDOM INCOME COMPOSITE INDEX 12.52%
CONSUMER PRICE INDEX 1.70%
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1997
FREEDOM 2000 15.29%
FREEDOM 2000 COMPOSITE INDEX 17.89%
CONSUMER PRICE INDEX 1.70%
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1997
FREEDOM 2010 19.36%
FREEDOM 2010 COMPOSITE INDEX 22.80%
CONSUMER PRICE INDEX 1.70%
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1997
FREEDOM 2020 21.24%
FREEDOM 2020 COMPOSITE INDEX 25.13%
CONSUMER PRICE INDEX 1.70%
YEAR-BY-YEAR TOTAL RETURNS
CALENDAR YEARS 1997
FREEDOM 2030 21.40%
FREEDOM 2030 COMPOSITE INDEX 25.03%
CONSUMER PRICE INDEX 1.70%
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE FIDELITY FREEDOM FUNDS' COMPOSITE INDICES are
hypothetical combinations of unmanaged indices, representing the
performance of the asset classes in which each Freedom Fund is
invested. The Composite Indices are based on the weightings of each
asset class in a Freedom Fund, adjusted on June 30 and December 31 of
each calendar year for Freedom Funds with target retirement dates, to
reflect the increasingly conservative asset allocations.
Total returns of the following indices are used to calculate a
Freedom Fund's Composite Index: Standard & Poor's 500 Index (S&P
500(registered trademark)) for the domestic equity fund class, Morgan
Stanley Capital International Europe, Australasia, Far East (EAFE)
Index for the international equity fund class, Lehman Brothers
Aggregate Bond Index for the investment grade fixed-income fund class,
Merrill Lynch High Yield Master Index for the high yield fixed-income
fund class, and Lehman Brothers 3-Month Treasury Bill Index for the
money market fund class:
(small solid bullet) STANDARD & POOR'S 500 INDEX (S&P 500) is a
widely recognized, unmanaged index of common stocks.
(small solid bullet) MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA, FAR EAST (EAFE) INDEX is an unmanaged, market
capitalization weighted index that is designed to represent the
performance of developed stock markets outside of the United States
and Canada. As of March 31, 1998 the index included over 1,000 equity
securities of companies domiciled in 21 countries.
(small solid bullet) LEHMAN BROTHERS AGGREGATE BOND INDEX is a
market value weighted performance benchmark for investment-grade
fixed-rate debt issues, including government, corporate, asset-backed,
and mortgage-backed securities, with maturities of at least one year.
(small solid bullet) MERRILL LYNCH HIGH YIELD MASTER INDEX
is a market capitalization weighted index of all domestic and yankee
high-yield bonds. Issues included in the index have maturities of at
least one year and have a credit rating lower than BBB-/Baa3, but are
not in default.
(small solid bullet) LEHMAN BROTHERS 3-MONTH TREASURY BILL
INDEX represents the average of Treasury Bill rates for each of the
prior three months, adjusted to a bond equivalent yield basis
(short-term and money market instruments).
Other illustrations of the Freedom Funds performance may show
moving averages over specified periods.
Historical performance for each underlying Fidelity fund is included
in the Freedom Funds' SAI. The Freedom Funds' recent strategies,
performance, and holdings are detailed twice a year in financial
reports, which are sent to all shareholders. For current performance
or a free annual report call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Each Freedom Fund is a
diversified fund of Fidelity Aberdeen Street 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 periodically 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 trustees serve as trustees for other Fidelity
funds, including the underlying Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. The transfer agent will mail proxy
materials in advance, including a voting card and information about
the proposals to be voted on. You are entitled to one vote for each
share you own.
STRATEGIC ADVISERS AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business
address at 82 Devonshire Street, Boston, Massachusetts 02109. It
includes a number of different subsidiaries and divisions which
provide a variety of financial services and products. Various Fidelity
companies perform activities required for the Freedom Funds'
operation.
The Freedom Funds are managed by Strategic Advisers, which administers
the asset allocation program for each Freedom Fund and handles its
business affairs. Strategic Advisers has its principal address at 82
Devonshire Street, Boston, Massachusetts 02109.
Strategic Advisers has six separate business units and also
markets a financial software produc t. Five of these units
provide discretionary and non-discretionary investment services
to specific types of investors. The sixth unit is responsible
for managing the Freedom Funds. Strategic Advisers has no previous
experience managing mutual funds, other than the Freedom Funds.
The underlying Fidelity funds are managed by FMR, which chooses their
investments and handles their business affairs. FMR chooses
investments with the assistance of foreign affiliates for all
underlying Fidelity funds except Fidelity Government Securities Fund
and Fidelity Money Market Trust: Retirement Money Market Portfolio.
As of March 31, 1998, Strategic Advisers advised assets with a total
value of more than $8 billion.
Ren Cheng is co-manager of the Freedom Funds, which he has managed
since inception. He also is manager of structured investments for
Fidelity Management Trust Company, which he has managed since 1994.
Mr. Cheng joined Fidelity as a portfolio manager in 1994.
Previously, he was a senior portfolio manager for Putnam Investments
from 1985 to 1994.
Scott Stewart is Vice President and co-manager of the Freedom
Funds, which he has managed since inception. He also manages other
Fidelity funds. Mr. Stewart is a Senior Vice President and
head of Fidelity's structured equity group . He joined Fidelity
in 1987 as a portfolio manager.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
performs transfer agent servicing functions for 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.
As of March 31, 1998, approximately 62.01% of Freedom 2000's total
outstanding shares, approximately 69.76% of Freedom 2010's total
outstanding shares, and approximately 76.52% of Freedom 2020's total
outstanding shares were held by Lucent Technology, respectively.
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 FREEDOM FUND seeks to achieve its investment objective by
investing in a combination of underlying Fidelity funds: domestic and
international equity funds, investment grade and high yield
fixed-income funds, and money market funds. The primary difference
among the Freedom Funds is their asset allocations among these types
of funds.
FREEDOM INCOME seeks high current income and, as a secondary
objective, capital appreciation. Strategic Advisers allocates the
fund's assets according to a stable asset allocation target that
emphasizes fixed-income and money market funds and also includes a
small amount of equity funds.
EACH FREEDOM FUND WITH A TARGET RETIREMENT DATE seeks high total
return. Strategic Advisers allocates each of these fund's assets among
underlying Fidelity funds according to an asset allocation strategy
that becomes increasingly conservative over time. When a fund's asset
allocation target matches Freedom Income's target (approximately five
to ten years after the fund's target retirement date), it is expected
that the fund will be combined with Freedom Income.
The target asset allocation strategy for each Freedom Fund is designed
to provide an approach to asset allocation that is neither overly
aggressive nor overly conservative. In general, Strategic Advisers
intends to manage each Freedom Fund according to its target asset
allocation strategy, and does not intend to trade actively among
underlying Fidelity funds or attempt to capture short-term market
opportunities. However, Strategic Advisers reserves the right to
modify the target asset allocation strategy for any Freedom Fund and
to modify the selection of underlying Fidelity funds for any Freedom
Fund from time to time.
The ability of each Freedom Fund to meet its investment objective is
directly related to its target asset allocation among underlying
Fidelity funds and the ability of those funds to meet their investment
objectives. Although the underlying Fidelity funds are categorized
generally as equity (domestic or international), fixed-income
(investment grade or high yield), and money market funds, many of the
underlying Fidelity funds may invest in a mix of foreign and domestic
stocks, investment grade and high yield bonds, and other securities.
The table on the following page lists the underlying Fidelity funds in
which each Freedom Fund currently may invest and the approximate
target asset allocation of each Freedom Fund to each underlying
Fidelity fund as of March 31, 1998 . Strategic Advisers may
change these percentages over time. For a brief description of each
underlying Fidelity fund, refer to "Descriptions of Underlying
Fidelity Funds," beginning on page .
Strategic Advisers normally invests each Freedom Fund's assets
according to its target asset allocation strategy. Each Freedom Fund
reserves the right to invest in futures contracts or other derivatives
as a way of managing its asset allocation on a temporary basis, and to
invest without limitation in Fidelity Money Market Trust: Retirement
Money Market Portfolio for temporary, defensive purposes. Each Freedom
Fund also reserves the right to invest directly in other types of
securities.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND CATEGORIES FREEDOM FREEDOM FREEDOM FREEDOM FREEDOM
INCOME 2000 2010 2020 2030
EQUITY FUNDS
DOMESTIC EQUITY FUNDS
FIDELITY BLUE CHIP GROWTH FUND 3% 6% 8% 10% 11%
FIDELITY DISCIPLINED EQUITY FUND 3% 6% 8% 10% 11%
FIDELITY EQUITY-INCOME FUND 3% 6% 8% 10% 11%
FIDELITY FUND 3% 6% 8% 10% 11%
FIDELITY GROWTH & INCOME
PORTFOLIO 3% 6% 8% 10% 11%
FIDELITY GROWTH COMPANY FUND 3% 6% 8% 10% 11%
FIDELITY OTC PORTFOLIO 2% 4% 6% 7% 7%
INTERNATIONAL EQUITY FUNDS
FIDELITY DIVERSIFIED
INTERNATIONAL FUND 0% 1% 2% 3% 4%
FIDELITY EUROPE FUND 0% 1% 2% 3% 4%
FIDELITY JAPAN FUND 0% <1% 2% 2% 3%
FIDELITY OVERSEAS FUND 0% 1% 2% 3% 4%
FIDELITY SOUTHEAST ASIA FUND 0% <1% <1% <1% <1%
FIXED-INCOME FUNDS
INVESTMENT GRADE
FIXED-INCOME FUNDS
FIDELITY GOVERNMENT
SECURITIES FUND 15% 15% 10% 5% 2%
FIDELITY INTERMEDIATE BOND FUND 10% 10% 7% 3% 1%
FIDELITY INVESTMENT GRADE BOND
FUND 15% 15% 10% 5% 2%
HIGH YIELD FIXED-INCOME
FUNDS
FIDELITY CAPITAL & INCOME FUND 0% 4% 7% 8% 10%
MONEY MARKET FUNDS
FIDELITY MONEY MARKET TRUST: 40% 15% 2% 0% 0%
RETIREMENT MONEY MARKET PORTFOLIO
NOTE: THE ALLOCATION PERCENTAGES MAY NOT ADD TO 100% DUE TO ROUNDING.
</TABLE>
The chart below illustrates the Freedom Funds' approximate target
asset allocations among equity, fixed-income, and money market funds
as of March 31, 19 98 . The chart also illustrates how these
allocations may change over time. The Freedom Funds' future target
asset allocations may differ from this illustration.
Freedom Freedom Freedom Freedom Freedom
2030 2020 2010 2000 Income
Weight (%)
Row: 1, Col: 1, Value: 84.0
Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 2, Col: 3, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 3, Col: 3, Value: nil
Row: 4, Col: 1, Value: nil
Row: 4, Col: 2, Value: nil
Row: 4, Col: 3, Value: nil
Row: 5, Col: 1, Value: nil
Row: 5, Col: 2, Value: nil
Row: 5, Col: 3, Value: nil
Row: 6, Col: 1, Value: nil
Row: 6, Col: 2, Value: nil
Row: 6, Col: 3, Value: nil
Row: 7, Col: 1, Value: nil
Row: 7, Col: 2, Value: nil
Row: 7, Col: 3, Value: nil
Row: 8, Col: 1, Value: 84.0
Row: 8, Col: 2, Value: nil
Row: 8, Col: 3, Value: nil
Row: 9, Col: 1, Value: nil
Row: 9, Col: 2, Value: nil
Row: 9, Col: 3, Value: nil
Row: 10, Col: 1, Value: nil
Row: 10, Col: 2, Value: nil
Row: 10, Col: 3, Value: nil
Row: 11, Col: 1, Value: nil
Row: 11, Col: 2, Value: nil
Row: 11, Col: 3, Value: nil
Row: 12, Col: 1, Value: nil
Row: 12, Col: 2, Value: nil
Row: 12, Col: 3, Value: nil
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: nil
Row: 13, Col: 3, Value: nil
Row: 14, Col: 1, Value: nil
Row: 14, Col: 2, Value: nil
Row: 14, Col: 3, Value: nil
Row: 15, Col: 1, Value: nil
Row: 15, Col: 2, Value: nil
Row: 15, Col: 3, Value: nil
Row: 16, Col: 1, Value: nil
Row: 16, Col: 2, Value: nil
Row: 16, Col: 3, Value: nil
Row: 17, Col: 1, Value: nil
Row: 17, Col: 2, Value: nil
Row: 17, Col: 3, Value: nil
Row: 18, Col: 1, Value: 80.0
Row: 18, Col: 2, Value: 20.0
Row: 18, Col: 3, Value: nil
Row: 19, Col: 1, Value: nil
Row: 19, Col: 2, Value: nil
Row: 19, Col: 3, Value: nil
Row: 20, Col: 1, Value: nil
Row: 20, Col: 2, Value: nil
Row: 20, Col: 3, Value: nil
Row: 21, Col: 1, Value: nil
Row: 21, Col: 2, Value: nil
Row: 21, Col: 3, Value: nil
Row: 22, Col: 1, Value: nil
Row: 22, Col: 2, Value: nil
Row: 22, Col: 3, Value: nil
Row: 23, Col: 1, Value: nil
Row: 23, Col: 2, Value: nil
Row: 23, Col: 3, Value: nil
Row: 24, Col: 1, Value: nil
Row: 24, Col: 2, Value: nil
Row: 24, Col: 3, Value: nil
Row: 25, Col: 1, Value: nil
Row: 25, Col: 2, Value: nil
Row: 25, Col: 3, Value: nil
Row: 26, Col: 1, Value: nil
Row: 26, Col: 2, Value: nil
Row: 26, Col: 3, Value: nil
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 27, Col: 3, Value: nil
Row: 28, Col: 1, Value: 65.0
Row: 28, Col: 2, Value: 33.0
Row: 28, Col: 3, Value: nil
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 29, Col: 3, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 30, Col: 3, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 31, Col: 3, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Row: 32, Col: 3, Value: nil
Row: 33, Col: 1, Value: nil
Row: 33, Col: 2, Value: nil
Row: 33, Col: 3, Value: nil
Row: 34, Col: 1, Value: nil
Row: 34, Col: 2, Value: nil
Row: 34, Col: 3, Value: nil
Row: 35, Col: 1, Value: nil
Row: 35, Col: 2, Value: nil
Row: 35, Col: 3, Value: nil
Row: 36, Col: 1, Value: nil
Row: 36, Col: 2, Value: nil
Row: 36, Col: 3, Value: nil
Row: 37, Col: 1, Value: nil
Row: 37, Col: 2, Value: nil
Row: 37, Col: 3, Value: nil
Row: 38, Col: 1, Value: 41.0
Row: 38, Col: 2, Value: 44.0
Row: 38, Col: 3, Value: nil
Row: 39, Col: 1, Value: nil
Row: 39, Col: 2, Value: nil
Row: 39, Col: 3, Value: nil
Row: 40, Col: 1, Value: nil
Row: 40, Col: 2, Value: nil
Row: 40, Col: 3, Value: nil
Row: 41, Col: 1, Value: nil
Row: 41, Col: 2, Value: nil
Row: 41, Col: 3, Value: nil
Row: 42, Col: 1, Value: nil
Row: 42, Col: 2, Value: nil
Row: 42, Col: 3, Value: nil
Row: 43, Col: 1, Value: nil
Row: 43, Col: 2, Value: nil
Row: 43, Col: 3, Value: nil
Row: 44, Col: 1, Value: nil
Row: 44, Col: 2, Value: nil
Row: 44, Col: 3, Value: nil
Row: 45, Col: 1, Value: nil
Row: 45, Col: 2, Value: nil
Row: 45, Col: 3, Value: nil
Row: 46, Col: 1, Value: nil
Row: 46, Col: 2, Value: nil
Row: 46, Col: 3, Value: nil
Row: 47, Col: 1, Value: nil
Row: 47, Col: 2, Value: nil
Row: 47, Col: 3, Value: nil
Row: 48, Col: 1, Value: nil
Row: 48, Col: 2, Value: nil
Row: 48, Col: 3, Value: nil
Row: 49, Col: 1, Value: 20.0
Row: 49, Col: 2, Value: 40.0
Row: 49, Col: 3, Value: nil
Row: 50, Col: 1, Value: nil
Row: 50, Col: 2, Value: nil
Row: 50, Col: 3, Value: nil
Row: 51, Col: 1, Value: nil
Row: 51, Col: 2, Value: nil
Row: 51, Col: 3, Value: nil
Row: 52, Col: 1, Value: nil
Row: 52, Col: 2, Value: nil
Row: 52, Col: 3, Value: nil
Row: 53, Col: 1, Value: nil
Row: 53, Col: 2, Value: nil
Row: 53, Col: 3, Value: nil
Row: 54, Col: 1, Value: nil
Row: 54, Col: 2, Value: nil
Row: 54, Col: 3, Value: nil
Row: 55, Col: 1, Value: nil
Row: 55, Col: 2, Value: nil
Row: 55, Col: 3, Value: nil
Row: 56, Col: 1, Value: 20.0
Row: 56, Col: 2, Value: 40.0
Row: 56, Col: 3, Value: nil
Money Market
Funds
Fixed-Income
Funds
Equity Funds
40 35 30 25 20 15 10 5 Retirement 5 10 15
Years to Retirement Years after Retirement
RISK CONSIDERATIONS OF THE UNDERLYING FIDELITY FUNDS
The value of an underlying Fidelity fund's investments varies in
response to many factors.
Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. Securities of
smaller companies, especially those whose business involves emerging
products or concepts, may be more volatile due to their limited
product lines, markets, or financial resources, or their
susceptibility to major setbacks or downturns. Bond values fluctuate
based on changes in interest rates and market conditions, and in
response to other economic, political or financial events, and on the
bonds' quality and maturity. In general, bond prices rise when
interest rates fall, and fall when interest rates rise. Longer-term
bonds and zero coupon bonds are generally more sensitive to interest
rate changes.
Lower-quality debt securities (sometimes called "junk bonds") are
considered to have speculative characteristics, and involve greater
risk of default or price changes due to changes in the issuer's
creditworthiness, or they may already be in default. The market prices
of these securities may fluctuate more than higher-quality securities
and may decline significantly in periods of general or regional
economic difficulty. Lower-quality securities may be thinly traded,
making them difficult to sell promptly at an acceptable price. Adverse
publicity and changing investor perceptions may affect the ability to
obtain prices for, or to sell, these securities.
Investments in foreign securities may involve risks in addition to
those of U.S. investments, including increased political and economic
risk, as well as exposure to currency fluctuations.
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. These risks may be greater
for funds that invest in emerging markets. The extent of economic
development, political stability, market depth, infrastructure and
capitalization, and regulatory oversight in emerging markets is
generally less than in more developed markets. Emerging market
economies may be subject to greater social, economic, regulatory and
political uncertainties. All of these factors generally make emerging
market securities more volatile and potentially less liquid than
securities issued in more developed markets.
Also, to the extent that an underlying Fidelity funds' investments
are denominated in foreign currencies, changes in the value of
currencies can significantly affect a fund's share price. Furthermore,
to the extent that an underlying Fidelity fund focuses its investments
in a particular country or group of countries, its performance is
expected to be closely tied to economic and political conditions
within its focal area and more volatile than more geographically
diversified funds.
An underlying Fidelity fund can use a variety of techniques to
increase or decrease the fund's exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, purchasing indexed securities, and selling securities
short. There is no guarantee that these strategies will work as FMR
intends.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about each
underlying Fidelity fu nd, o ther types of instruments in which a
Freedom Fund m ay invest, a nd strategies Strategic Advisers may
employ in pursuit of each Freedom Fund's investment object ive .
Any restrictions listed supplement those discussed earlier in this
section. A complete listing of each Freedom Fund's limitations and
more detailed information about the underlying Fidelity funds'
investments are contained in the Freedom Funds' SAI. Policies and
limitations are considered at the time of purchase; the sale of
underlying Fidelity fund shares or other 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 the Freedom Fund achieve its goal. Fund holdings and recent
investment strategies are detailed in each Freedom
Fund ' s financial reports, which are sent to shareholders twice
a year. For a free SAI or financial report, call Fidelity at
1-800-544-8888.
DESCRIPTION OF UNDERLYING FIDELITY FUNDS. The following descriptions
summarize the investment policies of the underlying Fidelity funds.
For more information about an underlying Fidelity fund, call Fidelity
at 1-800-544-8888.
EQUITY FUNDS
DOMESTIC EQUITY FUNDS
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 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 DISCIPLINED EQUITY FUND is an equity fund that seeks growth
of capital by investing primarily in a diversified portfolio of
domestic 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 securities.
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 EQUITY-INCOME FUND is an equity fund that seeks reasonable
income by investing primarily in income-producing equity securities.
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 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. When choosing the fund's investments, FMR
also considers the potential for capital appreciation.
FIDELITY FUND is an equity fund that seeks long-term capital growth by
investing mainly in common stocks and securities convertible into
common stocks. In pursuit of a current return, the fund invests in
some securities for their income characteristics. This two-fold
approach, which may limit the fund's growth potential, leads to
investments in a broad range of domestic and foreign equity and debt
securities.
FIDELITY GROWTH & INCOME PORTFOLIO is an equity fund that seeks high
total return through a combination of current income and capital
appreciation by investing mainly in equity securities. FMR
expects to invest the majority of the fund's assets in domestic
and foreign equity securities, with a focus on those that pay current
dividends and show potential earnings growth. However, FMR may
buy debt securities as well as equity securities that are not
currently paying dividends, but offer prospects for capital
appreciation or future income.
FIDELITY GROWTH COMPANY FUND is an equity fund that seeks capital
appreciation by investing primarily in common stocks and securities
convertible into common stock of companies that FMR believes have
above-average growth potential. Growth may be measured by factors
such as earnings or gross sales.
Companies with strong growth potential often have new products,
technologies, distribution channels, or other opportunities. Often,
these domestic and foreign companies are small and mid-sized companies
that have higher than average price/earnings (P/E) ratios. A high P/E
ratio means that the stock is more expensive than average relative to
the company's earnings. However, companies with strong growth
potential may also be larger companies that hold a strong industry or
market position.
FIDELITY OTC PORTFOLIO is an equity fund that seeks capital
appreciation by investing primarily in securities traded on the
over-the-counter (OTC) 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.
INTERNATIONAL EQUITY FUNDS
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 nited S tates.
FMR normally invests at least 65% of the fund's total assets in
foreign securities. The fund may also invest in U.S. issuers.
FMR determines where an issuer is located by looking at such
factors as its country of organization, the primary trading market for
its securities, and the location of its assets, personnel, sales, and
earnings.
The fund normally diversifies its investments across different
countries and regions. In allocating the fund's assets across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
The fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The fund, however, expects to invest primarily 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 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 EUROPE FUND is an equity fund that seeks growth of capital
over the long term by investing in securities of issuers that have
their principal activities in Europe. FMR normally invests at least
65% of the fund's total assets in these securities.
FMR determines where an issuer or its principal 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 fund normally diversifies its investments across different
countries. In allocating the fund's assets across countries, FMR will
consider the size of the market in each country relative to the size
of markets in Europe as a whole. FMR will also consider such factors
as the potential for economic growth, expected levels of inflation,
governmental policies, and the outlook for currency relationships.
The fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The fund however, expects to invest primarily in
equity securities, but may also invest in debt securities of any
quality.
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
e astern Europe, have less stable economies than those in
w estern Europe. A majority of the European economies continue
to be weak, and business and consumer confidence remains low. The
movement of many e astern 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 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 fund may also invest in securities of other
Southeast Asian issuers.
FMR determines where an issuer or its principal 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 fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The fund however, expects to invest primarily in
equity securities, but may also invest in debt securities of any
quality.
Japan's economic growth has declined significantly since 1990. The
general government position has deteriorated as a result of weakening
economic growth and unsuccessful stimul us 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 OVERSEAS FUND is an equity fund that seeks long-term growth
of capital by investing primarily in foreign securities . The
fund defines foreign securities as securities of issuers whose
principal activities are located outside of the U nited
S tates. N ormally , at least 65% of the fund's total
assets will be invested in foreign securities .
FMR determines where an issuer is located by looking at such
factors as its country of organization, the primary trading market for
its securities, and the location of its assets, personnel, sales, and
earnings.
The fund normally diversifies its investments across different
countries and regions. In allocating the fund's assets across
countries and regions, FMR will consider the size of the market in
each country and region relative to the size of the international
market as a whole.
The fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The fund, however, expects to invest primarily in
equity securities, but may also invest in debt securities of any
quality.
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 . The fund may also invest in securities of
other Asian and South Pacific issuers, but the fund does not
anticipate investing in Japan.
FMR determines where an issuer or its principal 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 fund normally diversifies its investments across different
countries. In allocating the fund's assets across countries, FMR will
consider the size of the market in each country relative to the size
of the markets in Southeast Asia as a whole.
The fund may invest in the securities of any issuer, including
companies and other business organizations as well as governments and
government agencies. The fund however, expects to invest primarily in
equity securities, but may also invest in debt securities of any
quality.
Countries in Southeast Asia are in various stages of economic
development - some are considered emerging markets - but each has
unique risks. Most countries in Southeast Asia are heavily dependent
on international trade. Some have prosperous economies, but are
sensitive to world commodity prices. Others are especially vulnerable
to recession in other countries. Some countries in Southeast Asia have
experienced rapid growth, although many have immature
financial sectors, economic problems, or archaic legal
systems. The return of Hong Kong to Chinese dominion will continue
to affect all of Southeast Asia.
FIXED-INCOME FUNDS
INVESTMENT GRADE
FIXED-INCOME FUNDS
FIDELITY GOVERNMENT SECURITIES FUND is a fixed-income fund that seeks
a high level of current income, consistent with preservation of
principal , by investing in U.S. Government securities and
instruments related to U.S. Government securities under normal
conditions.
The fund normally invest s only in U.S. Government
securities , repurchase agreements and other instruments related to
U.S. Government securities . FMR normally invests at least 65%
of the fund's total assets in U.S. Government securities and
repurchase agreements for U.S. Government securities. Other
instruments may include futures or options on U.S. Government
securities or interests in U. S. Government securities that have been
repackaged by dealers or other third parties. It is important to note
that neither the fund's share price nor its yield is guaranteed by the
U.S. Government.
In managing the fund, FMR selects a benchmark index which is
representative of the universe of securities in which the fund
invests. FMR uses this benchmark as a guide in structuring the fund
and selecting its investments. The benchmark index for the fund is the
Lehman Brothers Government Bond Index, a market value weighted
benchmark of U.S. Government and government agency securities (other
than mortgage securities) with maturities of one year or more. FMR
manages the fund to have similar overall interest rate risk to the
index. As of September 30, 1997, the dollar weighted average maturity
of the fund and the index was approximately 8.0 and 8.6 years,
respectively.
FMR allocates among different market sectors (for example, U.S.
Treasury or U.S. Government agency securities) and different
maturities based on its view of the relative value of each sector or
maturity.
FMR focuses on assembling a portfolio of income-producing bonds
that it believes will provide the best balance between risk and return
within the universe of securities in which the fund invests. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market
inefficiencies.
In determining a security's maturity for purpose of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
FIDELITY INTERMEDIATE BOND FUND is a fixed-income fund that seeks high
current income by investing in U.S. dollar-denominated
invest ment-grade debt securities under normal conditions.
In managing the fund, FMR selects a benchmark index which is
representative of the universe of securities in which the fund
invests. FMR uses this benchmark as a guide in structuring the fund
and selecting its investments. The benchmark index for the fund is the
Lehman Brothers Intermediate Government/Corporate Bond Index, a market
value weighted benchmark of government and investment-grade corporate
fixed-rate debt issues with maturities between one and 10 years. FMR
manages the fund to have similar overall interest rate risk to the
index. As of April 30, 1997, the dollar-weighted average maturity of
the fund and the index was approximately 4.9 and 4.3 years,
respectively. In addition, the fund normally maintains a
dollar-weighted average maturity between three and 10 years.
FMR allocates among different market sectors (for example,
corporate or government securities) and different maturities based on
its view of the relative value of each sector or maturity.
FMR focuses on assembling a portfolio of income-producing bonds
that it believes will provide the best balance between risk and return
within the universe of securities in which the fund invests. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market
inefficiencies.
In determining a security's maturity for purposes of calculating a
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
FIDELITY INVESTMENT GRADE BOND FUND is a fixed-income fund that seeks
high current income, consistent with reasonable risk, by investing
in U.S. dollar-denominated investment-grade debt securities under
normal conditions. The fund also considers capital
preservation a nd, where appropriate, takes advantage of
opportunities to realize capital appreciation.
In managing the fund, FMR selects a benchmark index which is
representative of the universe of securities in which the fund
invests. FMR uses this benchmark as a guide in structuring the fund
and selecting its investments. The benchmark index for the fund is the
Lehman Brothers Aggregate Bond Index, a market value weighted
benchmark of investment-grade fixed-rate debt issues with maturities
of one year or more. FMR manages the fund to have similar overall
interest rate risk to the index. As of April 30, 1997, the
dollar-weighted average maturity of the fund and the index was
approximately 8.4 and 8.8 years, respectively.
FMR allocates among different market sectors (for example,
corporate or government securities) and different maturities based on
its view of the relative value of each sector or maturity.
FMR focuses on assembling a portfolio of income-producing bonds
that it believes will provide the best balance between risk and return
within the universe of securities in which the fund invests. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market
inefficiencies.
In determining a security's maturity for purposes of calculating
the fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
HIGH YIELD FIXED-INCOME FUNDS
FIDELITY CAPITAL & INCOME FUND is a fixed-income fund that seeks
income and capital growth by investing primarily in debt instruments,
convertible securities, 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.
The fund's success depends on FMR's financial analysis and research,
and its ability to identify undervalued investments in the market.
FMR's analysis focuses on a company's relative values and its
potential for success in light of its current financial
situation, its industry position, economic conditions, and interest
rate trends. FMR also evaluates the probable outcome of any pending
restructurings and any legal or regulatory risks. Because of the
fund's investment strategy, its performance is especially affected by
individual company news.
MONEY MARKET FUNDS
FIDELITY MONEY MARKET TRUST: RETIREMENT MONEY MARKET PORTFOLIO is a
money market fund that seeks to earn a high level of current
income while maintaining a stable $1.00 share price by investing in
high-quality short-term securities. The fund invests only in
high-quality U.S. dollar-denominated money market securities of
domestic and foreign issuers, including U.S. Government securities and
repurchase agreements. The fund also may enter into reverse repurchase
agreements. The fund will invest more than 25% of its total assets in
the financial services industry.
The fund complies with industry-standard requirements for the
quality, maturity, and diversification of its investments, which are
designed to help maintain a stable $1.00 share price. Of course, there
is no guarantee that the fund will maintain a stable $1.00 share
price. The fund will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities it buys. In general, securities with longer
maturities are more vulnerable to price changes, although they may
provide higher yields. It is possible that a major change in interest
rates or a default on the fund's investments could cause its share
price (and the value of an investment in the fund) to change.
The fund earns income at current money market rates. It stresses
preservation of capital, liquidity and income and does not seek the
higher yields or capital appreciation that more aggressive investments
may provide. The fund's yield will vary from day to day and generally
reflects current short-term interest rates and other market
conditions.
OTHER FREEDOM FUND INVESTMENTS
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. Each Freedom Fund reserves the right to
invest in futures contracts or other derivatives temporarily in an
effort to remain fully invested, manage cash flows efficiently, or
facilitate asset allocation. Depending on how they are used, these
investments may effectively increase or decrease a Freedom Fund's
stock or bond allocation.
CASH MANAGEMENT. Each Freedom Fund may invest in money market
securities, in repurchase agreements, and in a money market fund
available only to funds and accounts managed by FMR or its affiliates,
whose goal is to seek a high level of current income while maintaining
a stable $1.00 share price. A major change in interest rates or a
default on the money market fund's investments could cause its share
price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, each Freedom
Fund may not invest more than 5% in the securities of any
one issuer. This limitation does not apply to U.S. Government
securities or to securities of other investment companies.
Each Freedom Fund may not invest more than 25% of its total
assets in any one industry. This limitation does not apply to U.S.
Government securities or to securities of other investment companies
(including underlying Fidelity funds).
BORROWING. Each Freedom F und may borrow from banks or from
other funds advised by FMR or its affiliates, 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 Freedom F und 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 Freedom Fund's securities. A Freedom Fund may
also lend money to other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
Freedom F und's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS OF THE FREEDOM FUNDS
Some of the policies and restrictions of the Freedom Funds 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 of the Freedom Funds stated
throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
Each of FREEDOM 2000, FREEDOM 2010, FREEDOM 2020, AND FREEDOM
2030 seeks high total return. FREEDOM INCOME seeks high
current income and, as a secondary objective, capital appreciation.
With respect to 75% of its total assets, each Freedom Fund may not
invest more than 5% in the securities of any one issuer. This
limitation does not apply to U.S. Government securities or to
securities of other investment companies.
Each Freedom Fund may not invest more than 25% of its total assets in
any one industry. This limitation does not apply to U.S. Government
securities or to securities of other investment companies (including
underlying Fidelity funds).
Each Freedom 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 a Freedom Fund's
total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the Freedom Funds pay fees related to their
daily operations. Expenses paid out of each Freedom 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.
MANAGEMENT FEE
Each Freedom Fund's management fee is calculated and paid to Strategic
Advisers every month. Strategic Advisers is responsible for the
payment of all other expenses of each Freedom Fund with limited
exceptions. Each Freedom Fund's annual management fee rate is
0.10% of its average net assets. For the fiscal year ended March
31, 1998, each Freedom Fund paid a management fee of 0.08%, after
reimbursement.
FIIOC performs the transfer agency, dividend disbursing and
shareholder servicing functions for each Freedom Fund. The Freedom
Funds do not bear the cost of these services performed by FIIOC.
Fidelity Service Company, Inc. (FSC) calculates the net asset value
per share (NAV) and dividends for each Freedom Fund, maintains each
Freedom Fund's general accounting records, and administers the
securities lending program for each Freedom Fund. Pursuant to
administration agreements between Strategic Advisers and FMR, FMR
bears the cost of these services performed by FSC and pays certain
other expenses of the Freedom Funds. Strategic Advisers pays FMR a
monthly administration fee equal to the monthly management fee
Strategic Advisers receives from each Freedom Fund, minus an amount
equal to an annual rate of 0. 02 % of that Freedom Fund's average
net assets.
Each Freedom Fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each
plan recognizes that Strategic Advisers or FMR may use its management
or administration fee revenues, respectively, as well as its past
profits or its resources from any other source, to pay FDC for
expenses incurred in connection with the distribution of Freedom Fund
shares. Strategic Advisers or FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of, or provide shareholder support services
for, the Freedom Funds' shares. Currently, the Board of
Trustees of each Freedom Fund has authorized such payments.
Each Freedom 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 rates for Freedom Income, Freedom 2000, Freedom
2010, Freedom 2020, and Freedom 2030 for the fiscal year ended March
31, 1998 were 33 %, 24 %, 20 %, 15 %,
and 34 %, respectively. These rates vary from year to
year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-advantaged 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 and Fidelity's Web site .
To reach Fidelity for general information, call these numbers:
(solid bullet) For mutual funds, 1-800-544-8888
(solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 80 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any
special provisions regarding your investment in a fund.
The different ways to set up (register) your account with Fidelity are
listed on page 36 .
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number , visit Fidelity's Web site at www.fidelity.com,
or contact Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS.
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS.
Retirement plans provide individuals with tax-advantaged ways to
save for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications
and typically have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to $2,000
per tax year. Married couples can contribute up to $4,000 per tax
year, provided no more than $2,000 is contributed on behalf of either
spouse. (These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income limits.
(solid bullet) ROTH IRAS allow individuals to make
non-deductible contributions of up to $2,000 per tax year. Married
couples can contribute up to $4,000 per tax year, provided no more
than $2,000 is contributed on behalf of either spouse. (These limits
are aggregate for Traditional and Roth IRAs.) Eligibility is subject
to certain income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with
assets held in a Traditional IRA or Rollover IRA to convert those
assets to a Roth Conversion IRA. Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages
for certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) 401(K) PLANS , and certain other 401(a)-qualified
plans, are employer-sponsored retirement plans that allow employer
contributions and may allow employee after-tax contributions. In
addition, 401(k) plans allow employee pre-tax (tax-deferred)
contributions. Contributions to these plans may be tax-deductible to
the employer.
(solid bullet) KEOGHS PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow employees of
businesses with 25 or fewer employees to contribute a percentage of
their wages on a tax-deferred basis. These plans must have been
established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees
of 501(c)(3) tax-exempt institutions, including schools, hospitals,
and other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each Freedom Fund is the fund's net
asset value per share (NAV). Each fund's shares are sold without a
sales charge.
Your shares will be purchased at the next NAV calculated
after your investment is received in proper form. Each
Freedom Fund's NAV is normally calculated each business day
at 4:00 p.m. Eastern time.
Each Freedom Fund reserves the right to reject any specific
purchase order, including certain purchases by exchange. See "Exchange
Restrictions" on page 47. Purchase orders may be refused if, in
Strategic Adviser's opinion, they would disrupt management of a
fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page 38 . If there is no
application accompanying this prospectus, call 1-800-544-8888 or
visit Fidelity's Web site at www.fidelity.com for an application .
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(solid bullet) Mail in an account application with a check, or
(solid bullet) Open your account by exchanging from another Fidelity
fund.
IF YOU ARE INVESTING THROUGH A TAX- ADVANTAGED RETIREMENT PLAN,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com for more information and a retirement
application.
If you buy shares by check or Fidelity Money LineR, 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 certain Fidelity retirement accounts A $500
TO ADD TO AN ACCOUNT $250
For certain Fidelity retirement accounts $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accounts A $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER
TO "INVESTOR SERVICES," PAGE 41.
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio
Adviso ry Services, certain Fi deli ty retirement accounts
funded through salary deduction , or accounts opened with the
proceeds of distributions from such retirement accounts. Refer to the
program materials for details. In addition, each fund reserves the
right to waive or lower investment minimums in other
circumstances.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN TO ADD TO
ACCOUNT AN ACCOUNT
PHONE (SOLID BULLET) EXCHANGE (SOLID BULLET) EXCHANG
1-800-544-7777 FROM E FROM
ANOTHER ANOTHER
FIDELITY FIDELITY
FUND FUND
ACCOUNT ACCOUNT
WITH THE WITH THE
SAME SAME
REGISTRATIO REGISTRATI
N, ON,
INCLUDING INCLUDING
NAME, NAME,
ADDRESS, ADDRESS,
AND AND
TAXPAYER TAXPAYER
ID ID
NUMBER. NUMBER.
(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.
MINIMU
M: $250.
MAXIMU
M: UP TO
$100,000
.
INTERNET (SOLID BULLET) COMPLETE (SOLID BULLET) EXCHANG
WWW.FIDELITY.COM AND SIGN E FROM
THE ANOTHER
APPLICATION FIDELITY
. MAKE FUND
YOUR CHECK ACCOUNT
PAYABLE TO WITH THE
THE SAME
COMPLETE REGISTRATI
NAME OF ON,
THE FUND. INCLUDING
MAIL TO THE NAME,
ADDRESS ADDRESS,
INDICATED AND
ON THE TAXPAYER
APPLICATION ID
. NUMBER.
(SOLID BULLET) USE
FIDELITY
MONEY
LINE TO
TRANSFER
FROM
YOUR
BANK
ACCOUNT.
VISIT
FIDELITY'S
WEB SITE
BEFORE
YOUR FIRST
USE TO
VERIFY
THAT THIS
SERVICE IS
IN PLACE
ON YOUR
ACCOUNT.
MAXIMU
M
MONEY
LINE: UP
TO
$100,000
.
MAIL (SOLID BULLET) COMPLETE (SOLID BULLET) MAKE
AND SIGN YOUR
THE CHECK
ACCOUNT PAYABLE
APPLICATIO TO THE
N. MAKE COMPLETE
YOUR NAME OF
CHECK THE
PAYABLE TO FREEDOM
THE FUND OF
COMPLETE YOUR
NAME OF CHOICE.
THE INDICATE
FREEDOM YOUR
FUND OF FREEDOM
YOUR FUND
CHOICE. ACCOUNT
MAIL TO THE NUMBER
ADDRESS ON YOUR
INDICATED CHECK
ON THE AND MAIL
APPLICATIO TO THE
N. ADDRESS
PRINTED
ON YOUR
ACCOUNT
STATEMENT
.
(SOLID BULLET) EXCHANGE
BY MAIL:
CALL
1-800-54
4-6666
FOR
INSTRUCTIO
NS.
IN PERSON (SOLID BULLET) BRING YOUR (SOLID BULLET) BRING
APPLICATIO YOUR
N AND CHECK TO
CHECK TO A A FIDELITY
FIDELITY INVESTOR
INVESTOR CENTER.
CENTER. CALL
CALL 1-800-54
1-800-54 4-9797
4-9797 FOR THE
FOR THE CENTER
CENTER NEAREST
NEAREST YOU.
YOU.
WIRE (SOLID BULLET) CALL (SOLID BULLET) NOT
1-800-54 AVAILABLE
4-7777 TO FOR
SET UP RETIREMEN
YOUR T
ACCOUNT ACCOUNTS.
AND TO (SOLID BULLET) WIRE TO:
ARRANGE A BANKERS
WIRE TRUST
TRANSACTION COMPANY
. NOT BANK
AVAILABLE ROUTING
FOR #021001
RETIREMENT 033
ACCOUNTS. ACCOUNT
(SOLID BULLET) WIRE #001630
WITHIN 24 53
HOURS TO: SPECIFY
BANKERS THE
TRUST COMPLETE
COMPANY NAME OF
BANK THE
ROUTING FREEDOM
#0210010 FUND OF
33 YOUR
ACCOUNT CHOICE
#0016305 AND
3 INCLUDE
SPECIFY YOUR
THE ACCOUNT
COMPLETE NUMBER
NAME OF AND YOUR
THE NAME.
FREEDOM
FUND OF
YOUR
CHOICE AND
INCLUDE
YOUR NEW
ACCOUNT
NUMBER
AND YOUR
NAME.
AUTOMATICALLY (SOLID BULLET) NOT (SOLID BULLET) USE
AVAILABLE. FIDELITY
AUTOMAT
IC
ACCOUNT
BUILDER.
SIGN UP
FOR THIS
SERVICE
WHEN
OPENING
YOUR
ACCOUNT,
VISIT
FIDELITY'
S WEB
SITE AT
WWW.FID
ELITY.CO
M TO
OBTAIN
THE FORM
TO ADD
THE
SERVICE,
OR CALL
1-800-5
44-6666
TO ADD
THE
SERVICE.
TDD - SERVICE FOR THE DEAF AND HEARING-IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of each Freedom Fund is the fund's
NAV.
Your shares will be sold at the next NAV calculated after your
order is received in proper form. Each Freedom Fund's NAV is normally
calculated each business day 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 , in writing , or through Fidelity's
Web site . Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINEr, 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:
(solid bullet) You wish to redeem more than $100,000 worth of shares,
(solid bullet) Your account registration has changed within the last
30 days,
(solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(solid bullet) The check is being made payable to someone other than
the account owner, or
(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:
(solid bullet) Your name,
(solid bullet) The fund's name,
(solid bullet) Your fund account number,
(solid bullet) The dollar amount or number of shares to be redeemed,
and
(solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to a Fidelity Investor Center or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Unless otherwise instructed, Fidelity will send a check to the record
address.
<TABLE>
<CAPTION>
<S> <C> <C>
ACCOUNT SPECIAL
TYPE REQUIREME
NTS
PHONE ALL ACCOUNT (SOLID BULLET) MAXIMUM
1-800-544-7777 TYPES EXCEPT CHECK
RETIREMENT REQUEST:
$100,000.
(SOLID BULLET) FOR MONEY
LINE
TRANSFERS TO
YOUR BANK
ACCOUNT.
MINIMUM:
$10;
MAXIMUM:
UP TO
$100,000.
ALL ACCOUNT (SOLID BULLET) YOU MAY
TYPES EXCHANGE
TO OTHER
FIDELITY
FUNDS IF
BOTH
ACCOUNTS
ARE
REGISTERED
WITH THE
SAME
NAME(S),
ADDRESS,
AND
TAXPAYER
ID
NUMBER.
MAIL OR IN PERSON INDIVIDUAL, (SOLID BULLET) THE LETTER
JOINT OF
TENANT, SOLE INSTRUCTION
PROPRIETORSH MUST BE
IP, SIGNED BY
UGMA, ALL PERSONS
UTMA REQUIRED TO
SIGN FOR
RETIREMENT TRANSACTION
ACCOUNT S, EXACTLY
AS THEIR
NAMES
APPEAR ON
THE
ACCOUNT.
(SOLID BULLET) THE
ACCOUNT
OWNER
SHOULD
COMPLETE A
RETIREMENT
DISTRIBUTIO
N FORM.
CALL
1-800-544
-6666 TO
REQUEST
ONE.
TRUST (SOLID BULLET) THE TRUSTEE
MUST SIGN
THE LETTER
INDICATING
CAPACITY AS
TRUSTEE. IF
THE
TRUSTEE'S
NAME IS
NOT IN THE
ACCOUNT
REGISTRATIO
N, PROVIDE
A COPY OF
THE TRUST
DOCUMENT
CERTIFIED
WITHIN THE
LAST 60
DAYS.
BUSINESS OR (SOLID BULLET) AT LEAST
ORGANIZATIO ONE PERSON
N AUTHORIZED
BY
CORPORATE
RESOLUTION
TO ACT ON
THE
ACCOUNT
MUST SIGN
THE LETTER.
(SOLID BULLET) INCLUDE A
CORPORATE
RESOLUTION
WITH
CORPORATE
SEAL OR A
SIGNATURE
GUARANTEE.
EXECUTOR, (SOLID BULLET) CALL
ADMINISTRAT 1-800-544
OR, -6666 FOR
CONSERVATOR INSTRUCTION
/GUARDIAN S.
WIRE ALL ACCOUNT (SOLID BULLET) YOU MUST
TYPES EXCEPT SIGN UP FOR
RETIREMENT THE WIRE
FEATURE
BEFORE
USING IT. TO
VERIFY THAT
IT IS IN
PLACE, CALL
1-800-544
-6666.
MINIMUM
WIRE:
$5,000.
(SOLID BULLET) YOUR WIRE
REDEMPTIO
N REQUEST
MUST BE
RECEIVED IN
PROPER
FORM BY
FIDELITY
BEFORE
4:00 P.M.
EASTERN
TIME FOR
MONEY TO
BE WIRED
ON THE NEXT
BUSINESS
DAY.
TDD - SERVICE FOR THE DEAF AND HEARING-IMPAIRED: 1-800-544-0118
</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.
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
(CHECKMARK)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
WEB SITE
WWW.FIDELITY.COM
AUTOMATED SERVICE
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(solid bullet) Account statements (quarterly)
(solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in a fund. Call 1-800-544-6666 if you need copies of
financial reports and prospectuses.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy
shares of other Fidelity funds by telephone , in writing , or
through Fidelity's Web site .
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see "Exchange Restrictions," page 47 .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINEr enables you to transfer money by phone between
your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web
site at www.fidelity.com for more information.
<TABLE>
<CAPTION>
<S> <C> <C>
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY
FUND
MINIMUM FREQUENCY SETTING UP OR
$100 MONTHLY OR CHANGING
QUARTERLY (SOLID BULLET) FOR A NEW
ACCOUNT,
COMPLETE THE
APPROPRIATE
SECTION ON THE
FUND
APPLICATION.
(SOLID BULLET) FOR EXISTING
ACCOUNTS, CALL
1-800-544-6
666 OR VISIT
FIDELITY'S WEB
SITE AT
WWW.FIDELITY.
COM FOR AN
APPLICATION.
(SOLID BULLET) TO CHANGE THE
AMOUNT OR
FREQUENCY OF
YOUR
INVESTMENT,
CALL
1-800-544-6
666 AT LEAST
THREE BUSINESS
DAYS PRIOR TO
YOUR NEXT
SCHEDULED
INVESTMENT
DATE.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT
CHECK TO A FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR
$100 EVERY PAY CHANGING
PERIOD (SOLID BULLET) CHECK THE
APPROPRIATE
BOX ON THE
FUND
APPLICATION, OR
CALL
1-800-544-6
666 OR VISIT
FIDELITY'S WEB
SITE AT
WWW.FIDELITY.
COM FOR AN
AUTHORIZATION
FORM.
(SOLID BULLET) CHANGES
REQUIRE A NEW
AUTHORIZATION
FORM.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO
ANOTHER FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR
$100 MONTHLY, CHANGING
BIMONTHLY, (SOLID BULLET) TO ESTABLISH,
QUARTERLY, OR CALL
ANNUALLY 1-800-544-6
666 AFTER BOTH
ACCOUNTS ARE
OPENED.
(SOLID BULLET) TO CHANGE THE
AMOUNT OR
FREQUENCY OF
YOUR
INVESTMENT,
CALL
1-800-544-6
666.
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE
FUNDS MAY NOT BE AN APPROPRIATE CHOICE FOR
DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
</TABLE>
SHAREHOLDER AND ACCOUNT POLICIES
COMBINATION WITH FREEDOM INCOME FUND
Freedom Income Fund is designed to provide income and some growth to
investors in their retirement. It is expected that each Freedom Fund
with a target retirement date will combine its assets with Freedom
Income's assets when the two funds' asset allocation targets match,
approximately five to ten years after the target retirement date. The
funds may be combined, without a vote of shareholders, if the trustees
determine at the time of the proposed combination that combining the
funds is in the best interests of the funds and their shareholders.
When a Freedom Fund with a target retirement date is combined with
Freedom Income Fund, its shareholders may have a capital gain or loss
for federal tax purposes. Prior to a combination, shareholders of a
Freedom Fund with a target retirement date will be notified of the
combination and any tax consequences.
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each Freedom Fund distributes substantially all of its net
investment income and capital gains to shareholders each year.
For each Freedom Fund with a target retirement date,
dividends and capital gains are normally distributed in December and
May. For Freedom Income Fund, income dividends are distributed
monthly, and capital gains are distributed in December and May.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. Each fund
offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the fund, but
you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
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 -advantaged
retirement account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains.
Every January, Fidelity will send you and the IRS a statement
showing the tax characterization of distributions paid to you in the
previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but
not yet distributed income or capital gains, you will pay the full
price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
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'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 assets of each Freedom Fund consist primarily of shares of the
underlying Fidelity funds, which are valued at their respective NAVs.
Most underlying Fidelity fund assets are valued primarily on the basis
of market quotations or on the basis of information furnished by a
pricing service. Short-term securities with remaining maturities of
sixty days or less for which quotations and information furnished
by a pricing service are not readily available are valued on the
basis of amortized cost. This method minimizes the effect of changes
in a security's market value. Foreign securities held by an underlying
Fidelity fund are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local
currency into U.S. dollars using current exchange rates. In addition,
if quotations and information furnished by a pricing service
are not readily available, or if the values have been materially
affected by events occurring after the closing of a foreign market,
underlying Fidelity fund assets may be valued by another method that
the Board of Trustees believes accurately reflects fair value. An
underlying Fidelity money market fund's assets are valued on the basis
of amortized cost. This method helps a money market fund maintain a
stable $1.00 share price.
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 OR
ELECTRONICALLY. Fidelity will not be responsible for any
losses resulting from unauthorized transactions if it follows
reasonable security procedures designed to verify the
identity of the investor . Fidelity will request personalized
security codes or other information, and may also record calls. For
transactions conducted through the Internet, Fidelity recommends the
use of an Internet browser with 128-bit encryption. 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.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be
purchased at the next NAV calculated after your
investment is received in proper form. 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 canceled and you could be liable for any losses or fees a fund or
the 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 FUND 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 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 the
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 order is received in
proper form. 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(registered trademark)
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.
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 $24.00 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. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity 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 $2,000, 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 any underlying
Fidelity fund. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage 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 a 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 Strategic Advisers' 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 1.00% and trading fees of up to 3.00%
of the amount exchanged. 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.
This prospectus is printed on recycled paper using soy-based inks.
DESCRIPTION OF CHART WHICH APPEARS ON PAGE 22 OF THE FIDELITY FREEDOM
FUNDS' PROSPECTUS:
The chart is a rectangular box. The x-axis (the bottom of the box)
charts, from left to right, years to retirement and years after
retirement in five-year intervals, counting down from 40 years to
retirement, reaching retirement, and then counting up to 15 years
after retirement. Immediately below and parallel to the x-axis is a
straight line with an arrow at each end. A perpendicular line crosses
the line at retirement and the word "Retirement" appears below the
perpendicular line. The words "Years to Retirement" appear below the
parallel line to the left of the perpendicular line, and the words
"Years after Retirement" appear below the parallel line to the right
of the perpendicular line. The y-axis (the left side of the box) is
marked in ten percentage point intervals up from 0% to 100% to
indicate the percentage of assets allocated to equity, fixed-income,
and money market funds.
The Freedom Funds are positioned along the top of the box at 32, 22,
12, and two years to retirement for Freedom 2030 Fund, Freedom 2020
Fund, Freedom 2010 Fund, and Freedom 2000 Fund, respectively. Freedom
Income Fund is positioned at the top of the box at seven years after
retirement. Each Fund's position is indicated with a downward
pointing solid triangle.
Inside the box are vertical lines (from the top of the box to the
bottom of the box) at each of the five-year intervals marked on the
x-axis. Also inside the box, directly below each Fund's position, are
data points that indicate the target asset allocation for that Fund as
of March 31, 1998. The first set of data points is charted at 84%,
80%, 65%, 41%, and 20% for Freedom 2030 Fund, Freedom 2020 Fund,
Freedom 2010 Fund, Freedom 2000 Fund, and Freedom Income Fund,
respectively. The second set of data points is charted at 98%, 85%,
and 60% for Freedom 2010 Fund, Freedom 2000 Fund, and Freedom Income
Fund, respectively. The data points are indicated by a solid circle.
The data points in each set are connected by a dotted line. The area
on the chart from the x-axis up to the dotted line connecting the
first set of data points (the "first dotted line") represents the
percentage allocation in equity funds. The words "Equity Funds"
appear in this area. The area on the chart from the first dotted line
up to the dotted line connecting the second set of data points (the
"second dotted line") represents the percentage allocation in
fixed-income funds. The words "Fixed-Income Funds" appear in this
area. The area on the chart from the second dotted line up to the top
of the chart represents the percentage allocation in money market
funds. The words "Money Market Funds" appear in this area.
FIDELITY ABERDEEN STREET TRUST
FIDELITY FREEDOM FUNDS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ COVER PAGE
12 ............................ DESCRIPTION OF THE TRUST
13 A - C ............................ INVESTMENT POLICIES AND LIMITATIONS
D ............................ PORTFOLIO TRANSACTIONS
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 ............................ FINANCIAL STATEMENTS
</TABLE>
* Not Applicable
FIDELITY FREEDOM FUNDSSM:
FIDELITY FREEDOM INCOME FUNDSM
FIDELITY FREEDOM 2000 FUNDSM
FIDELITY FREEDOM 2010 FUNDSM
FIDELITY FREEDOM 2020 FUNDSM
FIDELITY FREEDOM 2030 FUNDSM
FUNDS OF FIDELITY ABERDEEN STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 21, 1998
This Statement of Additional Information (SAI) is not a prospectus
but should be read in conjunction with the funds' current Prospectus
(dated May 21, 1998). Please retain this document for future
reference. The funds' Annual Report is a separate document supplied
with this SAI. To obtain a free additional copy of the Prospectus or
an Annual Report, please call Fidelity at 1-800-544-8888.
TABLE OF CONTENTS PAGE
INVESTMENT POLICIES AND LIMITATIONS 43
INVESTMENT PRACTICES OF THE FREEDOM FUNDS 43
INVESTMENT PRACTICES OF THE UNDERLYING FIDELITY FUNDS 44
PORTFOLIO TRANSACTIONS 50
VALUATION 52
PERFORMANCE 52
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION 63
DISTRIBUTIONS AND TAXES 63
STRATEGIC ADVISERS AND FMR 64
TRUSTEES AND OFFICERS 64
MANAGEMENT CONTRACTS 67
DISTRIBUTION AND SERVICE PLANS 69
CONTRACTS WITH FMR AFFILIATES 70
DESCRIPTION OF THE TRUST 70
FINANCIAL STATEMENTS 72
APPENDIX 72
INVESTMENT ADVISER
Strategic Advisers, Inc. (Strategic Advisers)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)
FF -ptb- 0598
703377
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 Freedom Fund's investment policies and
limitations.
A Freedom Fund's fundamental investment policies and limitations
cannot be changed without approval by a "majority of the outstanding
voting securities" (as defined in the Investment Company Act of 1940
(the 1940 Act)) of the 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 331/3% 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 331/3% 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 331/3% 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 Fidelity
Management & Research Company 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)). Each fund will not
borrow from other funds advised by Fidelity Management & Research
Company 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 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 Fidelity Management & Research Company or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in
connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vi) 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.
With respect to limitation (iv), if through a change in values, net
assets, or other circumstances, each Freedom Fund were in a position
where more than 10% of its net assets was invested in illiquid
securities, it would consider appropriate steps to protect
liquidity.
For the Freedom Funds' limitations on futures and options
transactions, see the section entitled "Limitations on Futures and
Options Transactions" on page .
Notwithstanding the foregoing investment limitations, the underlying
Fidelity funds in which the Freedom Funds may invest have adopted
certain investment limitations that may be more or less restrictive
than those listed above, thereby permitting a Freedom Fund to engage
indirectly in investment strategies that are prohibited under the
investment limitations listed above. The investment limitations of
each underlying Fidelity fund are set forth in its SAI.
In accordance with each Freedom Fund's investment program as set forth
in the prospectus, a Freedom Fund may invest more than 25% of its
assets in any one underlying Fidelity fund. However, each of the
underlying Fidelity funds in which a Freedom Fund may invest (other
than Fidelity Money Market Trust: Retirement Money Market Portfolio)
will not concentrate more than 25% of its total assets in any one
industry, except that Fidelity Money Market Trust: Retirement Money
Market Portfolio will invest more than 25% of its total assets in the
financial services industry.
INVESTMENT PRACTICES OF THE FREEDOM FUNDS
The following pages contain more detailed information about types of
instruments in which a Freedom Fund may invest, strategies Strategic
Advisers may employ in pursuit of a Freedom Fund's investment
objective, and a summary of related risks. Strategic Advisers may not
buy all of these instruments or use all of these techniques unless it
believes that doing so will help the Freedom Fund achieve its goal.
FUTURES CONTRACTS. In purchasing a futures contract, the
buyer agree s to purchase a specified underlying instrument at a
specified future date. In selling a futures contract , the
seller agrees to sell a specified underlying instrument at a
specified future date. The price at which the purchase and sale will
take place is fixed when the buyer and seller enter into the
contract. Some currently available futures contracts are based on
specific securities, such as U.S. Treasury bonds or notes, and some
are based on indices of securities prices, such as the Standard &
Poor's 500 Index (S&P 500 (registered trademark) ) or the Bond
Buyer Municipal Bond Index. Futures can be held until their delivery
dates, or can be closed out before then if a liquid secondary market
is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase a fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When a fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to
the market. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the
underlying instrument had been sold.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The funds intend to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which
the funds can commit assets to initial margin deposits and option
premiums.
In addition, 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 the funds' investments in futures contracts
and options, and the funds' policies regarding futures contracts and
options discussed elsewhere in this SAI, may be changed as regulatory
agencies permit.
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, on behalf of Strategic Advisers, 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 FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days.
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.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the Securities and Exchange Commission (SEC), a fund
may lend money to, and borrow money from, other funds advised by FMR
or its affiliates. A fund will lend through the program only when the
returns are higher than those available from an investment in
repurchase agreements, and will borrow through the program only when
the costs are equal to or lower than the cost of bank loans. Interfund
loans and borrowings normally extend overnight, but can have a maximum
duration of seven days. Loans may be called on one day's notice. A
fund 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.
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.
As protection against the risk that the original seller will
not fulfill its obligation, the securities are held in a
separate account 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), the Freedom Funds will
engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR on
behalf of 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.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon 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. The Freedom Fund s will enter
into reverse repurchase agreements with parties whose creditworthiness
has been reviewed and found satisfactory by FMR on behalf
of Strategic Advisers. Such transactions may increase fluctuations
in the market value of fund assets and may be viewed as a form of
leverage.
SECURITIES LENDING. A fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by 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 other
eligible securities. 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
FMR's evaluation of the credit of a bank or other entity in
determining whether to purchase a security supported by a letter of
credit guarantee, put or demand feature, 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.
INVESTMENT PRACTICES OF THE UNDERLYING FIDELITY FUNDS
The following pages contain more detailed information about types of
instruments in which an underlying Fidelity fund may invest,
strategies FMR may employ in pursuit of an underlying Fidelity fund's
investment objective, and a summary of related risks. FMR may not buy
all of these instruments or use all of these techniques unless it
believes that doing so will help an underlying Fidelity fund
achieve its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act. These
transactions may involve 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 SEC, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
ASSET-BACKED SECURITIES represent interests in pools of
mortgages, loans, receivables or other assets. Payment of interest and
repayment of principal may be largely dependent upon the cash flows
generated by the assets backing the securities and, in certain cases,
supported by letters of credit, surety bonds, or other credit
enhancements. Asset-backed security values may also be affected by the
creditworthiness of the servicing agent for the pool, the originator
of the loans or receivables, or the entities providing the credit
enhancement. In addition, these securities may be subject to
prepayment risk.
CLOSED-END INVESTMENT COMPANIES are investment companies
that issue a fixed number of shares which trade on a stock exchange or
over-the-counter. Closed-end investment companies are professionally
managed and may invest in any type of security. Shares of closed-end
investment companies may trade at a premium or a discount to their net
asset value A fund may purchase shares of closed-end investment
companies to facilitate investment in certain foreign countries.
CONVERTIBLE SECURITIES are bonds, debentures, notes,
preferred stocks or other securities that may be converted or
exchanged (by the holder or by the issuer) into shares of the
underlying common stock (or cash or securities of equivalent value) at
a stated exchange ratio. A convertible security may also be called for
redemption or conversion by the issuer after a particular date and
under certain circumstances (including a specified price) established
upon issue. If a convertible security held by a fund is called for
redemption or conversion, the fund could be required to tender it for
redemption, convert it into the underlying common stock, or sell it to
a third party.
Convertible securities generally have less potential for gain or
loss than common stocks. Convertible securities generally provide
yields higher than the underlying common stocks, but generally lower
than comparable non-convertible securities. Because of this higher
yield, convertible securities generally sell at prices above their
"conversion value," which is the current market value of the stock to
be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time
depending on changes in the value of the underlying common stocks and
interest rates. When the underlying common stocks decline in value,
convertible securities will tend not to decline to the same extent
because of the interest or dividend payments and the repayment of
principal at maturity for certain types of convertible securities.
However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same
extent as securities convertible at the option of the holder. When the
underlying common stocks rise in value, the value of convertible
securities may also be expected to increase. At the same time,
however, the difference between the market value of convertible
securities and their conversion value will narrow, which means that
the value of convertible securities will generally not increase to the
same extent as the value of the underlying common stocks. Because
convertible securities may also be interest-rate sensitive, their
value may increase as interest rates fall and decrease as interest
rates rise. Convertible securities are also subject to credit risk,
and are often lower-quality securities.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and
sold on a delayed-delivery or when-issued basis. These
transactions involve a commitment 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 bond funds may receive
fees or price concessions for entering into delayed-delivery
transactions.
When purchasing securities on a delayed-delivery basis, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the
security will not be issued as anticipated. Because payment for
the securities is not required until the delivery date, these
risks are in addition to the risks associated with a fund's
investments. If a fund remains substantially fully invested at a time
when delayed-delivery purchases are outstanding, the delayed-delivery
purchases may result in a form of leverage. When delayed-delivery
purchases are outstanding, a fund will set aside appropriate liquid
assets in a segregated custodial account to cover the purchase
obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, a fund could
miss a favorable price or yield opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may
sell the underlying securities before delivery , which
may result in capital gains or losses for the fund .
DOMESTIC AND FOREIGN INVESTMENTS (MONEY MARKET FUND ONLY) include
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. Domestic and foreign
investments may also include 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 r epayment of
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 re payment of principal or
payment of 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.
Foreign investments involve risks relating to local political,
economic, regulatory, 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 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. In addition, 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.
The risks of foreign investing may be magnified for investments in
emerging markets, which may have relatively unstable governments,
economies based on only a few industries, and securities markets that
trade a small number of securities.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC)
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 may be less liquid and more volatile than securities
of comparable U.S. issuers. Foreign security trading, settlement
and custodial practices (including those involving securities
settlement where fund assets may be released prior to receipt of
payment) are often less developed than those in U.S. markets, and
may result in increased risk or substantial delays in the event of a
failed trade or the insolvency of, or breach of duty by, a foreign
broker-dealer, securities depository or foreign subcustodian. In
addition, the costs associated with foreign investments,
including withholding taxes, brokerage commissions and custodial
costs, are generally higher than with U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. 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.
Adequate public information on foreign issuers may not be available,
and it may be difficult to secure dividends and information regarding
corporate actions on a timely basis. In general, there is less overall
governmental supervision and regulation of securities exchanges,
brokers, and listed companies than in the United States. OTC markets
tend to be less regulated than stock exchange markets and, in certain
countries, may be totally unregulated. Regulatory enforcement may be
influenced by economic or political concerns, and investors may have
difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.
The risks of foreign investing may be magnified for investments in
emerging markets. Security prices in emerging markets can be
significantly more volatile than those in more developed markets,
reflecting the greater uncertainties of investing in less established
markets and economies. In particular, countries with emerging markets
may have relatively unstable governments, may present the risks of
nationalization of businesses, restrictions on foreign ownership and
prohibitions on the repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be based on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
holdings difficult or impossible at times.
FOREIGN CURRENCY TRANSACTIONS . A bond or equity fund may
conduct foreign currency transactions on a spot (i.e., cash) or
forward basis (i.e., by entering into forward contracts to purchase or
sell foreign currencies). Although foreign exchange dealers generally
do not charge a fee for such conversions, they do realize a profit
based on the difference between the prices at which they are buying
and selling various currencies. Thus, a dealer may offer to sell a
foreign currency at one rate, while offering a lesser rate of exchange
should the counterparty desire to resell that currency to the dealer.
Forward contracts are customized transactions that require a specific
amount of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange. A fund may use currency
forward contracts for any purpose consistent with its investment
objective.
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by 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. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may
include agreements to purchase and sell foreign securities in exchange
for fixed U.S. dollar amounts, or in exchange for specified amounts of
foreign currency. Unlike typical U.S. repurchase agreements, foreign
repurchase agreements may not be fully collateralized at all times.
The value of a security purchased by a fund may be more or less than
the price at which the counterparty has agreed to repurchase the
security. In the event of default by the counterparty, the fund may
suffer a loss if the value of the security purchased is less than the
agreed-upon repurchase price, or if the fund is unable to successfully
assert a claim to the collateral under foreign laws. As a result,
foreign repurchase agreements may involve higher credit risks than
repurchase agreements in U.S. markets, as well as risks associated
with currency fluctuations. In addition, as with other emerging market
investments, repurchase agreements with counterparties located in
emerging markets or relating to emerging markets may involve issuers
or counterparties with lower credit ratings than typical U.S.
repurchase agreements.
FUNDS' RIGHTS AS SHAREHOLDERS. The funds do not intend to
direct or administer the day-to-day operations of any company. A fund,
however, may exercise its rights as a shareholder and may communicate
its views on important matters of policy to management, the Board of
Directors, and shareholders of a company when FMR determines that such
matters could have a significant effect on the value of the fund's
investment in the company. The activities in which a fund may
engage, 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. The funds 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 o f a fund's assets could impede portfolio
management or the fund's ability to meet redemption requests or other
current obligations.
COMBINED POSITIONS involve purchasing and writing 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, purchasing a put option and
writing a call option on the same underlying instrument
would 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, 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 the fund typically invests, which involves
a risk that the options or futures position will not track the
performance of the 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. In purchasing a futures contract, the
buyer agrees to purchase a specified underlying instrument at a
specified future date. In selling a futures contract, the seller
agrees to sell a specified underlying instrument at a
specified future date. The price at which the purchase and sale will
take place is fixed when the buyer and seller enter 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. The bond and
equity funds have filed a notice of eligibility for exclusion from
the definition of the term "commodity pool operator" with the
Commodity Futures Trading Commission (CFTC) and the National Futures
Association, which regulate trading in the futures markets . The
fund s intend to comply with Rule 4.5 under the Commodity
Exchange Act, which limits the extent to which the fund s can
commit assets to initial margin deposits and option premiums.
In addition, each bond and equity 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. Fidelity Government Securities Fund further limits
its options and futures investments to options and futures contracts
relating to U.S. Government Securities.
The above limitations on the bond and equity funds' investments in
futures contracts and options, and the funds' policies regarding
futures contracts and options discussed elsewhere in this SAI, may be
changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible 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. Currency options may also
be purchased or written in conjunction with each other or with
currency futures or forward contracts. Currency futures and options
values can be expected to correlate with exchange rates, but may not
reflect other factors that affect the value of a fund's
investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not
protect a fund against a price decline resulting from
deterioration in the issuer's creditworthiness. Because the value of
a fund's foreign-denominated investments changes in response to
many factors other than exchange rates, it may not be possible to
match the amount of currency options and futures to the value of the
fund's investments exactly over time.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the purchaser or writer 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, the
purchaser 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 purchaser pays the current market price for the
option (known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The purchaser may
terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is allowed to expire, the
purchaser will lose the entire premium. If the option is
exercised, the purchaser completes the sale of the
underlying instrument at the strike price. A purchaser 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, 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. The writer of a put or call option
takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the writer
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. The writer may seek to terminate a position
in a put option 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, however, the writer 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. When writing an option on a futures contract,
a fund will be required to make margin payments to an FCM as
described above for futures contracts.
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 the writer 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 FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, time deposits, 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. For Fidelity Money Market Trust: Retirement
Money Market Portfolio, illiquid investments are valued by this method
for purposes of monitoring amortized cost valuation.
INDEXED SECURITIES are instruments 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 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.
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. Indexed securities may be more
volatile than the underlying instruments. Indexed securities are also
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.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow
money from, other funds advised by FMR or its affiliates. A fund will
borrow through the program only when the costs are equal to or lower
than the costs of bank loans, and will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. A fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
ISSUER LOCATION. FMR determines where an issuer or its principal
activities are located by looking at such factors as the issuer's
country of organization, the primary trading market for the
issuer's securities, and the location of the issuer's
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 a fund's policies regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
interest and repayment of principal. Direct debt instruments
may not be rated by any nationally recognized statistical rating
service. If scheduled interest or principal payments are not made,
the value of the instrument may be adversely affected. Loans that
are fully secured provide more protections than an unsecured
loan in the event of failure to make scheduled interest or
principal payments . 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. For example, if a loan is foreclosed, the purchaser
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, a purchaser 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 the purchaser in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance,
FMR uses its research to attempt to avoid situations
where fraud or misrepresentation could adversely affect a 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, the purchaser has direct
recourse against the borrower, the purchaser 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 purchaser were
determined to be subject to the claims of the agent's general
creditors, the purchaser 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 may include letters of credit, revolving credit
facilities, or other standby financing commitments that obligate
purchasers to make additional cash payments on demand.
These commitments may have the effect of requiring a purchaser
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.
The fund limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry. 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 a
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. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal, or may be in default. These securities are often considered
to be speculative and involve greater risk of loss or price
changes due to changes in the issuer's capacity to pay. The market
prices of lower-quality debt securities may fluctuate more than those
of higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield 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 liquidity of lower-quality debt
securities and the ability of outside pricing services to value
lower-quality debt 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. FMR will attempt to identify those
issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to
improve in the future. FMR's analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the
issuer.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
M oney market securities may be structured to be, or may
employ a trust or other form so that they are eligible investments
for money market funds. 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 a structure fails
to function 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 certain 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 the fund.
MORTGAGE-BACKED SECURITIES are issued by government and
non-government entities such as banks, mortgage lenders, or other
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 (or "CMOs"), make
payments of both principal and interest at a range of specified
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.
Stripped mortgage-backed securities are created when the interest
and principal components of a mortgage-backed security are separated
and sold as individual securities. In the case of a stripped
mortgage-backed security, the holder of the "principal-only" security
(PO) receives the principal payments made by the underlying mortgage,
while the holder of the "interest-only" security (IO) receives
interest payments from the same underlying mortgage.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers and changes in interest rates.
In addition, regulatory or tax changes may adversely affect the
mortgage -backed 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 which is the risk that early principal
payments made on the underlying mortgages, usually in response
to a reduction in interest rates, will result in the return of
principal to the investor, causing it to be invested subsequently at a
lower current interest rate. Alternatively, in a rising interest rate
environment, mortgage-backed security values may be adversely affected
when prepayments on underlying mortgages do not occur as anticipated,
resulting in the extension of the security's effective maturity and
the related increase in interest rate sensitivity of a longer-term
instrument. The prices of stripped mortgage-backed securities tend to
be more volatile in response to changes in interest rates than those
of non-stripped mortgage-backed securities.
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 municipal security may be owned 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 (MONEY MARKET FUND 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.
Th e taxable fund may not invest more than 5% of its total
assets in second tier securities. In addition, the taxable 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 I NVESTMENT TRUS TS. Equity real estate
investment trusts own real estate properties, while mortgage real
estate investment trusts make construction, development, and long-term
mortgage loans. Their value may be affected by changes in the value of
the underlying property of the trusts, the creditworthiness of the
issuer, property taxes, interest rates, and tax and regulatory
requirements, such as those relating to the environment. Both types of
trusts are dependent upon management skill, are not diversified, and
are subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for
tax-free status of income under the Internal Revenue Code and failing
to maintain exemption from the 1940 Act.
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.
As protection against the risk that the original seller will not
fulfill its obligation, the securities are held in a separate
account 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), the fund s will 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, Fidelity Money Market Trust: 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 security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon 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. The funds will enter into reverse
repurchase agreements with parties whose creditworthiness has been
reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and may be
viewed as a form of leverage.
SECURITIES LENDING. A fund may lend securities to parties such
as broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied should the borrower fail financially,
loans will be made only to parties deemed by FMR to be of good
standing. Furthermore, they will only be made if, in FMR's judgment,
the consideration to be earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in other
eligible securities. 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" (GROWTH AND MONEY MARKET FUNDS) 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.
Such short sales are known as short sales "against the box." If a
fund enters into a short sale against the box, it will be required to
set aside securities equivalent in kind and amount to the securities
sold short (or securities convertible or exchangeable into such
securities) and will be required to hold such securities while the
short sale is outstanding.
Short sales against the box could be used to protect the net asset
value per share of a money market fund in anticipation of increased
interest rates, without sacrificing the current yield of the
securities sold short. A money market fund will incur transaction
costs in connection with opening and closing short sales against the
box. An equity fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.
SHORT SALES (GROWTH & INCOME AND HIGH INCOME FUNDS). A fund may
enter into short sales with respect to stocks underlying its
convertible security holdings. For example, if FMR anticipates a
decline in the price of the stock underlying a convertible security
a fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be
expected to offset all or a portion of the effect of the stock's
decline on the value of the convertible security. The fund currently
intends to hedge no more than 15% of its total assets with short sales
on equity securities underlying its convertible security holdings
under normal circumstances.
When a fund enters into a short sale, it will be required to
set aside securities equivalent in kind and amount to those sold short
(or securities convertible or exchangeable into such securities) and
will be required to hold them aside while the short sale is
outstanding. A fund will incur transaction costs, including
interest expenses, in connection with opening, maintaining, and
closing short sales.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its evaluation
of the credit of a bank or other entity in determining whether to
purchase a security supported by a letter of credit guarantee, put or
demand feature, 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.
SOVEREIGN DEBT OBLIGATIONS are issued or guaranteed by foreign
governments or their agencies, including debt of Latin American
nations or other developing countries. Sovereign debt may be in the
form of conventional securities or other types of debt instruments
such as loans or loan participations. Sovereign debt of developing
countries may involve a high degree of risk, and may be in default or
present the risk of default. Governmental entities responsible for
repayment of the debt may be unable or unwilling to repay principal
and pay interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of
principal and payment of interest may depend on political as well as
economic factors. Although some sovereign debt, such as Brady
Bonds, is collateralized by U.S. Government securities, repayment of
principal and payment of interest is not guaranteed by the U.S.
Government.
STRIPPED GOVERNMENT SECURITIES. Stripped government securities are
created by separating the income and principal components of a U.S.
Government security and selling them separately. 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 U.S. Treasury security by a Federal
Reserve Bank.
Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.
Because the SEC does not consider privately stripped government
securities to be U.S. Government securities for purposes of Rule 2a-7,
a money market fund must evaluate them as it would non-government
securities pursuant to regulatory guidelines applicable to money
market funds.
SWAP AGREEMENTS can be individually negotiated and structured to
include exposure to a variety of different types of investments or
market factors. Depending on their structure, swap agreements may
increase or decrease a fund's exposure to long- or short-term
interest rates (in the United States or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. Swap agreements
can take many different forms and are known by a variety of names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from
one type of investment to another. For example, if the fund agreed to
exchange payments in dollars for payments in foreign currency, the
swap agreement would tend to decrease the fund's exposure to U.S.
interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a fund's investments
and its share price 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 the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in losses.
A fund may be able to eliminate its exposure under a
swap agreement 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 AND FLOATING RATE SECURITIES provide for periodic
adjustments in the interest rate paid on the security. Variable
rate securities provide for a specified periodic adjustment in the
interest rate, while floating rate securities have interest rates that
change whenever there is a change in a designated benchmark rate. Some
variable or floating rate securities are structured with put features
that permit holders to demand payment of the unpaid principal
balance plus accrued interest from the issuers or certain financial
intermediaries.
WARRANTS. Warrants are instruments which entitle the holder
to buy an equity security at a specific price for a specific period of
time. Changes in the value of a warrant do not necessarily correspond
to changes in the value of its underlying security. The price of a
warrant may be more volatile than the price of its underlying
security, and a warrant may offer greater potential for capital
appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying security and do not represent any rights in
the assets of the issuing company. A warrant ceases to have value
if it is not exercised prior to its expiration date. These factors can
make warrants more speculative than other types of investments.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a 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 more volatile than other types
of fixed-income securities when interest rates change. In
calculating a fund's dividend, a portion of the difference
between a zero coupon bond's purchase price and its face value is
considered income.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities (normally,
shares of the underlying Fidelity funds) are placed on behalf of each
Freedom Fund by Strategic Advisers, either itself or through its
affiliates, pursuant to authority contained in each Freedom Fund's
management contract. A Freedom Fund will not incur any commissions or
sales charges when it invests in underlying Fidelity funds, but it may
incur such costs if it invests directly in other types of securities.
All orders for the purchase or sale of portfolio securities are placed
on behalf of each underlying Fidelity fund by FMR pursuant to
authority contained in each underlying Fidelity fund's management
contract. Because the market for most OTC securities is made by market
makers or dealers, rather than on an exchange, FMR will place
most of its orders on behalf of Fidelity OTC Portfolio with dealers.
Ordinarily commissions are not charged on such orders. Thus, Fidelity
OTC Portfolio should incur a relatively small amount of commission
expenses. When Fidelity OTC Portfolio places an order with a dealer,
it pays a spread, which is included in the cost of the security, and
is the difference between the dealer's cost and the cost to the fund.
If FMR grants investment management authority to an underlying
Fidelity fund's sub-adviser, the sub-adviser is authorized to place
orders for the purchase and sale of portfolio securities on behalf of
that fund, and will do so in accordance with the policies described
below.
Strategic Advisers and FMR each 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. Money market
securities generally will be traded on a net basis (i.e., without
commission). In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, Strategic Advisers and FMR
consider 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, in
selecting broker-dealers to place portfolio transactions for certain
underlying Fidelity funds, arrangements for payment of fund
expenses.
Generally, commissions for investments traded on foreign exchanges
will be higher than for investments traded on U.S. exchanges and may
not be subject to negotiation.
The Freedom Funds and underlying Fidelity funds may execute portfolio
transactions with broker-dealers who provide research and execution
services to the funds or other accounts over which Strategic Advisers,
FMR or their affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; and
the availability of securities or the purchasers or sellers of
securities. In addition, such broker-dealers may furnish analyses and
reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts;
and effect securities transactions and perform functions
incidental thereto (such as clearance and settlement).
The selection of such broker-dealers for transactions in equity
securities on behalf of the underlying funds is generally made by
Strategic Advisers or FMR (to the extent possible consistent with
execution considerations) in accordance with a ranking of
broker-dealers determined periodically by Strategic Advisers's or
FMR's investment staff based upon the quality of research and
execution services provided.
For transactions in fixed-income securities, Strategic Adviser's or
FMR's selection of broker-dealers is generally based on the
availability of a security and its price and, to a lesser extent, on
the overall quality of execution and other services, including
research, provided by the broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of the Freedom Funds or an underlying Fidelity fund
may be useful to Strategic Advisers or FMR, as the case may be, in
rendering investment management services to that fund or its
o the r clients, and conversely, such research provided by
broker-dealers who have executed transaction orders on behalf of other
Strategic Advisers or FMR clients may be useful to Strategic
Advisers or FMR, as the case may be, in carrying out its
obligations to a fund. The receipt of such research has not reduced
Strategic Advisers' or FMR 's normal independent research
activities; however, it enables Strategic Advisers and FMR to avoid
th e additional expenses that could be incurred if Strategic
Advisers or FMR tried to develop comparable information through its
own efforts.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer commissions for agency
transactions that are in excess of the amount of commissions charged
by other broker-dealers in recognition of their research and execution
services. In order to cause a fund to pay such higher
commissions, FMR must determine in good faith that such commissions
are reasonable in relation to the value of the brokerage and research
services provided by such executing broker-dealers, viewed in terms of
a particular transaction or FMR's overall responsibilities to
th at fund or its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value
on the brokerage and research services provided, or to determine what
portion of the compensation should be related to those services.
Strategic Advisers and FMR are authorized to use research services
provided by and to place portfolio transactions with brokerage firms
that have provided assistance in the distribution of shares of the
funds or shares of other Fidelity funds to the extent permitted by
law. Strategic Advisers and FMR may use research services provided by
and place agency transactions with National Financial Services
Corporation (NFSC) and Fidelity Brokerage Services Japan LLC
(FBS J ), indirect subsidiaries of FMR Corp., if the
commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services. Prior to December 9, 1997, FMR and Strategic Advisers
used research services provided by and placed agency transactions with
F idelity Brokerage Services (F BS ), an indirect
subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements
with FMR under which the broker-dealer allocates a portion of the
commissions paid by an underlying Fidelity fund toward the
reduction of that fund ' s expenses. 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 NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund periodically review Strategic
Advisers' or FMR's performance of its responsibilities in connection
with the placement of portfolio transactions on behalf of the Freedom
Funds or the underlying Fidelity funds, respectively, and review the
commissions paid by the fund over representative periods of
time to determine if they are reasonable in relation to the benefits
to the fund.
Each Freedom Fund's turnover rates for the fiscal periods ended
March 31, 1998 and 1997 are presented in the table below. For their
most recently ended fiscal periods, the underlying Fidelity funds'
portfolio turnover rates ranged from 23% to 309%. There can be no
assurance that the turnover rates for the underlying Fidelity funds
will remain within this range during subsequent fiscal periods.
Because a high turnover rate increases transaction costs and may
increase taxable gains, FMR carefully weighs the anticipated benefits
of short-term investing against these consequences. An increased
turnover rate is due to a greater volume of shareholder purchase
orders, short-term interest rate volatility and other special market
conditions.
TURNOVER RATES 1998 1997*
FREEDOM INCOME 33% 32%
FREEDOM 2000 24% 19%
FREEDOM 2010 20% 3%
FREEDOM 2020 15% 21%
FREEDOM 2030 34% 19%
* From October 17, 1996 (commencement of operations) to March 31,
1997, annualized.
For the fiscal year ended March 31, 1998 and the fiscal period
ended March 31, 1997, the Freedom Funds paid no brokerage
commissions to firms that provided research services.
The Trustees of each fund have approved procedures in
conformity with Rule 10f-3 under the 1940 Act whereby a fund may
purchase securities that are offered in underwritings in which an
affiliate of FMR participates. These procedures prohibit the funds
from directly or indirectly benefiting an FMR affiliate in connection
with such underwritings. In addition, for underwritings where an FMR
affiliate participates as a principal underwriter, certain
restrictions may apply that could, among other things, limit the
amount of securities that the funds could purchase in the
underwriting.
From time to time the Trustees will review whether the recapture for
the benefit of the Freedom Funds or the underlying Fidelity 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 Freedom Fund are
substantially the same as those of the underlying Fidelity funds and
other funds managed by FMR or its affiliates, investment decisions for
each Freedom 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, or an affiliate thereof, particularly when the
same security is suitable for the investment objective of more than
one fund or account.
When two or more Freedom Funds and/or underlying Fidelity 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 or FMR as investment adviser to each
Freedom Fund and underlying Fidelity fund, as
applicable , outweighs any disadvantages that may be said to
exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines each Freedom
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 assets of each Freedom Fund consist primarily of shares of the
underlying Fidelity funds, which are valued at their respective NAVs.
VALUATION OF UNDERLYING FIDELITY FUNDS' PORTFOLIO SECURITIES
EQUITY FUNDS. Portfolio securities are valued by various
methods depending on the primary market or exchange on which they
trade. Most equity securities for which the primary market is the
United States are valued at last sale price or, if no sale has
occurred, at the closing bid price. Most equity securities for which
the primary market is outside the United States are valued using the
official closing price or the last sale price in the principal market
in which they are traded. If the last sale price (on the local
exchange) is unavailable, the last evaluated quote or last bid price
normally is used. Securities of other open-end investment companies
are valued at their respective NAVs.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the funds may use various pricing
services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
servic e are not readily available are valued either at amortized
cost or at original cost plus accrued interest, both of which
approximate current value. In addition, securities and other assets
for which there is no readily available market value may be valued in
good faith by a committee appointed by the Board of Trustees. The
procedures set forth above need not be used to determine the value of
the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair market value of such securities.
FIXED-INCOME FUNDS. Portfolio securities are valued by various
methods depending on the primary market or exchange on which they
trade. Fixed-income securities and other assets for which market
quotations are readily available may be valued at market values
determined by such securities' most recent bid prices (sales prices if
the principal market is an exchange) in the principal market in which
they normally are traded, as furnished by recognized dealers in such
securities or assets.
Or, fixed-income securities and convertible securities may be valued
on the basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services
are available, and the funds may use various pricing services or
discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized
cost or at original cost plus accrued interest, both of which
approximate current value. In addition, securities and other assets
for which there is no readily available market value may be valued in
good faith by a committee appointed by the Board of Trustees. The
procedures set forth above need not be used to determine the value of
the securities owned by a fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more
accurately reflect the fair market value of such securities.
MONEY MARKET FUNDS. Portfolio securities and other assets are
valued on the basis of amortized cost. This technique involves
initially valuing an instrument at its cost as adjusted for
amortization of premium or accretion of discount rather than its
current market value. The amortized cost value of an instrument may be
higher or lower than the price the fund would receive if it sold the
instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
During periods of declining interest rates, the fund's yield based on
amortized cost valuation may be higher than would result if the fund
used market valuations to determine its NAV. The converse would apply
during periods of rising interest rates.
Valuing the fund's investments on the basis of amortized cost and use
of the term "money market fund" are permitted pursuant to Rule 2a-7
under the 1940 Act. The fund must adhere to certain conditions under
Rule 2a-7, as summarized in the section entitled "Quality and
Maturity" on page 49 .
The Board of Trustees oversees FMR's adherence to the provisions of
Rule 2a-7 and has established procedures designed to stabilize the
fund's NAV at $1.00. At such intervals as they deem appropriate, the
Trustees consider the extent to which NAV calculated by using market
valuations would deviate from $1.00 per share. If the Trustees believe
that a deviation from the fund's amortized cost per share may result
in material dilution or other unfair results to shareholders, the
Trustees have agreed to take such corrective action, if any, as they
deem appropriate to eliminate or reduce, to the extent reasonably
practicable, the dilution or unfair results. Such corrective action
could include selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind;
establishing NAV by using available market quotations; and such other
measures as the Trustees may deem appropriate.
PERFORMANCE
The Freedom Funds and the underlying Fidelity funds may quote
performance in various ways, and the Freedom Funds may quote the
performance of various underlying Fidelity funds. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. The s hare price of
a bond or equity fund, the yield, if applicable, of a bond,
money market, or equity fund, and total return fluctuate in
response to market conditions and other factors, and the value of
an equity or bond fund's shares when redeemed may be more or less
than their original cost. The following paragraphs describe how yield
and total return are calculated by the Freedom Funds and the
underlying Fidelity funds.
YIELD CALCULATIONS (FREEDOM INCOME) . The yield for Freedom
Income is the asset-weighted average of the yields of the underlying
Fidelity funds in which it invests, reduced by Freedom Income's
expenses. The asset-weighted yield is calculated by multiplying the
yield of each underlying fund by the value of Freedom Income's
investment in that fund, adding together the results, dividing the sum
by Freedom Income's total net assets and then subtracting the
annualized expenses of Freedom Income. The asset-weighted yield is
currently calculated once a month as of the last day of the prior
month. In those cases where a yield is not published for an underlying
fund, that fund's yield is assumed to be zero for purposes of this
calculation.
YIELD CALCULATIONS (MONEY MARKET FUND). To compute the yield for a
money market fund for a period, the net change in value of a
hypothetical account containing one share reflects the value of
additional shares purchased with dividends from the one original share
and dividends declared on both the original share and any additional
shares. The net change is then divided by the value of the account at
the beginning of the period to obtain a base period return. This base
period return is annualized to obtain a current annualized yield. A
money market fund also may calculate an effective yield by compounding
the base period return over a one-year period. In addition to the
current yield, a money market fund may quote yields in advertising
based on any historical seven-day period. Yields for a money market
fund are calculated on the same basis as other money market funds, as
required by applicable regulation.
Yield information may be useful in reviewing a fund's performance and
in providing a basis for comparison with other investment
alternatives. However, a 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 a 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.
YIELD CALCULATIONS (BOND AND EQUITY FUNDS). Yields for a fund
are computed by dividing a fund's interest and dividend income
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 or offering price, as
applicable, at the end of the period, and annualizing the result
(assuming compounding of income) in order to arrive at an annual
percentage rate. Yields do not reflect a fund's short-term trading
fee, if any. 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 then are 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. Income is adjusted to reflect
gains and losses from principal repayments received by a fund with
respect to mortgage-related securities and other asset-backed
securities. Other capital gains and losses generally are excluded from
the calculation 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 a 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 a 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, a 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 a 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. While average annual total
returns are a convenient means of comparing investment alternatives,
investors should realize that a fund's performance is not constant
over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis and may be quoted with or without taking a
fund's m aximum sales charge into account , if any, and
may or may not include the effect of a fund's short-term trading
fee, if any. Excluding a fund's sales charge or short-term
trading fee, if any, from a total return calculation produces a
higher total return figure. Total returns, yields, and other
performance information may be quoted numerically or in a table,
graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset
values , adjusted net asset values, and benchmark indices may be
used to exhibit performance. An adjusted NAV includes any
distributions paid by a fund and reflects all elements of its return.
Unless otherwise indicated, a fund's adjusted NAVs are not adjusted
for sales charges, if any.
MOVING AVERAGES. A fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving
average is the average of each day's adjusted closing NAV for a
specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving
averages for a specified period to produce indicators showing when an
NAV has crossed, stayed above, or stayed below its moving average.
The 13-week and 39-week long-term moving averages are shown
below.
FISCAL YEAR ENDING MARCH 31, 1998
13-WEEK 39-WEEK
MOVING AVERAGES MOVING AVERAGES
FREEDOM INCOME $ 10.74 $ 10.47
FREEDOM 2000 $ 11.55 $ 11.18
FREEDOM 2010 $ 12.15 $ 11.69
FREEDOM 2020 $ 12.46 $ 11.97
FREEDOM 2030 $ 12.56 $ 12.05
CALCULATING HISTORICAL EQUITY FUND RESULTS. The following table
shows performance for each fund calculated including certain fund
expenses.
H ISTORICAL FUND RESULTS. The following table shows each Freedom
Fund's total return and for Freedom Income, its 30 day yield,
for the period ended March 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
30 DAY ONE LIFE OF ONE LIFE OF
YIELD * YEAR FUND* * YEAR FUND* *
FREEDOM INCOME 4.31 % 14.88 % 11.53 % 14.88 % 17.17 %
FREEDOM 2000 N/A 23.25 % 17.14 % 23.25 % 25.83 %
FREEDOM 2010 N/A 31.31 % 22.78 % 31.31 % 34.71 %
FREEDOM 2020 N/A 35.36 % 25.71 % 35.36 % 39.41 %
FREEDOM 2030 N/A 36.28 % 26.30 % 36.28 % 40.35 %
</TABLE>
* The yield for Freedom Income is the asset-weighted average of the
yields of the underlying Fidelity funds in which it invests, reduced
by Freedom Income's expenses.
** From October 17, 1996 (commencement of operations).
Note: If Strategic Advisers had not reimbursed certain fund
expenses during these periods, each Freedom Fund's total returns would
have been lower.
Note: If Strategic Advisers had not reimbursed certain fund
expenses during these periods, Freedom Income's yield would have been
4.29%.
HISTORICAL FUND RESULTS - UNDERLYING FIDELITY FUNDS. The following
table shows the underlying Fidelity funds' 7-day or 30-day yields
and/or total returns for the periods ended March 31, 1998. Total
return figures include the effect of a fund's maximum sales charge, if
any, but do not include the effect of a fund's short-term trading
fee.
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
UNDERLYING FIDELITY FUND
YIELD
(DAGGER) ONE FIVE TEN ONE FIVE TEN
YEAR YEARS YEARS/ YEAR YEARS YEARS/
LIFE OF LIFE OF
FUND* FUND*
FIDELITY BLUE CHIP GROWTH FUND1
N/A 40.45% 22.21% 21.31% 40.45% 172.57% 590.05%
FIDELITY CAPITAL & INCOME FUND2
6.58% 22.63% 11.81% 12.18% 22.63% 74.72% 215.71%
FIDELITY DISCIPLINED EQUITY FUND
N/A 49.67% 20.39% 20.36% 49.67% 152.95% 456.22%
FIDELITY DIVERSIFIED INTERNATIONAL FUND
N/A 25.72% 17.13% 13.30% 25.72% 120.47% 118.61%
FIDELITY EQUITY-INCOME FUND
N/A 41.62% 20.86% 16.79% 41.62% 157.89% 372.18%
FIDELITY EUROPE FUND3
N/A 36.83% 21.82% 14.51% 36.83% 168.30% 287.50%
FIDELITY FUND
N/A 49.27% 22.04% 17.98% 49.27% 170.69% 422.49%
FIDELITY GOVERNMENT SECURITIES FUND
5.45% 11.57% 6.12% 8.47% 11.57% 34.57% 125.57%
FIDELITY GROWTH & INCOME PORTFOLIO
N/A 45.06% 22.01% 20.12% 45.06% 170.35% 525.32%
FIDELITY GROWTH COMPANY FUND4
N/A 37.88% 19.23% 20.19% 37.88% 140.98% 528.79%
FIDELITY INTERMEDIATE BOND FUND
5.70% 9.49% 5.97% 7.81% 9.49% 33.63% 112.09%
FIDELITY INVESTMENT GRADE BOND FUND
5.69% 11.55% 6.49% 8.78% 11.55% 36.97% 132.09%
FIDELITY JAPAN FUND5
N/A (9.09)% (2.74)% 0.54% (9.09)% (12.96)% 3.05%
FIDELITY MONEY MARKET TRUST:
5.31% 5.48% 4.83% 5.61% 5.48% 26.61% 66.46%
RETIREMENT MONEY MARKET PORTFOLIO
FIDELITY OTC PORTFOLIO6
N/A 38.29% 17.89% 18.10% 38.29% 127.73% 427.70%
FIDELITY OVERSEAS FUND
N/A 22.50% 14.55% 9.11% 22.50% 97.19% 139.09%
FIDELITY SOUTHEAST ASIA FUND7
N/A (32.36)% N/A 0.39% (32.36)% N/A 1.96%
</TABLE>
* Fidelity Disciplined Equity Fund commenced operations on December
28, 1988.
Fidelity Diversified International Fund commenced operations on
December 27, 1991.
Fidelity Japan Fund commenced operations on September 15,
1992.
Fidelity Money Market Trust: Retirement Money Market Portfolio
commenced operations on December 2, 1988.
Fidelity Southeast Asia Fund commenced operations on April 19,
1993.
(dagger) Yields shown are for the 30-day period ended March 31,
1998, except for the yield shown for Fidelity Money Market Trust:
Retirement Money Market Portfolio, which is for the seven-day period
ended March 31, 1998.
1 Total return figures include the effect of Fidelity Blue Chip
Growth Fund's 3.0% sales charge.
2 Total return figures do not include the effect of Fidelity
Capital & Income Fund's 1.5% redemption fee, applicable to shares held
less than 365 days. In addition, when considering historical
performance, be aware that effective December 30, 1990, the fund
adopted a new investment objective and changed its name from Fidelity
High Income Fund to Fidelity Capital & Income Fund. Accordingly,
historical performance may not be representative of the fund's future
performance under its current investment objective and policies.
3 Total return figures include the effect of Fidelity Europe Fund's
3.0% sales charge, but do not include the effect of the fund's 1.0%
short-term trading fee, applicable to shares held less than 90
days.
4 Total return figures include the effect of Fidelity Growth
Company's 3.0% sales charge which was in effect prior to January 1,
1997.
5 Total return figures include the effect of Fidelity Japan Fund's
3.0% sales charge, but do not include the effect of the fund's 1.5%
short-term trading fee, applicable to shares held less than 90
days.
6 Total return figures include the effect of Fidelity OTC
Portfolio's 3.0% sales charge.
7 Total return figures include the effect of Fidelity Southeast
Asia Fund's 3.0% sales charge, but do not include the effect of the
fund's 1.5% short-term trading fee, applicable to shares held less
than 90 days.
Note: If FMR had not reimbursed certain underlying Fidelity fund
expenses during these periods, Fidelity Diversified International
Fund, Fidelity Intermediate Bond Fund, Fidelity Europe Fund, Fidelity
Southeast Asia Fund, Fidelity Japan Fund, and Fidelity Money Market
Trust: Retirement Money Market Portfolio's total 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 when they purchase shares of the underlying Fidelity
funds.
The following tables show the income and capital elements of each
fund's cumulative total return. The tables compare each fund's return
to the record of the S&P 500, the Dow Jones Industrial Average (DJIA),
and the cost of living, as measured by the Consumer Price Index (CPI),
over the same period. The CPI information is as of the month-end
closest to the initial investment date for each fund. The S&P 500 and
DJIA comparisons are provided to show how each fund's total return
compared to the record of a broad unmanaged index of common stocks and
a narrower set of stocks of major industrial companies, respectively,
over the same period. Because a bond or money market fund invests in
fixed-income securities, common stocks represent a different type of
investment from the funds. Common stocks generally offer greater
growth potential than a bond or money market fund, 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 a bond or money market fund. 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 indexes. The S&P 500 and DJIA returns are based on the prices
of unmanaged groups of stocks and, unlike each fund's returns, do not
include the effect of brokerage commissions or other costs of
investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the life of each fund,
as suming all distributions were reinvested. Total returns are
based on past results and are not an indication of future performance.
Tax con sequences of different investments have not been factored
into the figures below.
During the period from October 17, 1996 (commencement of
operations) to March 31, 1998, a hypothetical $10,000 investment in
Freedom Income would have grown to $11,717.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FREEDOM INCOME INDICES
PERIOD ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
MARCH 31 INITIAL REINVESTED REINVESTED VALUE LIVING**
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS
1998 $ 10,950 $ 702 $ 65 $ 11,717 $ 15,993 $ 14,906 $ 10,246
1997* $ 10,060 $ 139 $ 0 $ 10,199 $ 10,806 $ 10,966 $ 10,107
</TABLE>
* From October 17, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Freedom
Income on October 17, 1996, the net amount invested in Freedom Income
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 10,732 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 650 for
dividends and $ 60 for capital gain distributions.
During the period from October 17, 1996 (commencement of operations)
to March 31, 199 8 , a hypothetical $10,000 investment in Freedom
2000 would have grown to $ 12,583 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FREEDOM 2000 INDICES
PERIOD ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
MARCH 31 INITIAL REINVESTED REINVESTED VALUE LIVING**
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS
1998 $ 11,980 $ 470 $ 133 $ 12,583 $ 15,993 $ 14,906 $ 10,246
1997* $ 10,120 $ 89 $ 0 $ 10,209 $ 10,806 $ 10,966 $ 10,107
</TABLE>
* From October 17, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Freedom
2000 on October 17, 1996, the net amount invested in Freedom 2000
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 10,547 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 420 for
dividends and $ 120 for capital gain distributions.
During the period from October 17, 1996 (commencement of operations)
to March 31, 19 98 , a hypothetical $10,000 investment in Freedom
2010 would have grown to $ 13,471 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FREEDOM 2010 INDICES
PERIOD ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
MARCH 31 INITIAL REINVESTED REINVESTED VALUE LIVING**
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS
1998 $ 12,810 $ 558 $ 103 $ 13,471 $ 15,993 $ 14,906 $ 10,246
1997* $ 10,150 $ 109 $ 0 $ 10,259 $ 10,806 $ 10,966 $ 10,107
</TABLE>
* From October 17, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Freedom
2010 on October 17, 1996, the net amount invested in Freedom 2010
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 10,577 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 480 for
dividends and $ 90 for capital gain distributions.
During the period from October 17, 1996 (commencement of operations)
to March 31, 19 98 , a hypothetical $10,000 investment in Freedom
2020 would have grown to $ 13,941 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FREEDOM 2020 INDICES
PERIOD ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
MARCH 31 INITIAL REINVESTED REINVESTED VALUE LIVING**
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS
1998 $ 13,280 $ 510 $ 151 $ 13,941 $ 15,993 $ 14,906 $ 10,246
1997* $ 10,210 $ 89 $ 0 $ 10,299 $ 10,806 $ 10,966 $ 10,107
</TABLE>
* From October 17, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Freedom
2020 on October 17, 1996, the net amount invested in Freedom 2020
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 10,566 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 430 for
dividends and $ 130 for capital gain distributions.
During the period from October 17, 1996 (commencement of operations)
to March 31, 19 98 , a hypothetical $10,000 investment in Freedom
2030 would have grown to $ 14,035 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FREEDOM 2030 INDICES
PERIOD ENDED VALUE OF VALUE OF VALUE OF TOTAL S&P 500 DJIA COST OF
MARCH 31 INITIAL REINVESTED REINVESTED VALUE LIVING**
$10,000 DIVIDEND CAPITAL GAIN
INVESTMENT DISTRIBUTIONS DISTRIBUTIONS
1998 $ 13,420 $ 475 $ 140 $ 14,035 $ 15,993 $ 14,906 $ 10,246
1997* $ 10,210 $ 89 $ 0 $ 10,299 $ 10,806 $ 10,966 $ 10,107
</TABLE>
* From October 17, 1996 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Freedom
2030 on October 17, 1996, the net amount invested in Freedom 2030
shares was $10,000. The cost of the initial investment ($10,000)
together with the aggregate cost of reinvested dividends and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 10,525 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 400 for
dividends and $ 120 for capital gain distributions.
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and
are prepared without regard to tax consequences. Lipper may also rank
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, a fund may quote Morningstar, Inc. in
its advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising.
A fund's performance may also be compared to that of a benchmark index
representing the universe of securities in which the fund may invest.
The total return of a benchmark index reflects reinvestment of all
dividends and capital gains paid by securities included in the index.
Unlike a fund's returns, however, the index returns do not reflect
brokerage commissions, transaction fees, or other costs of investing
directly in the securities included in the index.
The performance of each Freedom Fund may be compared to the
performance of a Target Asset Allocation Composite Index (Composite
Index). A Freedom Fund's Composite Index is a representation of the
performance of the asset classes (domestic and international equity
funds, investment grade and high yield fixed-income funds, and money
market funds) in which a Freedom Fund is invested and is based on the
weightings of each asset class in a Freedom Fund. The following
indices are used to calculate a Freedom Fund's Composite Index:
Standard & Poor's 500 Index (S&P 500) for the domestic equity fund
class, Morgan Stanley Capital International Europe, Australasia, Far
East ( EAFE ) Index for the international equity fund
class, Lehman Brothers Aggregate Bond Index for the investment grade
fixed-income fund class, Merrill Lynch High Yield Master Index for the
high yield fixed-income fund class, and Lehman Brothers 3-Month
T-Bill Index for the money market fund class. The index weightings of
each Composite Index are rebalanced monthly.
The index weightings in the Fidelity Freedom 2000 Composite Index,
Fidelity Freedom 2010 Composite Index, Fidelity Freedom 2020 Composite
Index, and Fidelity Freedom 2030 Composite Index, are adjusted
semi-annually to reflect the changing asset allocations of the Freedom
Funds with target retirement dates. On June 30 of each calendar year,
the index weightings will be adjusted to reflect the average of the
Freedom Fund's actual asset allocation as of March 31 and its
projected target asset allocation as of September 30, as reported in
the Freedom Funds' Annual Report for the fiscal year ended March 31.
On December 31, the index weightings will be adjusted to reflect the
Freedom Fund's actual asset allocation as of September 30 and its
projected target asset allocation as of March 31, as reported in the
Freedom Funds' Semi-Annual Report for the period ended September 30.
The index weightings in the Fidelity Freedom Income Composite Index
are not adjusted semi-annually, as Freedom Income maintains a stable
asset allocation strategy.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
THE FREEDOM FUNDS' COMPOSITE INDEX WEIGHTINGS:
OCTOBER 17, 1996 THROUGH JUNE 30, 1997 *
S&P 500 MSCI EAFE LEHMAN BROTHERS MERRILL LYNCH HIGH LEHMAN BROTHERS
AGGREGATE BOND YIELD MASTER INDEX 3-MONTH
INDEX T-BILL I NDEX
FREEDOM INCOME 20.0% -- 40.0% -- 40.0%
FREEDOM 2000 39.2% 4.4% 40.9% 4.0% 11.5%
FREEDOM 2010 59.2% 9.7% 24.1% 7.0% --
FREEDOM 2020 70.0% 12.4% 10.1% 7.5% --
FREEDOM 2030 70.0% 15.0% 5.0% 10.0% --
</TABLE>
* The weightings of the Composite Indices of the Freedom Funds' did
not change on December 31, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
THE FREEDOM FUNDS' COMPOSITE INDEX WEIGHTINGS:
JUNE 30, 1997 THROUGH DECEMBER 31, 1997
S&P 500 MSCI EAFE LEHMAN BROTHERS MERRILL LYNCH HIGH LEHMAN BROTHERS
AGGREGATE BOND YIELD MASTER INDEX 3-MONTH
INDEX T-BILL INDEX
FREEDOM INCOME 20.0% -- 40.0% -- 40.0 %
FREEDOM 2000 38.2% 4.5% 40.8% 4.0% 12.5 %
FREEDOM 2010 57.7% 9.5% 25.0% 7.1% 0.7%
FREEDOM 2020 69.1% 12.6% 10.7% 7.6% --
FREEDOM 2030 69.6% 15.1% 5.3% 10.0% --
</TABLE>
THE FREEDOM FUNDS' COMPOSITE INDEX WEIGHTINGS:
DECEMBER 31, 1997 THROUGH JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
S&P 500 MSCI EAFE LEHMAN BROTHERS MERRILL LYNCH HIGH LEHMAN BROTHERS
AGGREGATE BOND YIELD MASTER INDEX 3-MONTH
INDEX T-BILL INDEX
FREEDOM
INCOME 20.0% -- 40.0% -- 40.0%
FREEDOM
2000 37.9% 4.3% 40.5% 3.9% 13.4%
FREEDOM
2010 56.8% 9.2% 25.7% 7.0% 1.3%
FREEDOM
2020 68.6% 12.4% 11.4% 7.6% --
FREEDOM
2030 69.6% 15.0% 5.5% 9.9% --
</TABLE>
THE FREEDOM FUNDS' COMPOSITE INDEX WEIGHTINGS:
JUNE 30, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
S&P 500 MSCI EAFE LEHMAN BROTHERS MERRILL LYNCH HIGH LEHMAN BROTHERS
AGGREGATE BOND YIELD MASTER INDEX 3-MONTH
INDEX T-BILL INDEX
FREEDOM
INCOME 20.0% -- 40.0% -- 40.0%
FREEDOM
2000 36.8% 3.9% 40.3% 3.6% 15.4%
FREEDOM
2010 55.2% 8.5% 27.2% 6.7% 2.4%
FREEDOM
2020 67.9% 11.9% 12.7% 7.5% --
FREEDOM
2030 70.0% 14.5% 6.0% 9.5% --
</TABLE>
S&P 500. The Standard & Poor's 500 Index is a widely recognized,
unmanaged index of common stocks.
MSCI EAFE. The Morgan Stanley Capital International Europe,
Australia , Far East (EAFE) Index is an unmanaged,
market capitalization weighted index that is designed to represent
the performance of developed stock markets outside of the United
States and Canada. The index returns for periods after January 1, 1997
are adjusted for tax withholding rates applicable to U.S.-based mutual
funds organized as Massachusetts business trusts. Stocks are selected
for the Morgan Stanley Capital International (MSCI) Index on the basis
of industry representation, liquidity, sufficient float, and avoidance
of cross-ownership.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities. Issues included in the index have an outstanding par value
of at least $100 million and maturities of at least one year.
Government and corporate issues include all public obligations of the
U.S. Treasury (excluding flower bonds and foreign-targeted issues) and
U.S. Government agencies, as well as nonconvertible investment-grade,
SEC-registered corporate debt. Mortgage-backed securities include 15-
and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), and Fannie Mae. Asset-backed securities
include credit card, auto, and home equity loans.
MERRILL LYNCH HIGH YIELD MASTER INDEX is a market capitalization
weighted index of all domestic and yankee high-yield bonds with an
outstanding par value of at least $50 million and maturities of at
least one year. Issues included in the index have a credit rating
lower than BBB-/Baa3 but are not in default (DDD1 or lower).
Split-rated issues (i.e., rated investment-grade by one rating agency
and high-yield by another) are included in the index based on the
issue's corresponding composite rating. Structured-note issues,
deferred interest bonds, and pay-in-kind bonds are excluded.
LEHMAN BROTHERS 3-MONTH T REASURY BILL INDEX is a
representation of the average of T-Bill rates for each of the prior
three months, adjusted to a bond equivalent yield basis (short-term
instruments).
The following table represents the comparative indices' calendar
year-to-year performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
S&P 500 MSCI EAFE LEHMAN BROTHERS MERRILL LYNCH HIGH LEHMAN BROTHERS
AGGREGATE BOND YIELD 3-MONTH T-BILL
INDEX MASTER INDEX INDEX
1997 33.36 % 2.01 % 9.65 % 12.82 % 5.52 %
1996 22.96% 6.05% 3.63% 11.06% 5.38 %
1995 37.58% 11.21% 18.47% 19.91% 6.09 %
1994 1.32% 7.78% (2.92)% (1.17)% 4.26 %
1993 10.08% 32.56% 9.75% 17.18% 3.20 %
1992 7.62% (12.17)% 7.40% 18.16% 2.92 %
1991 30.47% 12.13% 16.00% 34.58% 6.22 %
1990 (3.10)% (23.45)% 8.96% (4.35)% 8.21 %
1989 31.69% 10.53% 14.53% 4.23% 8.74 %
1988 16.61% 28.27% 7.89% 13.47% 6.40 %
</TABLE>
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For
example, a fund may offer greater liquidity or higher potential
returns than CDs, a fund does not guarantee your principal or your
return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare a 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
a 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 March 31, 1998 , FMR advised over $ 32
billion in municipal fund assets, $ 103 billion in money
market fund assets, $ 449 billion in equity fund assets,
$ 73 billion in international fund assets, and $ 30
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, a bond or money market 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.
Each Freedom Fund may reference, illustrate or discuss the performance
of the underlying Fidelity funds.
Each Freedom Fund may also reference, illustrate, or discuss the
fund's composite portfolio returns. Composite portfolio returns show
the change in value of an investment in a composite portfolio of
underlying funds for the periods shown based on the asset allocation
for each Freedom Fund as of the end of the most recent semi-annual
period, including reinvestment of dividends and capital gains, and
deduction of expenses at the Freedom Fund and underlying fund levels.
Composite portfolio returns do not reflect any Freedom Fund's actual
performance and should not be considered indicative of past or future
performance. In addition, composite portfolio returns should not be
considered as a substitute for any Freedom Fund's own performance.
Composite portfolio returns are intended to demonstrate how
hypothetical investments based on a Freedom Fund's last reported asset
allocation would have performed over the periods shown. Unlike the
actual asset allocation of a Freedom Fund over time, composite
portfolio returns assume that the asset allocation of a composite
portfolio remained fixed during the periods shown. As Freedom 2030,
Freedom 2020, Freedom 2010, and Freedom 2000 near their target
retirement dates, asset allocations become increasingly conservative
and scheduled adjustments to the target asset allocations increase in
magnitude. Because Freedom Income is designed for individuals already
in retirement, the fund's assets are allocated according to a stable
asset allocation target.
In addition, Strategic Advisers retains discretion to modify a Freedom
Fund's target asset allocation and the identity of one or more of the
underlying funds from time to time. The composite portfolio returns do
not represent actual trading or reflect the effect that economic or
market conditions might have had on Strategic Adviser's decisions to
make adjustments if it had actually managed the Freedom Funds during
the periods shown. Although composite portfolio returns do not reflect
either target or discretionary adjustments, such adjustments will have
a significant impact on a Freedom Fund's actual performance.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
Each Freedom 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 19 98 : New Year's Day, Martin
Luther King's Birthday, Presidents' Day, Good Friday, Memorial
Day, Independence Day (observed), 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. In addition, each fund will be closed for
wire purchases and redemptions on days when the Federal Reserve Wire
System is closed.
FSC normally determines each Freedom 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 each 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 Freedom 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 Freedom 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 Freedom Fund's income may qualify for the
dividends-received deduction available to corporate shareholders to
the extent that the Freedom Fund's income is derived from qualifying
dividends or from the qualifying portion of dividends from an
underlying Fidelity fund. For the Freedom Funds and for those
underlying Fidelity funds that may earn other types of income that do
not qualify for the dividends-received deduction available to
corporate shareholders, such as interest, income from securities
loans, non-qualifying dividends, and short-term capital gains, the
percentage of fund dividends that qualifies for the deduction
generally will be less than 100%. Each Freedom Fund will notify
corporate shareholders annually of the percentage of fund dividends
that qualifies for the dividends-received deduction. A portion of each
Freedom Fund's dividends derived from certain U.S. Government
securities, including the portion of dividends from an
underlying Fidelity fund derived from certain U.S. Government
securities, may be exempt from state and local taxation.
Short-term capital gains (including short-term capital gains
distributed by an underlying Fidelity fund as a dividend as well as
short-term capital gains earned on the sale of underlying Fidelity
fund shares or other securities) are distributed as dividend income.
Each Freedom Fund will send each shareholder a notice in January
describing the tax status of dividends and capital gain distributions
for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
Freedom Fund (including amounts attributable to an underlying Fidelity
fund's capital gain distributions as well as long-term capital gains
earned on the sale of underlying Fidelity fund shares or 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 capital gain
distribution on shares of a Freedom Fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal
to the amount of the capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed
by each Freedom Fund are taxable to shareholders as dividends, not as
capital gains.
As of March 31, 1 998 , Freedom Income, Freedom 2000, Freedom
2010, Freedom 2020, and Freedom 2030 hereby designates approximately
$ 28,000 , $ 225,000 , $ 430,000 , $ 422,000 , and
$ 236,000 , as a capital gain dividend for the purpose of the
dividend-paid deduction.
TAX STATUS OF THE FUNDS. Each Freedom 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 Freedom Fund intends to distribute
substantially all of its net investment income and net realized
capital gains within each calendar year as well as on a fiscal year
basis, and intends to comply with other tax rules applicable to
regulated investment companies.
Each Freedom Fund is treated as a separate entity from the other funds
of its trust for tax purposes.
Five to ten years after a Freedom Fund with a target retirement date
reaches its target retirement year, its asset allocation target is
expected to match Freedom Income Fund's asset allocation target. It is
expected that at such time the assets of the Freedom Fund with a
target retirement date will be combined with the assets of Freedom
Income Fund. The Trustees reserve the right to engage in such
transactions in the best interests of the funds, taking into account
then existing laws and regulations. The trust's Trust Instrument
empowers the Trustees to take these actions with or without seeking
shareholder approval. A combination of assets may result in a capital
gain or loss for shareholders of a Freedom Fund with a target
retirement date.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting each Freedom Fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether a Freedom Fund
is suitable to 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 its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
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 ( 67 ), Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman
and a Director of F idelity Investments Money Management, Inc.,
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD ( 56 ), Member of the Advisory Board (1997),
is Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President of Fidelity Personal Investments and Brokerage
Group (1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (65), Trustee, is President of RABAR
Enterprises (management consulting-engineering industry, 1994).
Prior to February 1994, he was President of Greenhill Petroleum
Corporation (petroleum exploration and production). Until March 1990,
Mr. Cox was President and Chief Operating Officer of Union Pacific
Resources Company (exploration and production). He is a Director of
USA Waste Services, Inc. (non-hazardous waste, 1993), CH2M Hill
Companies (engineering), Rio Grande, Inc. (oil and gas production),
and Daniel Industries (petroleum measurement equipment manufacturer).
In addition, he is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (66), Trustee (1992). Prior to her
retirement in September 1991, Mrs. Davis was the Senior Vice President
of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (54), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central
Inte lligence Agency (CIA) from 1991-1993. From 1989 to 1991, Mr.
Gates served as Assistant to the President of the United States and
Deputy National Security Advisor. Mr. Gates is a Director of
LucasVarity PLC (automotive components and diesel engines ),
Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc.
(mining and manufacturing), and TRW Inc. (original equipment and
replacement products). Mr. Gates is also a Trustee of the Forum for
International Policy and of the Endowment Association of the College
of William and Mary. In addition, he is a member of the National
Executive Board of the Boy Scouts of America.
E. BRADLEY JONES (70), Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been
a member of the Executive Committee as well as Chairman of the Board
and President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (65) , Trustee, is Executive-in-Residence (1995)
at Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of the National Arts Stabilization Fund ,
Chairman of the Board of Trustees of the Greenwich Hospital
Association, Director of the Yale-New Haven Health Services Corp.
(1998), 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 (55) , Trustee, is Vice Chairman and Director of
FMR. Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.
WILLIAM O. McCOY (64) , Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (68) , Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director of York
International Corp. (air conditioning and refrigeration), Commercial
Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products,
1996), and Associated Estates Realty Corporation (a real estate
investment trust, 1993). Mr. McDonough served as a Director of
ACME-Cleveland Corp. (metal working, telecommunications, and
electronic products) from 1987 - 1996 and Brush-Wellman Inc.
(metal refining) from 1983-1997.
MARVIN L. MANN (64) , Trustee (1993) is Chairman of the Board,
President, and Chief Executive Officer of Lexmark International, Inc.
(office machines, 1991). Prior to 1991, he held the positions of Vice
President of International Business Machines Corporation ("IBM") and
President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993), Imation Corp. (imaging and information storage, 1997),
and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State
United Way (1993) and is a member of the University of Alabama
President's Cabinet.
ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (199 8 ),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (69) , Trustee, is President of The Wales
Group, Inc. (management and financial advisory services). Prior to
retiring in 1987, Mr. Williams served as Chairman of the Board of
First Wachovia Corporation (bank holding company), and Chairman and
Chief Executive Officer of The First National Bank of Atlanta and
First Atlanta Corporation (bank holding company). He is currently a
Director of ConAgra, Inc. (agricultural products), Georgia Power
Company (electric utility), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants,
1992).
ROBERT A. LAWRENCE (45), is Vice President of certain Equity Funds
(1997), Vice President of Fidelity Real Estate High Income Fund (1995)
and Fidelity Real Estate High Income Fund II (1996), and Senior Vice
President of FMR (1993).
SCOTT D. STEWART ( 39 ), is Vice President of the Freedom
Funds (1996) , and other funds advised by FMR . He is also
a Senior Vice President and group leader of Fidelity's
Structured Equity Group. Prior to his current responsibilities, Mr.
Stewart has managed a variety of Fidelity funds.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996 - 1997). Prior
to 1996, Mr. Silver was Senior Vice President and Chief Financial
Officer at The Colonial Group, Inc. Mr. Silver also served as Chairman
of the Accounting/Treasurer's Committee of the Investment Company
Institute (1987 - 1993).
JOHN H. COSTELLO (51) , Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (52) , Assistant Treasurer (1994), is an
employee of FMR (1994). Prior to becoming Assistant Treasurer of the
Fidelity funds, Mr. Rush was Chief Compliance Officer of FMR Corp.
(1993-1994) and Chief Financial Officer of Fidelity Brokerage
Services, Inc. (1990-1993).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended March 31, 1998 , or
calendar year ended December 31, 199 7 , as applicable.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C>
AGGREGATE
COMPENSATION
FROM A FUND
J. Ralph Phyllis Robert Edward E. Donald
Gary F. Burke M. Gates C. Bradley J.
Burkhead Cox Davis *** Johnson Jones Kirk
** 3d**
Freedom
$ 0 $ 8 $ 8 $ 8 $ 0 $ 8 $ 8
IncomeB
Freedom
0 26 26 26 0 26 26
2000B
Freedom
0 43 43 43 0 43 43
2010B
Freedom
0 33 33 33 0 33 33
2020B
Freedom
0 13 13 13 0 13 13
2030B
TOTAL
$ 0 $ 214 ,000 $ 210,0 00 $ 176,000 $ 0 $ 211,500 $ 211,500
COMPENSATIO
N FROM THE
FUND
COMPLEX*,A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AGGREGATE
COMPENSATION
FROM A FUND
Peter William Gerald Marvin Robert Thomas
S. O. C. Mc L. C. R.
Lynch McCoy Donough Mann Pozen Williams
** **** **
Freedom $ 0 $ 8 $ 10 $ 8 $ 0 $ 8
IncomeB
Freedom 0 26 32 26 0 26
2000B
Freedom 0 43 53 42 0 43
2010B
Freedom 0 33 41 32 0 33
2020B
Freedom 0 13 16 13 0 13
2030B
TOTAL $ 0 $ 214,500 $ 264,500 $ 214,500 $ 0 $ 214,500
COMPENSATIO
N FROM THE
FUND
COMPLEX*,A
</TABLE>
* Information is for the calendar year ended December 31, 1997 for
230 funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are
compensated by FMR.
*** Mr. Gates was appointed to the Board of Trustees effective
March 1, 1997.
**** Mr. McCoy was appointed to the Board of Trustees effective
January 1, 1997.
A Compensation figures include cash, amounts required to be
deferred, and may include amounts deferred at the election of
Trustees. For the calendar year ended December 31, 1997, the Trustees
accrued required deferred compensation from the funds as follows:
Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates,
$62,500; E. Bradley Jones, $75,000; Donald J. Kirk, $75,000; William
O. McCoy, $75,000; Gerald C. McDonough, $87,500; Marvin L,. Mann,
$75,000; and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation as follows: Ralph F. Cox, $53,699; Marvin L. Mann,
$53,699; and Thomas R. Williams, $62,462.
B Compensation figures include cash.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of March 31, 1998, the Trustees, Members of the Advisory Board, and
officers of each fund owned, in the aggregate, less than 1 % of
each fund 's total outstanding shares.
As of March 31, 1998, the following owned of record or beneficially
5% or more of each fund's outstanding shares:
Fidelity Freedom Income Fund: Lucent Technology, Morristown, NJ
(20.04%); General Motors Corporation, New York, NY (13.53%); AG
Communications Systems, Phoenix, AZ (8.34%).
Fidelity Freedom 2000 Fund: Lucent Technology, Morristown, NJ
(62.01%).
Fidelity Freedom 2010 Fund: Lucent Technology, Morristown, NJ
(69.76%).
Fidelity Freedom 2020 Fund: Lucent Technology, Morristown, NJ
(76.52%).
Fidelity Freedom 2030 Fund: Lucent Technology, Morristown, NJ
(21.90%); General Motors Corporation, New York, NY (6.26%); AG
Communications Systems, Phoenix, AZ (8.13%); Analog Devices, Inc.,
Norwood, MA (5.31%).
A shareholder owning of record or beneficially more than 25% of a
fund's outstanding shares may be considered a controlling person. That
shareholder's vote could have a more significant effect on matters
presented at a shareholders' meeting than votes of other
shareholders.
MANAGEMENT CONTRACTS
Strategic Advisers is each Freedom Fund's manager pursuant to
management contracts dated July 18, 1996, which were approved by FMR,
as the then sole shareholder of each Freedom Fund, on October 11,
1996.
MANAGEMENT SERVICES. Each Freedom Fund employs Strategic
Advisers to furnish investment advisory and other services. Under the
terms of 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 the fund in accordance
with its investment objective, policies, and limitations. Strategic
Advisers is authorized, in its discretion, to allocate each fund's
assets among the underlying Fidelity funds in which the fund may
invest. Strategic Advisers also provides each fund with all necessary
office facilities and personnel for servicing the fund's investments
and compensates all personnel of each fund or Strategic Advisers
performing services relating to research, statistical, and investment
activities.
Strategic Advisers in turn has entered into administration agreements
with FMR on behalf of each Freedom Fund. Under the terms of each
administration agreement, FMR or its affiliates provide the management
and administrative services (other than investment advisory services)
necessary for the operation of each Freedom Fund. These services
include providing facilities for maintaining each fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with each fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining each fund's records and the
registration of each fund's shares under federal securities laws and
making necessary filings under state laws; developing management and
shareholder services for each fund; and furnishing reports,
evaluations, and analyses on a variety of subjects to the Trustees.
MANAGEMENT-RELATED EXPENSES. Under the terms of each Freedom
Fund's management contract, Strategic Advisers, either itself or
through an affiliate, is responsible for payment of all operating
expenses of each Freedom Fund with certain exceptions. Under the terms
of each administration agreement, FMR pays all management and
administrative expenses (other than investment advisory expenses) for
which Strategic Advisers is responsible. Specific expenses payable by
FMR include expenses for typesetting, printing, and mailing proxy
materials to shareholders; legal expenses; fees of the custodian and
auditor; and each fund's proportionate share of insurance premiums and
Investment Company Institute dues. Each administration agreement
further provides that FMR will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices,
and reports to shareholders; however, under the terms of each Freedom
Fund's transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. In addition,
FMR compensates all officers of each fund and all Trustees who are
"interested persons" of the trust, Strategic Advisers, or FMR. FMR
also pays all fees associated with pricing and bookkeeping
services and administration of each Freedom Fund's securities lending
program.
Each Freedom Fund pays the following expenses: fees and expenses of
the non-interested Trustees; interest on borrowings; taxes; brokerage
commissions (if any); shareholder charges (if any) associated with
investing in the underlying Fidelity funds; 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.
MANAGEMENT FEES. For the services of Strategic Advisers under
each management contract, each Freedom Fund pays Strategic Advisers a
monthly management fee at the annual rate of 0.10% of its
average net assets throughout the month. The management fee paid to
Strategic Advisers by each Freedom Fund is reduced by an amount equal
to the fees and expenses paid by each Freedom Fund to the
non-interested Trustees.
The following table shows the amount of management fees paid by each
Freedom Fund to Strategic Advisers for the past two fiscal periods,
and the amount of credits reducing management fees for each Freedom
Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Period Ended March 31 Amount of Credits Reducing Management Fees Paid to
Management Fees Strategic Advisers
Freedom Income 1998 $ 33 $ 24,292*
1997 $ 50 $ 1,428*
Freedom 2000 1998 $ 3,562 $ 88,363*
1997 $ 27 $ 2,691*
Freedom 2010 1998 $ 7,774 $ 152,611*
1997 $ 31 $ 3,651*
Freedom 2020 1998 $ 5,024 $ 124,538*
1997 $ 32 $ 2,469*
Freedom 2030 1998 $ 253 $ 41,724*
1997 $ 27 $ 692*
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
For the services of FMR under each administration agreement, Strategic
Advisers pays FMR a monthly administration fee equal to the monthly
management fee received by Strategic Advisers from each Freedom Fund,
minus an amount equal to an annual rate of 0.02% of that fund's
average net assets throughout the month. The following table shows
the amount of administrative fees paid by Strategic Advisers to FMR
for the past two fiscal periods.
Fund Fiscal Period Ended March 31 Administrative Fees Paid to FMR
Freedom Income 1998 $ 14,643
1997 $ 888 *
Freedom 2000 1998 $ 55,308
1997 $ 1,635 *
Freedom 2010 1998 $ 96,482
1997 $ 2,196 *
Freedom 2020 1998 $ 77,929
1997 $ 1,485 *
Freedom 2030 1998 $ 25,262
1997 $ 432 *
* For the fiscal period October 17, 1996 (commencement of
operations) to March 31, 1997.
Strategic Advisers may, from time to time, voluntarily reimburse all
or a portion of each Freedom Fund's operating expenses (exclusive of
interest, taxes, brokerage commissions, shareholder charges, 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 Freedom Fund's
total returns and yield and repayment of the reimbursement by each
fund will lower its total returns and yield.
Effective November 1, 1996, Strategic Advisers voluntarily
agreed to reimburse each Freedom Fund if and to the extent that
its aggregate operating expenses, including management fees, were
in excess of an annual rate of 0.08% of its average net assets. The
table below shows the periods of reimbursement and levels of expense
limitations; the dollar amount of management fees incurred under each
Freedom Fund's contract before reimbursement; and the dollar amount of
management fees reimbursed by Strategic Advisers under the expense
reimbursement for each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Period Ended March 31 Management Fee Before Amount of Management Fee
Reimbursement Reimbursement
Freedom Income 1998 $ 24,325 * $ 4,813
1997 $ 1,478 * $ 283
Freedom 2000 1998 $ 91,925 * $ 17,482
1997 $ 2,718 * $ 444
Freedom 2010 1998 $ 160,385 * $ 30,159
1997 $ 3,682 * $ 623
Freedom 2020 1998 $ 129,562 * $ 24,214
1997 $ 2,501 * $ 436
Freedom 2030 1998 $ 41,977 * $ 8,077
1997 $ 719 * $ 118
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved a Distribution and Service Plan on behalf
of each Freedom 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 the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the Freedom 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 Freedom Fund
to Strategic Advisers, or the payment of administration fees by
Strategic Advisers to FMR out of the management fees, is deemed to be
indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that Strategic Advisers or FMR may use its
past profits or its other resources, including management fees
paid to Strategic Advisers by the funds, or administration fees paid
to FMR by Strategic Advisers out of the management fees, to pay FDC
for expenses incurred in connection with the distribution of Freedom
Fund shares. In addition, each Plan provides that Strategic
Advisers or FMR, directly or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of
Freedom Fund shares or provide shareholder support services.
Currently, the Board of Trustees has authorized such payments for
the Freedom Funds.
FMR made no payments either directly or through FDC to third
parties for the fiscal year ended 1998.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the Freedom Fund and its shareholders. In particular, the
Trustees noted that each Plan does not authorize payments by the
Freedom 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 fund shares , additional sales of fund
shares may result. Furthermore, certain shareholder support services
may be provided more effectively under the Plans by local entities
with whom shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the funds might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
Each Freedom Fund may execute portfolio transactions with, and
purchase securities issued by, depository institutions that receive
payments under the Plans. No preference for the instruments of such
depository institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
Each Freedom Fund has entered into a transfer agent agreement with
FIIOC , an affiliate of Strategic Advisers and FMR. Under the
terms of the agreements, FIIOC performs transfer agency,
dividend disbursing, and shareholder services for each Freedom
Fund.
For providing transfer agency services, FIIOC receives no fees from
each Freedom Fund; however, each underlying Fidelity fund pays
its respective transfer, dividend disbursing, and shareholder
servicing agent (either FIIOC or an affiliate of FIIOC) fees based, in
part, on the number of accounts in and assets of each Freedom
Fund invested in such underlying Fidelity fund.
FIIOC pays out-of-pocket expenses associated with providing
transfer agent services. In addition, FIIOC bears the expense of
typesetting, printing, and mailing prospectuses, statements of
additional information, and all other reports, notices, and statements
to existing shareholders, with the exception of proxy
statements.
Each Freedom Fund has also entered into a service agent agreement
with FSC, an affiliate of Strategic Advisers and FMR. Under the terms
of the agreements, FSC calculates the NAV and dividends for each
Freedom Fund, maintains each Freedom Fund's portfolio and general
accounting records, and administers each Freedom Fund's securities
lending program.
For providing pricing and bookkeeping services, FSC receives a
monthly fee based on each Freedom Fund's average daily net assets
throughout the month.
For administering each Freedom Fund's securities lending program,
FSC receives fees based on the number and duration of individual
securities loans.
FMR bears the cost of pricing and bookkeeping services and
administration of the securities lending program under the terms of
its administration agreements with Strategic Advisers.
Each Freedom Fund has entered into a distribution agreement
with FDC, an affiliate of Strategic Advisers and FMR organized as a
Massachusetts corporation 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.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The Freedom Funds are funds of Fidelity
Aberdeen Street Trust, an open-end management investment company
organized as a Delaware business trust under the name Income
Portfolios II on June 20, 1991. The name of the Trust was changed to
Fidelity Institutional Investors Trust on January 16, 1992, pursuant
to a Certificate of Amendment. On August 21, 1996, pursuant to a
Certificate of Amendment, the name of the Trust was changed to
Fidelity Aberdeen Street Trust. Currently, there are five funds of
Fidelity Aberdeen Street Trust: Fidelity Freedom Income
Fund , Fidelity Freedom 2000 Fund , Fidelity
Freedom 2010 Fund , Fidelity Freedom 2020
Fund , and Fidelity Freedom 2030 Fund . 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.
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.
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, 110 Washington 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 any 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. The Chase
Manhattan Bank, headquartered in New York, also may serve as a special
purpose custodian of certain assets in connection with repurchase
agreement transactions.
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. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts serves as the trust's independent accountant. The
auditor examines financial statements for the funds and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the
fiscal period ended March 31, 1 998 , and reports of the auditor,
are included in the funds' Annual Report, which is a separate report
supplied with this SAI. The funds' financial statements, including the
financial highlights, and reports of the auditors are incorporated
herein by reference. For a free additional copy of the funds' Annual
Report, contact Fidelity at 1-800-544-8888, 82 Devonshire Street,
Boston, MA 02109.
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
underlying Fidelity 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 RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody applies numerical
modifiers of 1, 2, or 3 to each generic rating classification from Aa
through B. 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
on the lower end of its generic rating category.
AAA - Bonds that 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 that 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 that 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 that 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 that 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 that 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 that 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 that 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 that 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.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF CORPORATE BONDS
Debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB"
through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA to CCC may be modified by the addition of a plus sign (+) or minus
sign (-) to show relative standing within the major rating categories.
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
D rating will also be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF COMMERCIAL PAPER
Moody's assigns short-term debt ratings to obligations which have an
original maturity not exceeding one year.
Issuers rated PRIME-1 (or related supporting institutions) have a
superior ability for repayment of principal and payment of interest.
Issuers rated PRIME-2 (or related supporting institutions) have a
strong ability for repayment of principal and payment of interest.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF COMMERCIAL PAPER
Debt issues considered short-term in the relevant market may be
assigned a Standard & Poor's commercial paper rating.
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
PART C. OTHER INFORMATION
Item 24.
(a) (1) Financial Statements and Financial Highlights included in
the Annual Report for Fidelity Freedom Income Fund, Fidelity Freedom
2000 Fund, Fidelity Freedom 2010 Fund, Fidelity Freedom 2020 Fund, and
Fidelity Freedom 2030 Fund, for the fiscal year ended March 31, 1998,
are incorporated by reference into the funds' Statement of Additional
Information, and were filed on May 18, 1998 for Fidelity Aberdeen
Street Trust (File No. 811-6440), pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporate herein by
reference.
(b) Exhibits:
(1)(a) Trust Instrument of the Trust dated June 20, 1991, was
electronically filed and is incorporated herein by reference as
Exhibit 1 to Post-Effective Amendment No. 13.
(b) Certificate of Amendment of the Trust Instrument dated
January 16, 1992, was electronically filed and is incorporated herein
as Exhibit 1(b) to Post-Effective Amendment No. 13.
(c) Supplemental Trust Instrument dated August 21, 1996, was
electronically filed and is incorporated herein by reference as
Exhibit 1(b) of Post-Effective Amendment No. 16.
(d) Certificate of Amendment of the Trust Instrument dated
August 22, 1996, was electronically filed and is incorporated herein
by reference as Exhibit 1(c) to Post-Effective Amendment No. 16.
(e) Supplemental Trust Instrument dated March 31, 1997, was
electronically filed and is incorporated herein by reference as
Exhibit 1(e) of Post-Effective Amendment No. 19.
(2) Bylaws of the Trust effective May 19, 1994, were electronically
filed in and are incorporated herein by reference to Exhibit 2 of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(3) None.
(4) None.
(5)(a) Management Contract between the Registrant, on behalf of
Fidelity Freedom 2030 Fund, and Strategic Advisers, Inc. was
electronically filed and is incorporated herein by reference as
Exhibit 5(a) to Post-Effective Amendment No. 18.
(b) Management Contract between the Registrant, on behalf of
Fidelity Freedom 2020 Fund, and Strategic Advisers, Inc. was
electronically filed and is incorporated herein by reference as
Exhibit 5(b) to Post-Effective Amendment No. 18.
(c) Management Contract between the Registrant, on behalf of
Fidelity Freedom 2010 Fund, and Strategic Advisers, Inc. was
electronically filed and is incorporated herein by reference as
Exhibit 5(c) to Post-Effective Amendment No. 18.
(d) Management Contract between the Registrant, on behalf of
Fidelity Freedom 2000 Fund, and Strategic Advisers, Inc. was
electronically filed and is incorporated herein by reference as
Exhibit 5(d) to Post-Effective Amendment No. 18.
(e) Management Contract between the Registrant, on behalf of
Fidelity Freedom Income Fund, and Strategic Advisers, Inc. was
electronically filed and is incorporated herein by reference as
Exhibit 5(e) to Post-Effective Amendment No. 18.
(f) Administration Agreement between Strategic Advisers, Inc.
and Fidelity Management & Research Company for Fidelity Freedom 2030
Fund was electronically filed and is incorporated herein by reference
as Exhibit 5(f) to Post-Effective Amendment No. 18.
(g) Administration Agreement between Strategic Advisers, Inc.
and Fidelity Management & Research Company for Fidelity Freedom 2020
Fund was electronically filed and is incorporated herein by reference
as Exhibit 5(g) to Post-Effective Amendment No. 18.
(h) Administration Agreement between Strategic Advisers, Inc.
and Fidelity Management & Research Company for Fidelity Freedom 2010
Fund was electronically filed and is incorporated herein by reference
as Exhibit 5(h) to Post-Effective Amendment No. 18.
(i) Administration Agreement between Strategic Advisers, Inc.
and Fidelity Management & Research Company for Fidelity Freedom 2000
Fund was electronically filed and is incorporated herein by reference
as Exhibit 5(i) to Post-Effective Amendment No. 18.
(j) Administration Agreement between Strategic Advisers, Inc.
and Fidelity Management & Research Company for Fidelity Freedom Income
Fund was electronically filed and is incorporated herein by reference
as Exhibit 5(j) to Post-Effective Amendment No. 18.
(6)(a) General Distribution Agreement between the Registrant, on
behalf of Fidelity Freedom 2030 Fund, and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by
reference as Exhibit 6(a) to Post-Effective Amendment No. 18.
(b) General Distribution Agreement between the Registrant, on
behalf of Fidelity Freedom 2020 Fund, and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by
reference as Exhibit 6(b) to Post-Effective Amendment No. 18.
(c) General Distribution Agreement between the Registrant, on
behalf of Fidelity Freedom 2010 Fund, and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by
reference as Exhibit 6(c) to Post-Effective Amendment No. 18.
(d) General Distribution Agreement between the Registrant, on
behalf of Fidelity Freedom 2000 Fund, and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by
reference as Exhibit 6(d) to Post-Effective Amendment No. 18.
(e) General Distribution Agreement between the Registrant, on
behalf of Fidelity Freedom Income Fund, and Fidelity Distributors
Corporation was electronically filed and is incorporated herein by
reference as Exhibit 6(e) to Post-Effective Amendment No. 18.
(7)(a) Retirement Plan for Non-Interested Person Trustees, Directors
or General Partners, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Portfolio's
(File No. 2-69972) Post-Effective Amendment No. 54.
(b) The Fee Deferral Plan for Non-Interested Persons, Directors,
and Trustees of the Fidelity Funds, effective as of September 14, 1995
and amended through November 14, 1996, is incorporated herein by
reference as Exhibit 7(b) to Post-Effective Amendment No. 19.
(8)(a) Custodian Agreement and Appendix C, dated December 1, 1994,
between The Bank of New York and the Registrant is incorporated herein
by reference to Exhibit 8(a) of Fidelity Hereford Street Trust's
Post-Effective Amendment No. 4 (File No. 33-52577).
(b) Appendix A, dated September 18, 1997, to the Custodian
Agreement, dated December 1, 1994, between The Bank of New York and
the Registrant is incorporated herein by reference to Exhibit 8(e) of
Fidelity Charles Street Trust's Post-Effective Amendment No. 62 (File
No. 2-73133).
(c) Appendix B, dated September 18, 1997, to the Custodian
Agreement, dated December 1, 1994, between The Bank of New York and
the Registrant is incorporated herein by reference to Exhibit 8(f) of
Fidelity Charles Street Trust's Post-Effective Amendment No. 62 (File
No. 2-73133).
(d) Addendum, dated August 31, 1996, to Custodian Agreement,
dated December 1, 1994, between The Bank of New York and the
Registrant, is incorporated herein by reference to Exhibit 8(d) of
Post-Effective Amendment No. 19.
(e) Forms of Fidelity Group Repo Custodian Agreement and
Schedule 1 among The Bank of New York, J. P. Morgan Securities, Inc.,
and the Registrant, on behalf of Fidelity Freedom Funds, are filed
herein as Exhibit 8(e).
(f) Forms of Fidelity Group Repo Custodian Agreement and
Schedule 1 among Chemical Bank, Greenwich Capital Markets, Inc., and
the Registrant, on behalf of Fidelity Freedom Funds, are filed herein
as Exhibit 8(f).
(g) Forms of Joint Trading Account Custody Agreement and First
Amendment to Joint Trading Account Custody Agreement between The Bank
of New York and the Registrant, on behalf of Fidelity Freedom Funds,
are filed herein as Exhibit 8(g).
(9) Not applicable.
(10) Not applicable.
(11) Consent of Coopers & Lybrand, L.L.P., independent accountants,
is electronically filed herein as Exhibit 11.
(12) None.
(13) Representation by FMR, as initial shareholder, of agreement to
purchase shares of beneficial interest of the trust for investment was
electronically filed and is incorporated herein by reference as
Exhibit 13 to Post-Effective Amendment No. 18.
(14)(a) Fidelity Individual Retirement Account Custodial Agreement
and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(a) of Fidelity Union Street Trust's
(File No. 2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(i) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(l) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(m) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No.
57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) of Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document,
Standardized Adoption Agreement, and Non-Standardized Adoption
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(o) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k)
Basic Plan Document, Standardized Adoption Agreement, and
Non-Standardized Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan
Adoption Agreement, Non-Standardized Discretionary Contribution Plan
No. 002 Adoption Agreement, and Non-Standardized Discretionary
Contribution Plan No. 003 Adoption Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(g) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No.
2-93601) Post-Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(c) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(q) Fidelity SIMPLE-IRAPlan Adoption Agreement, Company Profile
Form, and Plan Document, as currently in effect, is incorporated
herein by reference to Exhibit 14(q) of Post-Effective Amendment No.
19.
(15)(a) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Freedom 2030 Fund was electronically filed and is
incorporated herein by reference as Exhibit 15(a) to Post-Effective
Amendment No. 18.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Freedom 2020 Fund was electronically filed and is
incorporated herein by reference as Exhibit 15(b) to Post-Effective
Amendment No. 18.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Freedom 2010 Fund was electronically filed and is
incorporated herein by reference as Exhibit 15(c) to Post-Effective
Amendment No. 18.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Freedom 2000 Fund was electronically filed and is
incorporated herein by reference as Exhibit 15(d) to Post-Effective
Amendment No. 18.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Freedom Income Fund was electronically filed and is
incorporated herein by reference as Exhibit 15(e) to Post-Effective
Amendment No. 18.
(16)(a) A schedule for computation of 30-day yields and total return
was electronically filed and is incorporated herein by reference as
Exhibit 16(a) to Post-Effective Amendment No. 18.
(b) A schedule for computation of moving averages was
electronically filed and is incorporated herein by reference as
Exhibit 16(b) to Post-Effective Amendment No. 18.
(17) Financial Data Schedules are filed herein for Fidelity Freedom
Income Fund, Fidelity Freedom 2000 Fund, Fidelity Freedom 2010 Fund,
Fidelity Freedom 2020 Fund, and Fidelity Freedom 2030 Fund, as Exhibit
27, respectively.
(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 board of
other funds advised by FMR, each of which has Fidelity Management &
Research Company as its investment adviser. In addition, the officers
of these funds are substantially identical. Nonetheless, the
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
As of March 31, 1998
Name of Series Number of Record Holders
Fidelity Freedom Income Fund 6,990
Fidelity Freedom 2000 Fund 33,340
Fidelity Freedom 2010 Fund 80,340
Fidelity Freedom 2020 Fund 100,937
Fidelity Freedom 2030 Fund 42,735
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
all claims and demands whatsoever. Article X, Section 10.02 of the
Trust Instrument 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
Trust Instrument, 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, the Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with,
information furnished to the Registrant by or on behalf of the
Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of
their own disabling conduct.
Pursuant to the agreement by which Fidelity Investments Institutional
Operations Company, Inc. ("FIIOC") is appointed transfer agent, the
Registrant agrees to indemnify and hold FIIOC harmless against any
losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names FIIOC
and/or the Registrant as a party and is not based on and does not
result from FIIOC's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with
FIIOC's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by FIIOC's willful misfeasance, bad faith or negligence
or reckless disregard of duties) which results from the negligence of
the Registrant, or from FIIOC's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of FIIOC's
acting in reliance upon advice reasonably believed by FIIOC to have
been given by counsel for the Registrant, or as a result of FIIOC's
acting in reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or
executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) STRATEGIC ADVISERS, INC.
Strategic Advisers, Inc. 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, and other business
organizations, and provides 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); Chief Operating Officer,
Director and Vice Chairman of FMR Corp. (1997).
Roger T. Servison Director and President of Strategic Advisers, Inc.
(1996); Director of Fidelity Brokerage Services,
Inc. (1994).
Lynn Davis Vice President -Portfolio Advisory Services of
Strategic Advisers, Inc. (1997).
Donald Alhart Vice President -Crosby Advisors of Strategic
Advisers, Inc. (1996).
Amy F. Barnwell Vice President -Charitable Advisory Services of
Strategic Advisers, Inc. (1997).
Stephen G.
Manning Treasurer of Strategic Advisers, Inc. (1997); Vice
President and Treasurer of FMR Corp. (1997).
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); Clerk of
FMR Corp. (1995).
Susan Shields Assistant Clerk of Strategic Advisers, Inc. (1995);
Employee of Fidelity Investments (1991).
Page Pennell Assistant Clerk of Strategic Advisers, Inc. (1997).
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
James Curvey Director None
Martha B. Willis President None
Eric D. Roiter Senior Vice President Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company, Strategic
Advisers, Inc., or Fidelity Service Company, Inc. 82 Devonshire
Street, Boston, MA 02109, or the funds' 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 Fidelity Freedom Income Fund, Fidelity
Freedom 2000 Fund, Fidelity Freedom 2010 Fund, Fidelity Freedom 2020
Fund, and Fidelity Freedom 2030 Fund, provided the information
required by Item 5A is contained in the annual report, undertakes to
furnish to each person to whom a prospectus has been delivered, upon
their request and without charge, a copy of the Registrant's latest
annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 20 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 19th day of May 1998.
FIDELITY ABERDEEN STREET 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.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d (dagger) President and Trustee May 19, 1998
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer May 19, 1998
Richard A. Silver
/s/Robert C. Pozen Trustee May 19, 1998
Robert C. Pozen
/s/Ralph F. Cox * Trustee May 19, 1998
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee May 19, 1998
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee May 19, 1998
Robert M. Gates
/s/E. Bradley Jones * Trustee May 19, 1998
E. Bradley Jones
/s/Donald J. Kirk * Trustee May 19, 1998
Donald J. Kirk
/s/Peter S. Lynch * Trustee May 19, 1998
Peter S. Lynch
/s/Marvin L. Mann * Trustee May 19, 1998
Marvin L. Mann
/s/William O. McCoy * Trustee May 19, 1998
William O. McCoy
/s/Gerald C. McDonough * Trustee May 19, 1998
Gerald C. McDonough
/s/Thomas R. Williams * Trustee May 19, 1998
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact 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 attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
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>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen 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, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, 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 on my 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. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
EXHIBIT 8(E)
Form of
FIDELITY GROUP
REPO CUSTODIAN AGREEMENT
FOR JOINT TRADING ACCOUNT
AGREEMENT dated as of _____________, among THE BANK OF NEW YORK, a
banking corporation organized under the laws of the State of New York
("Repo Custodian"), J.P. MORGAN SECURITIES INC. ("Seller") and each of
the entities listed on Schedule A-1, A-2, A-3 and A-4 (collectively,
the "Funds" and each a "Fund") hereto, acting on behalf of itself or
(i) in the case of the Funds listed on Schedule A-1 or A-2 hereto
which are portfolios or series, acting through the series company
listed on Schedule A-1 or A-2 hereto, (ii) in the case of the accounts
listed on Schedule A-3 hereto, acting through Fidelity Management &
Research Company, and (iii) in the case of the commingled or
individual accounts listed on Schedule A-4 hereto, acting through
Fidelity Management Trust Company (collectively, the "Funds" and each,
a "Fund").
WITNESSETH
WHEREAS, each of the Funds has entered into a master repurchase
agreement dated as of ________________(the "Master Agreement") with
Seller pursuant to which from time to time one or more of the Funds,
as buyers, and Seller, as seller, may enter into repurchase
transactions effected through one or more joint trading accounts
(collectively, the "Joint Trading Account") established and
administered by one or more custodians of the Funds identified on
Schedule C hereto (each a "Custodian"); and,
WHEREAS, in each such repurchase transaction Seller will sell to such
Funds certain Securities (as hereinafter defined) selected from
Eligible Securities (as hereinafter defined) held by Repo Custodian,
subject to an agreement by Seller to repurchase such Securities; and
WHEREAS, Repo Custodian currently maintains a cash and securities
account (the "Seller Account") for Seller for the purpose of, among
other things, effecting repurchase transactions hereunder; and
WHEREAS, the Funds desire that the Repo Custodian serve as the
custodian for the Funds in connection with the repurchase transactions
effected hereunder, and that the Repo Custodian hold cash, Cash
Collateral (as hereinafter defined) and Securities for the Funds for
the purpose of effecting repurchase transactions hereunder.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Banking Day" shall mean any day on which the Funds, Seller
Custodian, Repo Custodian, and the Federal Reserve Banks where the
Custodian and the Repo Custodian are located, are each open for
business.
(b) "Cash Collateral" shall mean all cash, denominated in U.S.
Dollars, credited by Repo Custodian to a Transaction Account pursuant
to Paragraphs 3, 6, 8 or 9 of the Master Agreement.
(c) "Custodian" shall have the meaning set forth in the preamble of
this Agreement.
(d) "Eligible Securities" shall mean those securities which are
identified as permissible securities for a particular Transaction
Category.
(e) "FICASH I Transaction" and "FICASH III Transaction " shall mean a
repurchase transaction in which the Repurchase Date is the Banking Day
next following the Sale Date and for which securities issued by the
government of the United States of America that are direct obligations
of the government of the United States of America shall constitute
Eligible Securities.
(f) "FICASH II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is the Banking Day next following the Sale
Date and for which one or more of the following two categories of
securities, as specified by the Funds, shall constitute Eligible
Securities: (x) securities issued by the government of the United
States of America that are direct obligations of the government of the
United States of America, or (y) securities issued by or guaranteed as
to principal and interest by the government of the United States of
America, or by its agencies and/or instrumentalities, including, but
not limited to, the Federal Home Loan Bank, Federal Home Loan Mortgage
Corp., Government National Mortgage Association, Federal National
Mortgage Association, Federal Farm Credit Bank, Federal Intermediate
Credit Bank, Banks for Cooperatives, and Federal Land Banks.
(g) "FITERM I Transaction" and "FITERM III Transaction" shall mean a
repurchase transaction in which the Repurchase Date is a date fixed by
agreement between Seller and the Participating Funds which is not the
Banking Day next following the Sale Date and for which securities
issued by the government of the United States of America that are
direct obligations of the government of the United States of America
shall constitute Eligible Securities.
(h) "FITERM II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is a date fixed by agreement between Seller
and the Participating Funds which is not the Banking Day next
following the Sale Date and for which one or more of the following two
categories of securities, as specified by the Funds, shall constitute
Eligible Securities: (x) securities issued by the government of the
United States of America that are direct obligations of the government
of the United States of America, or (y) securities issued by or
guaranteed as to principal and interest by the government of the
United States of America, or by its agencies and/or instrumentalities,
including, but not limited to, the Federal Home Loan Bank, Federal
Home Loan Mortgage Corp., Government National Mortgage Association,
Federal National Mortgage Association, Federal Farm Credit Bank,
Federal Intermediate Credit Bank, Banks for Cooperatives, and Federal
Land Banks.
(i) "Fund" shall have the meaning set forth in the preamble of this
Agreement.
(j) "Fund Agent" shall mean the agent for the Participating Funds
designated in Paragraph 18 of the Master Agreement.
(k) "Joint Trading Account" shall have the meaning set forth in the
preamble of this Agreement.
(l) "Margin Percentage" with respect to any repurchase transaction
shall be 102% or such other percentage as is agreed to by Seller and
the Participating Funds (except that in no event shall the Margin
Percentage be less than 100%).
(m) "Market Value" shall have the meaning set forth in Paragraph 4 of
the Master Agreement.
(n) "Master Agreement" shall have the meaning set forth in the
preamble of this Agreement.
(o) "1940 Act" shall mean have the meaning set forth in Paragraph
3(c) of this Agreement.
(p) "Partial Payment" shall have the meaning set forth in Section
4(g) of this Agreement.
(q) "Participating Funds" shall mean those Funds that are parties to
a particular repurchase transaction effected through the Joint Trading
Account.
(r) "Pricing Rate" shall mean the per annum percentage rate agreed to
by Seller and the Participating Funds for a repurchase transaction.
(s) "Pricing Services" shall have the meaning set forth in Paragraph
7 of this Agreement.
(t) "Repo Custodian" shall have the meaning set forth in the preamble
of this Agreement.
(u) "Repurchase Date" shall mean the date fixed by agreement between
Seller and the Participating Funds on which the Seller is to
repurchase Securities and Cash Collateral, if any, from the
Participating Funds and the Participating Funds are to resell the
Securities and Cash Collateral, if any, including any date determined
by application of the provisions of Paragraphs 7 and 15 of the Master
Agreement.
(v) "Repurchase Price" for each repurchase transaction shall mean the
Sale Price, plus an incremental amount determined by applying the
Pricing Rate to the Sale Price, calculated on the basis of a 360-day
year and the number of actual days elapsed from (and including) the
Sale Date to (but excluding) the Repurchase Date.
(w) "Sale Date" shall mean the Banking Day on which Securities and
Cash Collateral, if any, are to be sold to the Participating Funds by
Seller pursuant to a repurchase transaction hereunder.
(x) "Sale Price" shall mean the price agreed upon by the
Participating Funds and Seller at which the Securities and Cash
Collateral, if any, are to be sold to the Participating Funds by
Seller.
(y) "Securities" shall mean all Eligible Securities delivered by
Seller or to be delivered by Seller to the Participating Funds
pursuant to a particular repurchase transaction and not yet
repurchased hereunder, together with all rights related thereto and
all proceeds thereof.
(z) "Securities System" shall have the meaning set forth in Paragraph
3(c) of this Agreement.
(aa) "Seller" shall have the meaning set forth in the preamble to
this Agreement.
(bb) "Seller Account" shall have the meaning set forth in the
preamble of this Agreement.
(cc) "Transaction Account" shall mean a cash account established and
maintained by Repo Custodian for the Funds to effect repurchase
transactions pursuant to the Master Agreement.
(dd) "Transaction Category" shall mean the particular type of
repurchase transaction effected hereunder, as determined with
reference to the term of the transaction and the categories of
Securities that constitute Eligible Securities therefor, which term
shall include FICASH I Transactions, FICASH II Transactions, FICASH
III Transactions, FITERM I Transactions, FITERM II Transactions,
FITERM III Transactions, and such other transaction categories as may
from time to time be designated by the Funds by notice to Seller,
Custodian and Repo Custodian.
2. Appointment of Repo Custodian. Upon the terms and conditions set
forth in this Agreement, Repo Custodian is hereby appointed by the
Funds to act as the custodian for the Participating Funds to hold
cash, Cash Collateral and Securities for the purpose of effecting
repurchase transactions for the Participating Funds through the Joint
Trading Account pursuant to the Master Agreement. Repo Custodian
hereby acknowledges the terms of the Master Agreement between the
Funds and Seller (attached as an Exhibit hereto), as amended from time
to time, and agrees to abide by the provisions thereof to the extent
such provisions relate to the responsibilities and operations of Repo
Custodian hereunder.
3. Maintenance of Transaction Accounts.
(a) Repo Custodian shall establish and maintain one or more
Transaction Accounts for the purpose of effecting repurchase
transactions hereunder for the Funds, in each case pursuant to the
Master Agreement. From time to time the Funds may cause Custodian, on
behalf of the Funds, to deposit Securities and cash with Repo
Custodian in the designated Transaction Account, in each case in
accordance with Paragraph 3 of the Master Agreement.
(b) Repo Custodian shall keep all Securities, cash and Cash
Collateral received for the Participating Funds segregated at all
times from those of any other person, firm or corporation in its
possession and shall identify all such Securities, cash and Cash
Collateral as subject to this Agreement and the Master Agreement.
Segregation may be accomplished by physical segregation with respect
to certificated securities held by the Repo Custodian and, in
addition, by appropriate identification on the books and records of
Repo Custodian in the case of all other Securities, cash and Cash
Collateral. Title to all Securities and Cash Collateral under a
repurchase transaction shall pass to the Participating Funds that are
parties to such repurchase transaction. All such Securities and Cash
Collateral shall be held by Repo Custodian for the Participating
Funds, and shall be subject at all times to the proper instructions of
the Participating Funds, or the Custodian on behalf of the
Participating Funds, with respect to the holding, transfer or
disposition of such Securities and Cash Collateral. Repo Custodian
shall include in its records for each Transaction Account all
instructions received by it which evidence an interest of the
Participating Funds in the Securities and Cash Collateral and shall
hold physically segregated any written agreement, receipt or other
writing received by it which evidences an interest of the
Participating Funds in the Securities and Cash Collateral.
(c) Any requirement to "deliver" or "transfer" cash or Cash
Collateral to the Participating Funds or to "credit" a Transaction
Account under this or any other paragraph of this Agreement shall be
made in immediately available funds. If Repo Custodian is required to
"deliver" or "transfer" Securities to the Participating Funds under
this or any other paragraph of this Agreement, Repo Custodian shall
take, or cause to be taken, the following actions to perfect the
Participating Funds' interest in such Securities as an outright
purchaser: (i) in the case of certificated securities and instruments
held by Seller, by physical delivery of the share certificates or
other instruments representing the Securities and by physical
segregation of such certificates or instruments from the Repo
Custodian's other assets in a manner indicating that the Securities
are being held for the Participating Funds (such securities and
instruments to be delivered in form suitable for transfer or
accompanied by duly executed instruments of transfer or assignment in
blank and accompanied by such other documentation as the Participating
Funds may request), (ii) in the case of Securities held in a customer
only account in a clearing agency or federal book-entry system
authorized for use by the Funds and meeting the requirements of Rule
17f-4 under the Investment Company Act of 1940, as amended (the "1940
Act") (such authorized agency or system being referred to herein as a
"Securities System"), by appropriate entry on the books and records of
Repo Custodian identifying the Securities as belonging to the
Participating Funds, or (iii) in the case of Securities held in Repo
Custodian's own account in a Securities System, by transfer to a
customer only account in the Securities System and by appropriate
entry on the books and records of Repo Custodian identifying such
Securities as belonging to the Participating Funds; provided, further,
that Repo Custodian shall confirm to the Participating Funds the
identity of the Securities transferred or delivered. Acceptance of a
"due bill", "trust receipt" or similar receipt or notification of
segregation issued by a third party with respect to Securities held by
such third party shall not constitute good delivery of Securities to
Repo Custodian for purposes of this Agreement or the Master Agreement
and shall expressly violate the terms of this Agreement and the Master
Agreement. The Funds shall identify by notice to Repo Custodian and
Seller those agencies or systems which have been approved by the Funds
for use under this Agreement and the Master Agreement. The Funds
hereby notify Repo Custodian and Seller that the following agencies
and systems have been approved by the Funds for use under this
Agreement and the Master Agreement, until such time as Repo Custodian
and Seller shall have been notified by the Funds to the contrary: (i)
Participants Trust Company; (ii) The Depository Trust Company; and
(iii) any book-entry system as provided in (A) Subpart O of Treasury
Circular No. 300, 31 CFR 306.115, (B) Subpart B of Treasury Circular
Public Debt Series No. 27-76, 31 CFR 350.2, or (C) the book-entry
regulations of federal agencies substantially in the form of 31 CFR
306.115.
4. Repurchase Transactions.
(a) Repo Custodian shall make all credits and debits to the
Transaction Account and effect the transfer of Securities to or from
the Participating Funds upon proper instructions received from the
Participating Funds, or the Custodian on behalf of the Participating
Funds, and shall make all credits and debits to the Seller Account and
effect the transfer of Securities to or from the Seller upon proper
instructions received from Seller. In the event that Repo Custodian
receives conflicting proper instructions from Seller and the
Participating Funds, or the Custodian on behalf of the Participating
Funds, Repo Custodian shall follow the Participating Funds' or the
Custodian's proper instructions. The Participating Funds shall give
Repo Custodian only such instructions as shall be permitted by the
Master Agreement. Notwithstanding the preceding sentence, the
Participating Funds, or the Custodian on behalf of the Participating
Funds, may from time to time instruct Repo Custodian to transfer cash
from the Transaction Account to Custodian.
(b) (i) Whenever on any Banking Day one or more Funds and Seller agree
to enter into a repurchase transaction, Seller and the Participating
Funds, or the Custodian on behalf of the Participating Funds, will
give Repo Custodian proper instructions by telephone or otherwise on
the Sale Date, specifying the Transaction Category, Repurchase Date,
Sale Price, Repurchase Price or the applicable Pricing Rate and the
Margin Percentage for each such repurchase transaction.
(ii) In the case of repurchase transactions in which the Repurchase
Date is the Banking Day next following the Sale Date (x) the
Participating Funds may increase or decrease the Sale Price for any
such repurchase transaction by no more than 10% of the initial Sale
Price by causing to be delivered further proper instructions by
telephone or otherwise to Repo Custodian prior to the close of
business on the Sale Date and (y) Seller and the Participating Funds
may by mutual consent agree to increase or decrease the Sale Price by
more than 10% of the initial Sale Price by causing to be provided
further proper instructions to Repo Custodian by the close of business
on the Sale Date. In any event, Repo Custodian shall not be
responsible for determining whether any such increase or decrease of
the Sale Price exceeds the 10% limitation.
(c) Seller will take such actions as are necessary to ensure that on
the Sale Date the aggregate Market Value of all Securities held by
Repo Custodian for Seller and cash in the Seller Account equals or
exceeds the Margin Percentage of the Sale Price. Seller shall give
Repo Custodian proper instructions specifying with respect to each of
the Securities which is to be the subject of a repurchase transaction
(a) the name of the issuer and the title of the Securities, and (b)
the Market Value of such Securities. Such instructions shall
constitute Seller's instructions to Repo Custodian to transfer the
Securities to the Participating Funds and/or Cash Collateral from the
Seller Account to the Transaction Account.
(d) Prior to the close of business on the Sale Date, the
Participating Funds shall transfer to, or maintain on deposit with,
Repo Custodian in the Transaction Account immediately available funds
in an amount equal to the Sale Price with respect to a particular
repurchase transaction.
(e) Prior to the close of business on the Sale Date, Repo Custodian
shall transfer Securities from Seller to the Participating Funds
and/or cash held in the Seller Account to the Transaction Account and
shall transfer to the Seller Account immediately available funds from
the Transaction Account in accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred by Seller to the Participating Funds are Eligible
Securities. Any securities which are not Eligible Securities for a
particular repurchase transaction hereunder shall not be included in
the calculations set forth below and shall not be transferred to the
Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Securities and cash, if any, to be so transferred.
(iii) Repo Custodian shall notify Seller in the event that the
aggregate Market Value of Securities and cash, if any, applicable to
the repurchase transaction is less than the Margin Percentage of the
Sale Price and Seller shall transfer, by the close of business on the
Sale Date, to Repo Custodian additional Securities and/or cash in the
amount of such deficiency. If Seller does not, by the close of
business on the Sale Date, transfer additional Securities and/or cash,
the Market Value of which equals or exceeds such deficiency, Repo
Custodian may, at its option, without notice to Seller, advance the
amount of such deficiency to Seller in order to effectuate the
repurchase transaction. It is expressly agreed that Repo Custodian is
not obligated to make an advance to Seller to enable it to complete
any repurchase transaction.
(iv) Subject to the provisions of Subparagraph (v) below, Repo
Custodian shall cause the Securities applicable to the repurchase
transaction received from Seller to be transferred to the
Participating Funds and shall cause any cash received from Seller to
be transferred to the Transaction Account, against transfer of the
Sale Price from the Transaction Account to the Seller Account, such
transfers of Securities and/or cash and funds to occur simultaneously
on a delivery versus payment basis.
(v) Notwithstanding anything to the contrary, if, for any repurchase
transaction, the amount of immediately available funds in the
Transaction Account is less than the agreed upon Sale Price in
connection with the repurchase transaction immediately prior to
effectuating such repurchase transaction, or if the aggregate Market
Value of the Securities and cash, if any, applicable to such
repurchase transaction is less than the Sale Price multiplied by the
Margin Percentage immediately prior to effectuating such repurchase
transaction, Repo Custodian shall effect the repurchase transaction to
the best of its ability by transferring Securities from Seller to the
Participating Funds and/or cash from the Seller Account to the
Transaction Account with an aggregate Market Value equal to the lesser
of (x) the amount of immediately available funds in the Transaction
Account multiplied by the Margin Percentage and (y) the aggregate
Market Value of the Securities available for transfer from Seller to
the Participating Funds and cash, if any, in the Seller Account,
against the transfer of immediately available funds from the
Transaction Account to the Seller Account in an amount equal to the
aggregate Market Value of the Securities and/or cash to be transferred
divided by the Margin Percentage; provided, however, that in either
such event Repo Custodian shall have the right not to transfer to the
Participating Funds such Securities and not to transfer such cash, if
any, to the Transaction Account and not to transfer from the
designated Transaction Account such funds as Repo Custodian
determines, in its sole discretion, will not be the subject of a
repurchase transaction. The actions of Repo Custodian pursuant to
this subparagraph (e)(v) shall not affect the obligations and
liabilities of the parties to each other pursuant to the Master
Agreement with regard to such repurchase transaction.
(f) In the event that on a Banking Day Seller desires to substitute
Securities applicable to such repurchase transaction with Eligible
Securities and/or Cash Collateral (to the extent provided in the
Master Agreement), Repo Custodian shall perform such substitution in
accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred to the Participating Funds are Eligible Securities. Any
securities which are not eligible for repurchase transactions
hereunder shall not be included in the calculations set forth below
and shall not be transferred to the Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Eligible Securities and/or Cash Collateral to be transferred.
Repo Custodian shall not make any substitution if, at the time of
substitution, the aggregate Market Value of all Securities and any
Cash Collateral applicable to such repurchase transaction immediately
after such substitution would be less than the Margin Percentage of
the Repurchase Price (calculated as if the Repurchase Date were the
date of substitution).
(iii) Repo Custodian shall then deliver to the Seller, subject to the
qualifications set forth above, the Securities to be substituted
against the delivery by Repo Custodian of substitute Eligible
Securities to the Participating Funds and/or the crediting of the
Transaction Account with Cash Collateral.
(iv) In the event Seller has caused Repo Custodian to credit the
Transaction Account with Cash Collateral in lieu of substitute
Eligible Securities, and has failed to deliver Eligible Securities
against such Cash Collateral not later than the close of business on
such Banking Day in accordance with the terms of the Master Agreement,
Repo Custodian shall promptly, but in no event later than 10:00 a.m.
the following Banking Day, notify the Participating Funds and Seller
of such failure.
(g) With respect to each repurchase transaction, at 10:00 a.m. New
York time, or at such other time as specified in proper instructions
of the Participating Funds (or the Custodian on behalf of the
Participating Funds) on the Repurchase Date, Repo Custodian shall
debit the Seller Account and credit the Transaction Account in the
amount of the Repurchase Price and shall transfer Securities from the
Participating Funds to the Seller and Cash Collateral, if any, from
the Transaction Account to the Seller Account in accordance with the
following provisions:
(i) If the amount of available funds in the Seller Account equals or
exceeds the Repurchase Price, Repo Custodian shall debit the Seller
Account and credit the Transaction Account in the amount of the
Repurchase Price and shall transfer all Securities applicable to such
repurchase transaction from the Participating Funds to the Seller and
debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(ii) If the amount of available funds in the Seller Account is less
than the Repurchase Price, then Repo Custodian shall notify the Seller
of the amount of the deficiency and Seller shall promptly cause such
amount to be transferred to the Seller Account. If Seller fails to
cause the transfer of the entire amount of the deficiency to the
Seller Account, then Repo Custodian may, at its option and without
notice to Seller, advance to Seller the amount of such remaining
deficiency. It is expressly agreed that Repo Custodian is not
obligated to make any advance to Seller. If, following such transfer
and/or advance, the amount of available funds in the Seller Account
equals or exceeds the Repurchase Price then Repo Custodian shall debit
the Seller Account and credit the Transaction Account in the amount of
the Repurchase Price and shall transfer from the Participating Funds
to the Seller all Securities applicable to such repurchase transaction
and debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(iii) If the Seller fails to cause the transfer of the entire amount
of the deficiency, as required by (ii) above, and Repo Custodian fails
to advance to Seller an amount sufficient to eliminate the entire
deficiency, then Repo Custodian shall debit the Seller Account in the
amount of all immediately available funds designated by Seller as
applicable to the repurchase transaction and credit the Transaction
Account in such amount (such amount being referred to as the "Partial
Payment") and shall transfer Securities from the Participating Funds
to the Seller such that the aggregate Market Value of all remaining
Securities and Cash Collateral in the Transaction Account with respect
to such repurchase transaction shall at least equal the difference
between Margin Percentage of the Repurchase Price and the Partial
Payment.
5. Payments on Securities. Repo Custodian shall credit to the Seller
Account as soon as received, all principal, interest and other sums
paid by or on behalf of the issuer in respect of the Securities and
collected by Repo Custodian, except as otherwise provided in Paragraph
8 of the Master Agreement.
6. Daily Statement. On each Banking Day on which any Participating
Funds have an outstanding repurchase transaction, Repo Custodian shall
deliver by facsimile to Custodian and to the Participating Funds a
statement identifying the Securities held by Repo Custodian with
respect to such repurchase transaction and the cash and Cash
Collateral, if any, held by Repo Custodian in the Transaction Account,
including a statement of the then current Market Value of such
Securities and the amounts, if any, credited to the Transaction
Account as of the close of trading on the previous Banking Day. Repo
Custodian shall also deliver to Custodian and the Participating Funds
such additional statements as the Participating Funds may reasonably
request.
7. Valuation.
(a) Repo Custodian shall confirm the Market Value of Securities and
the amount of Cash Collateral, if any (i) on the Sale Date prior to
transferring the Sale Price out of the Transaction Account to the
Seller Account against the receipt from Seller of the Securities and
Cash Collateral, if any, and (ii) on each Banking Day on which such
repurchase transaction is outstanding. If on any Banking Day the
aggregate Market Value of the Securities and Cash Collateral with
respect to any repurchase transaction is less than the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Banking Day) for such transaction, Repo Custodian shall
promptly, but in any case no later than 10:00 a.m. the following
Banking Day, notify Seller. If on any Banking Day the aggregate
market value of the Securities and Cash Collateral with respect to any
repurchase transaction is less than the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Banking Day) for such transaction, and Seller fails to deliver
additional Eligible Securities applicable to such repurchase
transaction or an additional amount of Cash Collateral by the close of
business on such Banking Day such that the aggregate market value of
the Securities and Cash Collateral at least equals the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Banking Day), Repo Custodian shall promptly, but in any
event no later than 10:00 a.m. the following Banking Day, notify the
Participating Funds of such failure. For purposes of determining
Seller's margin maintenance requirements on the Sale Date for
repurchase transactions in which the Repurchase Date is the Banking
Day immediately following the Sale Date, such aggregate market value
shall equal at least the Margin Percentage of the Sale Price.
(b) Repo Custodian shall determine the bid side portion of the Market
Value of the Securities by reference to the independent pricing
services ("Pricing Services") set forth on Schedule B. It is
understood and agreed that Repo Custodian shall use the prices made
available by the Pricing Services on the Banking Day of such
determination unless Seller and the Participating Funds mutually agree
that some other prices shall be used and so notify Repo Custodian by
proper instructions of the sum of the prices of all such Securities
priced in such different manner. In the event that Repo Custodian is
unable to obtain a valuation of any Securities from the Pricing
Services, Repo Custodian shall request a bid quotation from a broker's
broker or a broker dealer, set forth in Schedule B, other than Seller.
In the event Repo Custodian is unable to obtain a bid quotation for
any Securities from such a broker's broker or a broker dealer, Repo
Custodian (i) shall not include any such Securities in the
determination of whether the aggregate Market Value of the Securities
and any Cash Collateral equals at least the Margin Percentage of the
Repurchase Price and (ii) shall redeliver such Securities to Seller if
the Market Value of all other Securities and any Cash Collateral with
respect to such repurchase transaction equals at least the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Banking Day). The Repo Custodian may rely on prices
quoted by Pricing Services, broker's brokers or broker dealers, except
Seller, as set forth in Schedule B.
(c) (i) If, on any Banking Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction is less than the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Banking Day)
applicable to such repurchase transaction, Repo Custodian shall
deliver to the Participating Funds an amount of additional Eligible
Securities applicable to such repurchase transaction and/or debit the
Seller Account and credit the Transaction Account with an additional
amount of Cash Collateral, such that the aggregate Market Value of all
Securities and any Cash Collateral with respect to such repurchase
transaction shall equal at least the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Banking Day) applicable to such repurchase transaction; except that,
for purposes of determining Seller's margin maintenance requirements
on the Sale Date for repurchase transactions in which the Repurchase
Date is the Banking Day immediately following the Sale Date, such
aggregate market value shall equal at least the Margin Percentage of
the Sale Price.
(ii) If, on any Banking Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction exceeds the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Banking Day)
applicable to such repurchase transaction, Repo Custodian shall return
to the Seller all or a portion of such Securities or Cash Collateral,
if any; provided that the Market Value of the remaining Securities and
any Cash Collateral with respect to the repurchase transaction shall
be at least equal to the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Banking Day)
applicable to such repurchase transaction. At any time and from time
to time with respect to any repurchase transaction, if authorized by
the Participating Funds, or the Custodian on behalf of the
Participating Funds, the Repo Custodian shall debit the Transaction
Account by an amount of Cash Collateral and credit the Seller Account
by the same amount of Cash Collateral against simultaneous delivery
from Seller to the Participating Funds of Eligible Securities
applicable to such repurchase transaction with a Market Value at least
equal to the amount of Cash Collateral credited and debited.
8. Authorized Persons. Schedule C hereto sets forth those persons
who are authorized to act for Repo Custodian, Custodian, Seller and
the Funds, respectively, under this Agreement.
9. Proper Instructions. Proper instructions shall mean a tested
telex, facsimile, a written request, direction, instruction or
certification signed or initialed by or on behalf of the party giving
the instructions by one or more authorized persons (as provided in
Paragraph 8); provided, however, that no instructions directing the
delivery of Securities or the payment of funds to any individual who
is an authorized signatory of Custodian or Repo Custodian shall be
signed by that individual. Telephonic, other oral or
electro-mechanical or electronic instructions (including the code
which may be assigned by Repo Custodian to Custodian from time to
time) given by one of the above authorized persons shall also be
considered proper instructions if the party receiving such
instructions reasonably believes them to have been given by an
authorized person with respect to the transaction involved. Oral
instructions will be confirmed by tested telex, facsimile or in
writing in the manner set forth above. The Funds authorize Repo
Custodian to tape record any and all telephonic or other oral
instructions given to Repo Custodian. Proper instructions may relate
to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
10. Standard of Care.
(a) Repo Custodian shall be obligated to exercise reasonable care and
diligence in carrying out the provisions of this Agreement and the
Master Agreement and shall be liable to each of the Funds and Seller
for any expenses or damages to the Funds or Seller for breach of Repo
Custodian's standard of care in this Agreement, as further provided in
this Paragraph. Repo Custodian assumes responsibility for loss to any
property held by it pursuant to the provisions of this Agreement which
is occasioned by the negligence of, or conversion, misappropriation or
theft by, Repo Custodian's officers, employees and agents. Repo
Custodian, at its option, may insure itself against loss from any
cause but shall be under no obligation to obtain insurance directly
for the benefit of the Funds. So long as and to the extent that Repo
Custodian exercises reasonable care and diligence and acts without
negligence, misfeasance or misconduct, Repo Custodian shall not be
liable to Seller or the Funds for (i) any action taken or omitted in
good faith in reliance upon proper instructions, (ii) any action taken
or omitted in good faith upon any notice, request, certificate or
other instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties, (iii) any delay or failure to
act as may be required under this Agreement or under the Master
Agreement when such delay or failure is due to any act of God or war,
(iv) the actions or omissions of a Securities System, (v) the title,
validity or genuineness of any security received, delivered or held by
it pursuant to this Agreement or the Master Agreement, (vi) the
legality of the purchase or sale of any Securities by or to the
Participating Funds or Seller or the propriety of the amount for which
the same are purchased or sold (except to the extent of Repo
Custodian's obligations hereunder to determine whether securities are
Eligible Securities and to calculate the Market Value of Securities
and any Cash Collateral), (vii) the due authority of any person listed
on Schedule C to act on behalf of Custodian, Seller or the Funds, as
the case may be, with respect to this Agreement or (viii) the errors
of the Pricing Services, broker's brokers or broker dealers set forth
in Schedule B.
(b) Repo Custodian shall not be liable to Seller or the Funds for, or
considered to be the custodian of, any Eligible Securities or any
money to be used in a repurchase transaction, whether or not such
money is represented by any check, draft, or other instrument for the
payment of money, until the Eligible Securities have been delivered in
accordance with Paragraph 3 or until Repo Custodian actually receives
and collects such money on behalf of Seller or the Funds directly or
by the final crediting of the Seller Account or a Transaction Account
through the Securities System, except that this Paragraph 10(b) shall
not be deemed to limit the liability of Repo Custodian to Seller or
the Funds if the non-delivery of such Eligible Securities or the
failure to receive and collect such money results from the breach by
Repo Custodian of its obligations under this Agreement or the Master
Agreement.
(c) Repo Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by
it are such as properly may be held by the Participating Funds;
provided that notwithstanding anything to the contrary herein, Repo
Custodian shall be obligated to act in accordance with the guidelines
and proper instructions of the Participating Funds, or the Custodian
on behalf of the Participating Funds, with respect to the types of
Eligible Securities and the issuers of such Eligible Securities that
may be used in specific repurchase transactions.
(d) Repo Custodian promptly shall notify the Fund Agent and the
Custodian if Securities held by Repo Custodian are in default or if
payment on any Securities has been refused after due demand and
presentation and Repo Custodian shall take action to effect collection
of any such amounts upon the proper instructions of the Participating
Funds, or the Custodian on behalf of the Participating Funds, and
assurances satisfactory to it that it will be reimbursed for its costs
and expenses in connection with any such action.
(e) Repo Custodian shall have no duties, other than such duties as
are necessary to effectuate repurchase transactions in accordance with
this Agreement and the Master Agreement within the standard of care
set forth in Paragraph 10(a) above and in a commercially reasonable
manner.
11. Representations and Additional Covenants of Repo Custodian.
(a) Repo Custodian represents and warrants that (i) it is duly
authorized to execute and deliver this Agreement and to perform its
obligations hereunder and has taken all necessary action to authorize
such execution, delivery and performance, (ii) the execution, delivery
and performance of this Agreement do not and will not violate any
ordinance, declaration of trust, partnership agreement, articles of
incorporation, charter, rule or statute applicable to it or any
agreement by which it is bound or by which any of its assets are
affected, (iii) the person executing this Agreement on its behalf is
duly and properly authorized to do so, (iv) it has (and will maintain)
a copy of this Agreement and evidence of its authorization in its
official books and records, and (v) this Agreement has been executed
by one of its duly authorized officers at the level of Vice President
or higher.
(b) Repo Custodian further represents and warrants that (i) it has
not pledged, encumbered, hypothecated, transferred, disposed of, or
otherwise granted, any third party an interest in any Securities, (ii)
it does not have any security interest, lien or right of setoff in the
Securities, and (iii) it has not been notified by any third party, in
its capacity as Repo Custodian, custodian bank or clearing bank, of
the existence of any lien, claim, charge or encumbrance with respect
to any Securities that are the subject of such repurchase transaction.
Repo Custodian agrees that (i) it will not pledge, encumber,
hypothecate, transfer, dispose of, or otherwise grant, any third party
an interest in any Securities, (ii) it will not acquire any security
interest, lien or right of setoff in the Securities, and (iii) it will
promptly notify the Fund Agent, if, during the term of any outstanding
repurchase transaction, it is notified by any third party, in its
capacity as Repo Custodian, custodian bank or clearing bank, of the
Participating Funds or Seller, of the existence of any lien, claim,
charge or encumbrance with respect to any Securities that are the
subject of such repurchase transaction.
12. Indemnification.
(a) Notwithstanding the Participating Fund's obligation to the Repo
Custodian under Paragraph 12(b) below, so long as and to the extent
that Repo Custodian is in the exercise of reasonable care and
diligence and acts without negligence, misfeasance or misconduct,
Seller will indemnify Repo Custodian and hold it harmless against any
and all losses, claims, damages, liabilities or actions to which it
may become subject, and reimburse it for any expenses (including
attorneys' fees and expenses) incurred by it in connection therewith,
insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon or in any way related to this Agreement, the
Master Agreement or those arrangements. Without limiting the
generality of the foregoing indemnification, Repo Custodian shall be
indemnified by Seller for all costs and expenses, including attorneys'
fees, for its successful defense against claims that Repo Custodian
breached its standard of care and was negligent or engaged in
misfeasance or misconduct.
(b) So long as and to the extent that Repo Custodian is in the
exercise of reasonable care and diligence and acts without negligence,
misconduct or misfeasance, the Participating Funds will indemnify Repo
Custodian and hold it harmless against any and all losses, claims,
damages, liabilities or actions to which it may become subject, and
reimburse it for any expenses (including attorneys' fees and expenses)
incurred by it in connection therewith, insofar as such losses,
claims, damages, liabilities or actions result from the negligence,
misconduct or misfeasance of the Participating Funds under this
Agreement.
13. Rights and Remedies. The rights and remedies conferred upon the
parties hereto shall be cumulative, and the exercise or waiver of any
thereof shall not preclude or inhibit the exercise of any additional
rights and remedies.
14. Modification or Amendment. Except as otherwise provided in this
Paragraph 14, no modification, waiver or amendment of this Agreement
shall be binding unless in writing and executed by the parties hereto.
Schedule A, listing the Funds, may be amended from time to time to add
or delete Funds by the Funds (i) delivering an executed copy of an
addendum to Schedule A to Seller and Repo Custodian, and (ii)
amending Schedule A to the Master Agreement in accordance with the
provisions therein. The amendment of Schedule A as provided above
shall constitute appointment of Repo Custodian as a custodian for such
Fund. Schedule B may be amended from time to time by an instrument in
writing, or counterpart thereof, executed by Repo Custodian, Seller
and the Funds. Schedule C may be amended from time to time to change
an authorized person of: (i) the Funds, by written notice to Repo
Custodian and Seller by Ms. Sarah Zenoble or the Treasurer of the
Funds (or such persons who may be authorized from time to time in
writing by Ms. Zenoble or the President or Treasurer of Fidelity
Management and Research Company to trade on behalf of Fidelity's
taxable money market funds); (ii) Seller, by written notice to Repo
Custodian and the Funds by any Vice President of Seller; (iii) Repo
Custodian, by written notice to Seller, Custodian and the Funds by any
Vice President of Repo Custodian; and (iv) Custodian, by written
notice to Repo Custodian by any Vice President of Custodian. Schedule
D may be amended from time to time by any party hereto by delivery of
written notice to the other parties hereto. Repo Custodian shall
receive notice of any amendment to the Master Agreement at the address
set forth in Schedule D hereto; and, if such amendment would have a
material adverse effect on the rights of, or would materially increase
the obligations of Repo Custodian under this Agreement, any such
amendment shall also require the consent of Repo Custodian. Any such
amendment shall be deemed not to be material if Repo Custodian fails
to object in writing within 21 days after receipt of notice thereof.
No amendment to this Agreement shall affect the rights or obligations
of any Fund with respect to any outstanding repurchase transaction
entered into under this Agreement and the Master Agreement prior to
such amendment or with respect to any actions or omissions by any
party hereto prior to such amendment. In the event of conflict
between this Agreement and the Master Agreement, the Master Agreement
shall control.
15. Termination. This Agreement shall terminate forthwith upon
termination of the Master Agreement or may be terminated by any party
hereto on ten Banking Days' written notice to the other parties;
provided, however, that any such termination shall not affect any
repurchase transaction then outstanding or any rights or obligations
under this Agreement or the Master Agreement with respect to any
actions or omissions of any party hereto prior to termination. In the
event of termination, Repo Custodian will deliver any Securities, Cash
Collateral or cash held by it or any agent to Custodian or to such
successor custodian or custodian or subcustodian as the Participating
Funds shall instruct.
16. Compensation. Seller agrees to pay Repo Custodian compensation
for the services to be rendered hereunder, based upon rates which
shall be agreed upon from time to time.
17. Notices. Except with respect to communications between Custodian
and the Funds which shall be governed by the custodian agreement or
subcustodian agreement between such parties, as the case may be, and
except as otherwise provided herein or as the parties to the Agreement
shall from time to time otherwise agree, all instructions, notices,
reports and other communications contemplated by this Agreement shall
be given to the party entitled to receive such notice at the telephone
number and address listed on Schedule D hereto.
18. Severability. If any provision of this Agreement is held to be
unenforceable as a matter of law, the other terms and provisions
hereof shall not be affected thereby and shall remain in full force
and effect.
19. Binding Nature. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and
assignees; provided that, no party hereto may assign this Agreement or
any of the rights or obligations hereunder without the prior written
consent of the other parties.
20. Headings. Section headings are for reference purposes only and
shall not be construed as a part of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one
instrument.
22. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
23. Limitation of Liability. Seller is hereby expressly put on
notice that the Declarations of Trust or the Certificates and
Agreements of Limited Partnership, as the case may be, of each
Participating Fund contain a limitation of liability provision
pursuant to which the obligations assumed by such Participating Fund
hereunder shall be limited in all cases to such Participating Fund and
its assets or, in the case of a series Fund, to the assets of that
series only, and neither Seller nor its respective agents or assigns
shall seek satisfaction of any such obligation from the officers,
employees, agents, directors, trustees, shareholders or partners of
any such Participating Fund or series.
24. Rights and Obligations of Each Fund. The rights and obligations
set forth in this Agreement with respect to each repurchase
transaction shall accrue only to the Participating Funds in accordance
with their respective interests therein. No other Fund shall receive
any rights or have any liabilities arising from any action or inaction
of any Participating Fund under this Agreement with respect to such
repurchase transaction.
25. General Provisions. This Agreement supersedes any other
custodian agreement by and among Seller, the Funds, and Repo Custodian
concerning repurchase transactions effected through the Joint Trading
Account. It is understood and agreed that time is of the essence with
respect to the performance of each party's respective obligations
hereunder.
26. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) In the case of transactions in which one of the parties is a
broker or dealer registered with the SEC under Section 15 of the
Exchange Act, the Securities Investor Protection Corporation has taken
the position that the provisions of the Securities Investor Protection
Act of 1970 (the "SIPA") do not protect the other party with respect
to any transaction hereunder; and
(b) In the case of transactions in which one of the parties is a
government securities broker or a government securities dealer
registered with the SEC under Section 15C of the Exchange Act, SIPA
will not provide protection to the other party with respect to any
transaction hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
[Signature Lines Omitted]
SCHEDULE B
PRICING SOURCES
PRICING SERVICES
U.S. Government Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
GNMA - The Bond Buyer
FHLMC - The Bond Buyer
All other U.S. Government
and Agency Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
BROKERS' BROKERS AND BROKER DEALERS
U.S. Government Securities - Any Primary Dealer
GNMA - Any Primary Broker-Dealer's bid rate for such security
FHLMC - Any Primary Broker-Dealer's bid rate for such security
All other U.S. Government and Agency Securities - Any Primary
Broker-Dealer's bid rate for such security
Prices shall be as of the business day of the date of determination
or the last quote available. The pricing services, Brokers' Brokers
and Broker Dealers may be changed from time to time by agreement of
all the parties.
SCHEDULE C
AUTHORIZED PERSONS
Repo Custodian
Ken Rindos
Kurt Woetzel
Custodian
Ken Rindos
Kurt Woetzel
Seller
Joseph P. Blauvelt
Michael B. Boyer
Robert E. Curry
Patrick Doyle
Frank Forgione
Edward J. Frederick
Christopher Juliano
Joseph Marrone
Thomas T. McGee
John S. Mehrtens
John A. Michielini
Allen Smith, II
The Funds
Barron, Leland C. Harlow, Katharyn M. Stehman, Burnell R.
Carbone, John M. Henning, Frederick L. Jr. Todd, Deborah
Curtis, Fritz Huyck, Timothy Todd, John J.
Duby, Robert K. Jamen, Jon Torres, Joseph E.
Egan, Dorothy T. Litterst, Robert Williams, Richard
Glocke, David Silver, Samuel Zenoble, Sarah
SCHEDULE D
NOTICES
If to Custodian: The Bank of New York
One Wall Street, 4th Floor
New York, NY 10286
Telephone: (212) 635-7947
Attention: Sherman Yu, Esq.
With a copy to the Fund Agent
If to Repo Custodian: The Bank of New York
One Wall Street, 4th Floor
New York, New York 10286
Telephone: (212) 635-4809
Attention: Ms. Kristin Smith
If to Seller: J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Telephone: (212) 483-2323
Attention: Middle Office Traders Support
If to any of the Funds: FMR Texas Inc.
400 East Las Colinas Blvd., CP9M
Irving, Texas 75039
Telephone: (214) 584-7800
Attention: Ms. Deborah R. Todd or
Mr. Samuel Silver
If to the Fund Agent: Fidelity Investments
[Name of Fund]
400 East Las Colinas Blvd., CP9E
Irving, Texas 75039
Telephone: (214) 584-4071
Attention: Mr. Mark Mufler
277282.c1
SCHEDULE 1
The following lists the additional counterparties to the Repo
Custodian Agreement for Joint Trading Account between The Bank of New
York and the Fidelity Funds:
BZW Government Securities, Inc.
CS First Boston Corp.
Daiwa Securities America, Inc.
Deutsche Bank Securities Corp.
Donaldson, Lufkin & Jenerette Securities Corp.
Fuji Securities, Inc.
Goldman Sachs & Co
Morgan Stanley & Co., Inc.
NationsBanc Capital Markets
Nikko Securities Co. International, Inc.
Nomura Securities International, Inc.
Prudential Securities, Inc.
Salomon Brothers, Inc.
Sanwa BJK Securities Co., LP
SBC Capital Markets, Inc.
Smith Barney, Inc.
EXHIBIT 8(F)
Form of
FIDELITY GROUP
REPO CUSTODIAN AGREEMENT
FOR JOINT TRADING ACCOUNT
AGREEMENT dated as of _________________, among CHEMICAL BANK, a
banking corporation organized under the laws of the State of New York
("Repo Custodian"), GREENWICH CAPITAL MARKETS, INC. ("Seller") and
each of the entities listed on Schedule A-1, A-2, A-3 and A-4 hereto
acting on behalf of itself or (i) in the case of a series company, on
behalf of one or more of its portfolios or series listed on Schedule
A-1 or A-2 hereto, (ii) in the case of the accounts listed on Schedule
A-3 hereto, acting through Fidelity Management & Research Company, and
(iii) in the case of the commingled or individual accounts listed on
Schedule A-4 hereto, acting through Fidelity Management Trust Company
(collectively, the "Funds" and each, a "Fund").
WITNESSETH
WHEREAS, each of the Funds has entered into a master repurchase
agreement dated as of _________________, (the "Master Agreement") with
Seller pursuant to which from time to time one or more of the Funds,
as buyers, and Seller, as seller, may enter into repurchase
transactions effected through one or more joint trading accounts
(collectively, the "Joint Trading Account") established and
administered by one or more custodians of the Funds identified on
Schedule C hereto (each a "Custodian"); and,
WHEREAS, in each such repurchase transaction Seller will sell to such
Funds certain Securities (as hereinafter defined) selected from
Eligible Securities (as hereinafter defined) held by Repo Custodian ,
subject to an agreement by Seller to repurchase such Securities; and
WHEREAS, Repo Custodian currently maintains a cash and securities
account (the "Seller Account") for Seller for the purpose of, among
other things, effecting repurchase transactions hereunder; and
WHEREAS, the Funds desire that the Repo Custodian serve as the
custodian for each of the Funds in connection with the repurchase
transactions effected hereunder, and that the Repo Custodian hold
cash, Cash Collateral (as hereinafter defined) and Securities for each
of the Funds for the purpose of effecting repurchase transactions
hereunder.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definitions.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Banking Day" shall mean any day on which the Funds, Seller
Custodian, Repo Custodian, and the Federal Reserve Banks where the
Custodian and the Repo Custodian are located, are each open for
business.
(b) "Cash Collateral" shall mean all cash, denominated in U.S.
Dollars, credited by Repo Custodian to a Transaction Account pursuant
to Paragraphs 3, 6, 8 or 9 of the Master Agreement.
(c) "Custodian" shall have the meaning set forth in the preamble of
this Agreement.
(d) "Eligible Securities" shall mean those securities which are
identified as permissible securities for a particular Transaction
Category.
(e) "FICASH I Transaction" and "FICASH III Transaction" shall mean a
repurchase transaction in which the Repurchase Date is the Banking Day
next following the Sale Date and for which securities issued by the
government of the United States of America that are direct obligations
of the government of the United States of America shall constitute
Eligible Securities.
(f) "FICASH II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is the Banking Day next following the Sale
Date and for which one or more of the following two categories of
securities, as specified by the Funds, shall constitute Eligible
Securities: (x) securities issued by the government of the United
States of America that are direct obligations of the government of the
United States of America, or (y) securities issued by or guaranteed as
to principal and interest by the government of the United States of
America, or by its agencies and/or instrumentalities, including, but
not limited to, the Federal Home Loan Bank, Federal Home Loan Mortgage
Corp., Government National Mortgage Association, Federal National
Mortgage Association, Federal Farm Credit Bank, Federal Intermediate
Credit Bank, Banks for Cooperatives, and Federal Land Banks.
(g) "FITERM I Transaction" and "FITERM III Transaction" shall mean a
repurchase transaction in which the Repurchase Date is a date fixed by
agreement between Seller and the Participating Funds which is not the
Banking Day next following the Sale Date, or if applicable, the date
fixed upon exercise of an Unconditional Resale Right (as hereinafter
defined) by the Participating Funds and for which securities issued by
the government of the United States of America that are direct
obligations of the government of the United States of America shall
constitute Eligible Securities.
(h) "FITERM II Transaction" shall mean a repurchase transaction in
which the Repurchase Date is a date fixed by agreement between Seller
and the Participating Funds which is not the Banking Day next
following the Sale Date, or, if applicable, the date fixed upon
exercise of an Unconditional Resale Right (as hereinafter defined) by
the Participating Funds and for which one or more of the following two
categories of securities, as specified by the Funds, shall constitute
Eligible Securities: (x) securities issued by the government of the
United States of America that are direct obligations of the government
of the United States of America, or (y) securities issued by or
guaranteed as to principal and interest by the government of the
United States of America, or by its agencies and/or instrumentalities,
including, but not limited to, the Federal Home Loan Bank, Federal
Home Loan Mortgage Corp., Government National Mortgage Association,
Federal National Mortgage Association, Federal Farm Credit Bank,
Federal Intermediate Credit Bank, Banks for Cooperatives, and Federal
Land Banks.
(i) "Fund" shall have the meaning set forth in the preamble of this
Agreement.
(j) "Fund Agent" shall mean the agent for the Participating Funds
designated in Paragraph 18 of the Master Agreement.
(k) "Joint Trading Account" shall have the meaning set forth in the
preamble of this Agreement.
(l) "Margin Percentage" with respect to any repurchase transaction
shall be 102% or such other percentage as is agreed to by Seller and
the Participating Funds (except that in no event shall the Margin
Percentage be less than 100%).
(m) "Market Value" shall have the meaning set forth in Paragraph 4 of
the Master Agreement.
(n) "Master Agreement" shall have the meaning set forth in the
preamble of this Agreement.
(o) "1940 Act" shall mean have the meaning set forth in Paragraph
3(c) of this Agreement.
(p) "Partial Payment" shall have the meaning set forth in Section
4(g) of this Agreement.
(q) "Participating Funds" shall mean those Funds that are parties to
a particular repurchase transaction effected through the Joint Trading
Account.
(r) "Pricing Rate" shall mean the per annum percentage rate agreed to
by Seller and the Participating Funds for a particular repurchase
transaction.
(s) "Pricing Services" shall have the meaning set forth in Paragraph
7 of this Agreement.
(t) "Repo Custodian" shall have the meaning set forth in the preamble
of this Agreement.
(u) "Repurchase Date" shall mean the date fixed by agreement between
Seller and the Participating Funds on which the Seller is to
repurchase Securities and Cash Collateral, if any, from the
Participating Funds and the Participating Funds are to resell the
Securities and Cash Collateral, if any, including any date determined
by application of the provisions of Paragraphs 7(a) and 15 of the
Master Agreement.
(v) "Repurchase Price" for each repurchase transaction shall mean the
Sale Price, plus an incremental amount determined by applying the
Pricing Rate to the Sale Price, calculated on the basis of a 360-day
year and the number of actual days elapsed from (and including) the
Sale Date to (but excluding) the Repurchase Date.
(w) "Sale Date" shall mean the Banking Day on which Securities and
Cash Collateral, if any, are to be sold to the Participating Funds by
Seller pursuant to a repurchase transaction hereunder.
(x) "Sale Price" shall mean the price agreed upon by the
Participating Funds and Seller at which the Securities and Cash
Collateral, if any, are to be sold to the Participating Funds by
Seller.
(y) "Securities" shall mean all Eligible Securities delivered by
Seller or to be delivered by Seller to the Participating Funds
pursuant to a particular repurchase transaction and not yet
repurchased hereunder, together with all rights related thereto and
all proceeds thereof.
(z) "Securities System" shall have the meaning set forth in Paragraph
3(c) of this Agreement.
(aa) "Seller" shall have the meaning set forth in the preamble to
this Agreement.
(bb) "Seller Account" shall have the meaning set forth in the
preamble of this Agreement.
(cc) "Transaction Account" shall mean a cash account established and
maintained by Repo Custodian for the Funds to effect repurchase
transactions pursuant to the Master Agreement.
(dd) "Transaction Category" shall mean the particular type of
repurchase transaction effected hereunder, as determined with
reference to the term of the transaction and the categories of
Securities that constitute Eligible Securities therefor, which term
shall include FICASH I Transactions, FICASH II Transactions, FICASH
III Transactions, FITERM I Transactions, FITERM II Transactions,
FITERM III Transactions, and such other transaction categories as may
from time to time be designated by the Funds by notice to Seller,
Custodian and Repo Custodian.
(ee) "Unconditional Resale Right" shall have the meaning set forth
in Paragraph 7(b) of the Master Agreement.
(ff) "Valuation Day" shall mean any day on which Repo Custodian is
open for business.
2. Appointment of Repo Custodian. Upon the terms and conditions set
forth in this Agreement, Repo Custodian is hereby appointed by the
Funds to act as the custodian for the Participating Funds to hold
cash, Cash Collateral and Securities for the purpose of effecting
repurchase transactions for the Participating Funds through the Joint
Trading Account pursuant to the Master Agreement. Repo Custodian
hereby acknowledges the terms of the Master Agreement between the
Funds and Seller (attached as an Exhibit hereto), as amended from time
to time, and agrees to abide by the provisions thereof to the extent
such provisions relate to the responsibilities and operations of Repo
Custodian hereunder.
3. Maintenance of Transaction Accounts.
(a) Repo Custodian shall establish and maintain one or more
Transaction Accounts for the purpose of effecting repurchase
transactions hereunder for the Funds, in each case pursuant to the
Master Agreement. From time to time the Funds may cause Custodian, on
behalf of the Funds, to deposit Securities and cash with Repo
Custodian in the designated Transaction Account, in each case in
accordance with Paragraph 3 of the Master Agreement.
(b) Repo Custodian shall keep all Securities, cash and Cash
Collateral received for the Participating Funds segregated at all
times from those of any other person, firm or corporation in its
possession and shall identify all such Securities, cash and Cash
Collateral as subject to this Agreement and the Master Agreement.
Segregation may be accomplished by physical segregation with respect
to certificated securities held by the Repo Custodian and, in
addition, by appropriate identification on the books and records of
Repo Custodian in the case of all other Securities, cash and Cash
Collateral. Title to all Securities and Cash Collateral under a
repurchase transaction shall pass to the Participating Funds that are
parties to such repurchase transaction. All such Securities and Cash
Collateral shall be held by Repo Custodian for the Participating
Funds, and shall be subject at all times to the proper instructions of
the Participating Funds, or the Custodian on behalf of the
Participating Funds, with respect to the holding, transfer or
disposition of such Securities and Cash Collateral. Repo Custodian
shall include in its records for each Transaction Account all
instructions received by it which evidence an interest of the
Participating Funds in the Securities and Cash Collateral and shall
hold physically segregated any written agreement, receipt or other
writing received by it which evidences an interest of the
Participating Funds in the Securities and Cash Collateral.
(c) Any requirement to "deliver" or "transfer" cash or Cash
Collateral to the Participating Funds or to "credit" a Transaction
Account under this or any other paragraph of this Agreement shall be
made in immediately available funds. If Repo Custodian is required to
"deliver" or "transfer" Securities to the Participating Funds under
this or any other paragraph of this Agreement, Repo Custodian shall
take, or cause to be taken, the following actions to perfect the
Participating Funds' interest in such Securities as an outright
purchaser: (i) in the case of certificated securities and instruments
held by Seller, by physical delivery of the share certificates or
other instruments representing the Securities and by physical
segregation of such certificates or instruments from the Repo
Custodian's other assets in a manner indicating that the Securities
are being held for the Participating Funds (such securities and
instruments to be delivered in form suitable for transfer or
accompanied by duly executed instruments of transfer or assignment in
blank and accompanied by such other documentation as the Participating
Funds may request), (ii) in the case of Securities held in a customer
only account in a clearing agency or federal book-entry system
authorized for use by the Funds and meeting the requirements of Rule
17f-4 under the Investment Company Act of 1940, as amended (the "1940
Act") (such authorized agency or system being referred to herein as a
"Securities System"), by appropriate entry on the books and records of
Repo Custodian identifying the Securities as belonging to the
Participating Funds, or (iii) in the case of Securities held in Repo
Custodian's own account in a Securities System, by transfer to a
customer only account in the Securities System and by appropriate
entry on the books and records of Repo Custodian identifying such
Securities as belonging to the Participating Funds; provided, further,
that Repo Custodian shall confirm to the Participating Funds the
identity of the Securities transferred or delivered. Acceptance of a
"due bill", "trust receipt" or similar receipt or notification of
segregation issued by a third party with respect to Securities held by
such third party shall not constitute good delivery of Securities to
Repo Custodian for purposes of this Agreement or the Master Agreement
and shall expressly violate the terms of this Agreement and the Master
Agreement. The Funds shall identify by notice to Repo Custodian and
Seller those agencies or systems which have been approved by the Funds
for use under this Agreement and the Master Agreement. The Funds
hereby notify Repo Custodian and Seller that the following agencies
and systems have been approved by the Funds for use under this
Agreement and the Master Agreement, until such time as Repo Custodian
and Seller shall have been notified by the Funds to the contrary: (i)
Participants Trust Company; (ii) The Depository Trust Company; and
(iii) any book-entry system as provided in (A) Subpart O of Treasury
Circular No. 300, 31 CFR 306.115, (B) Subpart B of Treasury Circular
Public Debt Series No. 27-76, 31 CFR 350.2, or (C) the book-entry
regulations of federal agencies substantially in the form of 31 CFR
306.115.
4. Repurchase Transactions.
(a) Repo Custodian shall make all credits and debits to the
Transaction Account and effect the transfer of Securities to or from
the Participating Funds upon proper instructions received from the
Participating Funds, or the Custodian on behalf of the Participating
Funds, and shall make all credits and debits to the Seller Account and
effect the transfer of Securities to or from the Seller upon proper
instructions received from Seller. In the event that Repo Custodian
receives conflicting proper instructions from Seller and the
Participating Funds, or the Custodian on behalf of the Participating
Funds, Repo Custodian shall follow the Participating Funds' or the
Custodian's proper instructions. The Participating Funds shall give
Repo Custodian only such instructions as shall be permitted by the
Master Agreement. Notwithstanding the preceding sentence, the
Participating Funds, or the Custodian on behalf of the Participating
Funds, may from time to time instruct Repo Custodian to transfer cash
from the Transaction Account to Custodian so long as such transfer is
not in contravention of the Master Agreement.
(b) (i) Whenever on any Banking Day one or more Funds and Seller agree
to enter into a repurchase transaction, Seller and the Participating
Funds, or the Custodian on behalf of the Participating Funds, will
give Repo Custodian proper instructions by telephone or otherwise by
5:00 p.m. New York time on the Sale Date, specifying the Transaction
Category, Repurchase Date, Sale Price, Repurchase Price or the
applicable Pricing Rate and the Margin Percentage for each such
repurchase transaction.
(ii) In the case of repurchase transactions in which the Repurchase
Date is the Banking Day next following the Sale Date (x) the
Participating Funds may increase or decrease the Sale Price for any
such repurchase transaction by no more than 10% of the initial Sale
Price by causing to be delivered further proper instructions by
telephone or otherwise to Repo Custodian by 5:15 p.m. New York time
(or at such later time as may be agreed upon by the parties) on the
Sale Date and (y) Seller and the Participating Funds may by mutual
consent agree to increase or decrease the Sale Price by more than 10%
of the initial Sale Price by causing to be provided further proper
instructions to Repo Custodian by the close of business on the Sale
Date. In any event, Repo Custodian shall not be responsible for
determining whether any such increase or decrease of the Sale Price
exceeds the 10% limitation.
(c) Seller will take such actions as are necessary to ensure that on
the Sale Date the aggregate Market Value of all Securities held by
Repo Custodian for Seller and cash in the Seller Account equals or
exceeds the Margin Percentage of the Sale Price. Seller shall give
Repo Custodian proper instructions specifying with respect to each of
the Securities which is to be the subject of a repurchase transaction
(a) the name of the issuer and the title of the Securities, and (b)
the Market Value of such Securities. Such instructions shall
constitute Seller's instructions to Repo Custodian to transfer the
Securities to the Participating Funds and/or Cash Collateral from the
Seller Account to the Transaction Account.
(d) By 5:00 p.m. New York Time on the Sale Date, the Participating
Funds shall transfer to, or maintain on deposit with, Repo Custodian
in the Transaction Account immediately available funds in an amount
equal to the Sale Price with respect to a particular repurchase
transaction.
(e) Prior to the close of business on the Sale Date, Repo Custodian
shall transfer Securities from Seller to the Participating Funds
and/or cash held in the Seller Account to the Transaction Account and
shall transfer to the Seller Account immediately available funds from
the Transaction Account in accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred by Seller to the Participating Funds are Eligible
Securities. Any securities which are not Eligible Securities for a
particular repurchase transaction hereunder shall not be included in
the calculations set forth below and shall not be transferred to the
Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Securities and cash, if any, to be so transferred.
(iii) Repo Custodian shall notify Seller in the event that the
aggregate Market Value of Securities and cash, if any, applicable to
the repurchase transaction is less than the Margin Percentage of the
Sale Price and Seller shall transfer, by the close of business on the
Sale Date, to Repo Custodian additional Securities and/or cash in the
amount of such deficiency. If Seller does not, by the close of
business on the Sale Date, transfer additional Securities and/or cash,
the Market Value of which equals or exceeds such deficiency, Repo
Custodian may, at its option, without notice to Seller, advance the
amount of such deficiency to Seller in order to effectuate the
repurchase transaction. It is expressly agreed that Repo Custodian is
not obligated to make an advance to Seller to enable it to complete
any repurchase transaction.
(iv) Subject to the provisions of Subparagraph (v) below, Repo
Custodian shall cause the Securities applicable to the repurchase
transaction received from Seller to be transferred to the
Participating Funds and shall cause any cash received from Seller to
be transferred to the Transaction Account, against transfer of the
Sale Price from the Transaction Account to the Seller Account, such
transfers of Securities and/or cash and funds to be deemed to occur
simultaneously.
(v) Notwithstanding anything to the contrary, if, for any repurchase
transaction, the amount of immediately available funds in the
Transaction Account is less than the agreed upon Sale Price in
connection with the repurchase transaction immediately prior to
effectuating such repurchase transaction, or if the aggregate Market
Value of the Securities and cash, if any, applicable to such
repurchase transaction is less than the Sale Price multiplied by the
Margin Percentage immediately prior to effectuating such repurchase
transaction, Repo Custodian shall effect the repurchase transaction to
the best of its ability by transferring Securities from Seller to the
Participating Funds and/or cash from the Seller Account to the
Transaction Account with an aggregate Market Value equal to the lesser
of (x) the amount of immediately available funds in the Transaction
Account multiplied by the Margin Percentage and (y) the aggregate
Market Value of the Securities available for transfer from Seller to
the Participating Funds and cash, if any, in the Seller Account,
against the transfer of immediately available funds from the
Transaction Account to the Seller Account in an amount equal to the
aggregate Market Value of the Securities and/or cash to be transferred
divided by the Margin Percentage; provided, however, that in either
such event Repo Custodian shall have the right not to transfer to the
Participating Funds such Securities and not to transfer such cash, if
any, to the Transaction Account and not to transfer from the
designated Transaction Account such funds as Repo Custodian
determines, in its sole discretion, will not be the subject of a
repurchase transaction. The actions of Repo Custodian pursuant to
this subparagraph (e)(v) shall not affect the obligations and
liabilities of the parties to each other pursuant to the Master
Agreement with regard to such repurchase transaction.
(f) In the event that on a Banking Day Seller desires to substitute
Securities applicable to such repurchase transaction with Eligible
Securities and/or Cash Collateral (to the extent provided in the
Master Agreement), Repo Custodian shall perform such substitution in
accordance with the following provisions:
(i) Repo Custodian shall determine that all securities to be
transferred to the Participating Funds are Eligible Securities. Any
securities which are not eligible for repurchase transactions
hereunder shall not be included in the calculations set forth below
and shall not be transferred to the Participating Funds.
(ii) Repo Custodian shall then calculate the aggregate Market Value
of the Eligible Securities and/or Cash Collateral to be transferred.
Repo Custodian shall not make any substitution if, at the time of
substitution, the aggregate Market Value of all Securities and any
Cash Collateral applicable to such repurchase transaction immediately
after such substitution would be less than the Margin Percentage of
the Repurchase Price (calculated as if the Repurchase Date were the
date of substitution).
(iii) Repo Custodian shall then deliver to the Seller, subject to the
qualifications set forth above, the Securities to be substituted
against the delivery by Repo Custodian of substitute Eligible
Securities to the Participating Funds and/or the crediting of the
Transaction Account with Cash Collateral.
(iv) In the event Seller has caused Repo Custodian to credit the
Transaction Account with Cash Collateral in lieu of substitute
Eligible Securities, and has failed to deliver Eligible Securities
against such Cash Collateral not later than the close of business on
such Banking Day in accordance with the terms of the Master Agreement,
Repo Custodian shall promptly, but in no event later than 10:00 a.m.
the following Banking Day, notify the Participating Funds and Seller
of such failure.
(g) With respect to each repurchase transaction, at 9:00 a.m. New
York time, or at such other time as specified in proper instructions
of the Participating Funds (or the Custodian on behalf of the
Participating Funds) on the Repurchase Date, Repo Custodian shall
debit the Seller Account and credit the Transaction Account in the
amount of the Repurchase Price and shall transfer Securities from the
Participating Funds to the Seller and Cash Collateral, if any, from
the Transaction Account to the Seller Account in accordance with the
following provisions:
(i) If the amount of available funds in the Seller Account equals or
exceeds the Repurchase Price, Repo Custodian shall debit the Seller
Account and credit the Transaction Account in the amount of the
Repurchase Price and shall transfer all Securities applicable to such
repurchase transaction from the Participating Funds to the Seller and
debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(ii) If the amount of available funds in the Seller Account is less
than the Repurchase Price, then Repo Custodian shall notify the Seller
of the amount of the deficiency and Seller shall promptly cause such
amount to be transferred to the Seller Account. If Seller fails to
cause the transfer of the entire amount of the deficiency to the
Seller Account, then Repo Custodian may, at its option and without
notice to Seller, advance to Seller the amount of such remaining
deficiency. It is expressly agreed that Repo Custodian is not
obligated to make any advance to Seller. If, following such transfer
and/or advance, the amount of available funds in the Seller Account
equals or exceeds the Repurchase Price then Repo Custodian shall debit
the Seller Account and credit the Transaction Account in the amount of
the Repurchase Price and shall transfer from the Participating Funds
to the Seller all Securities applicable to such repurchase transaction
and debit the Transaction Account and credit the Seller Account in the
amount of any Cash Collateral applicable to such repurchase
transaction.
(iii) If the Seller fails to cause the transfer of the entire amount
of the deficiency, as required by (ii) above, and Repo Custodian fails
to advance to Seller an amount sufficient to eliminate the entire
deficiency, then Repo Custodian shall debit the Seller Account in the
amount of all immediately available funds designated by Seller as
applicable to the repurchase transaction and credit the Transaction
Account in such amount (such amount being referred to as the "Partial
Payment") and shall transfer Securities from the Participating Funds
to the Seller such that the aggregate Market Value of all remaining
Securities and Cash Collateral in the Transaction Account with respect
to such repurchase transaction shall at least equal the difference
between Margin Percentage of the Repurchase Price and the Partial
Payment.
5. Payments on Securities. Repo Custodian shall credit to the Seller
Account as soon as received, all principal, interest and other sums
paid by or on behalf of the issuer in respect of the Securities and
collected by Repo Custodian, except as otherwise provided in Paragraph
8 of the Master Agreement.
6. Daily Statement. On each Banking Day on which any Participating
Funds have an outstanding repurchase transaction, Repo Custodian shall
deliver by facsimile, or other electronic means acceptable to the
Participating Funds, the Custodian and the Repo Custodian, to
Custodian and to the Participating Funds a statement identifying the
Securities held by Repo Custodian with respect to such repurchase
transaction and the cash and Cash Collateral, if any, held by Repo
Custodian in the Transaction Account, including a statement of the
then current Market Value of such Securities and the amounts, if any,
credited to the Transaction Account as of the close of trading on the
previous Banking Day. Repo Custodian shall also deliver to Custodian
and the Participating Funds such additional statements as the Repo
Custodian and the Participating Funds may agree upon from time to
time.
7. Valuation.
(a) Repo Custodian shall confirm the Market Value of Securities and
the amount of Cash Collateral, if any (i) on the Sale Date prior to
transferring the Sale Price out of the Transaction Account to the
Seller Account against the receipt from Seller of the Securities and
Cash Collateral, if any, and (ii) on each Valuation Day on which such
repurchase transaction is outstanding. If on any Valuation Day the
aggregate Market Value of the Securities and Cash Collateral with
respect to any repurchase transaction is less than the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Valuation Day) for such transaction, Repo Custodian
shall promptly, but in any case no later than 10:00 a.m. the following
Valuation Day, notify Seller. If on any Valuation Day the aggregate
market value of the Securities and Cash Collateral with respect to any
repurchase transaction is less than the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Valuation Day) for such transaction, and Seller fails to deliver
additional Eligible Securities applicable to such repurchase
transaction or an additional amount of Cash Collateral by the close of
business on such Valuation Day such that the aggregate market value of
the Securities and Cash Collateral at least equals the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Valuation Day), Repo Custodian shall promptly, but in
any event no later than 10:00 a.m. the following Valuation Day, notify
the Participating Funds of such failure.
(b) Repo Custodian shall determine the bid side portion of the Market
Value of the Securities by reference to the independent pricing
services ("Pricing Services") set forth on Schedule B. It is
understood and agreed that Repo Custodian shall use the prices made
available by the Pricing Services at the close of business of the
preceding Valuation Day. In the event that Repo Custodian is unable
to obtain a valuation of any Securities from the Pricing Services,
Repo Custodian shall request a bid quotation from a broker's broker or
a broker dealer, set forth in Schedule B, other than Seller. In the
event Repo Custodian is unable to obtain a bid quotation for any
Securities from such a broker's broker or a broker dealer, Repo
Custodian (i) shall not include any such Securities in the
determination of whether the aggregate Market Value of the Securities
and any Cash Collateral equals at least the Margin Percentage of the
Repurchase Price and (ii) shall redeliver such Securities to Seller if
the Market Value of all other Securities and any Cash Collateral with
respect to such repurchase transaction equals at least the Margin
Percentage of the Repurchase Price (calculated as if the Repurchase
Date were such Valuation Day). The Repo Custodian may rely on prices
quoted by Pricing Services, broker's brokers or broker dealers, except
Seller, as set forth in Schedule B.
(c) (i) If, on any Valuation Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction is less than the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Valuation Day)
applicable to such repurchase transaction, Repo Custodian shall
deliver to the Participating Funds an amount of additional Eligible
Securities applicable to such repurchase transaction and/or debit the
Seller Account and credit the Transaction Account with an additional
amount of Cash Collateral, such that the aggregate Market Value of all
Securities and any Cash Collateral with respect to such repurchase
transaction shall equal at least the Margin Percentage of the
Repurchase Price (calculated as if the Repurchase Date were such
Valuation Day) applicable to such repurchase transaction.
(ii) If, on any Valuation Day, the aggregate Market Value of the
Securities and any Cash Collateral with respect to a repurchase
transaction exceeds the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Valuation Day)
applicable to such repurchase transaction, Repo Custodian shall return
to the Seller all or a portion of such Securities or Cash Collateral,
if any; provided that the Market Value of the remaining Securities and
any Cash Collateral with respect to the repurchase transaction shall
be at least equal to the Margin Percentage of the Repurchase Price
(calculated as if the Repurchase Date were such Valuation Day)
applicable to such repurchase transaction. At any time and from time
to time with respect to any repurchase transaction, if authorized by
the Participating Funds, or the Custodian on behalf of the
Participating Funds, the Repo Custodian shall debit the Transaction
Account by an amount of Cash Collateral and credit the Seller Account
by the same amount of Cash Collateral against simultaneous delivery
from Seller to the Participating Funds of Eligible Securities
applicable to such repurchase transaction with a Market Value at least
equal to the amount of Cash Collateral credited and debited.
8. Authorized Persons. Schedule C hereto sets forth those persons
who are authorized to act for Repo Custodian, Custodian, Seller and
the Funds, respectively, under this Agreement.
9. Proper Instructions. Proper instructions shall mean a tested
telex, facsimile, a written request, direction, instruction or
certification signed or initialed by or on behalf of the party giving
the instructions by one or more authorized persons (as provided in
Paragraph 8); provided, however, that no instructions directing the
delivery of Securities or the payment of funds to any individual who
is an authorized signatory of Custodian or Repo Custodian shall be
signed by that individual. Telephonic, other oral or
electro-mechanical or electronic instructions (including the code
which may be assigned by Repo Custodian to Custodian from time to
time) given by one of the above authorized persons shall also be
considered proper instructions if the party receiving such
instructions reasonably believes them to have been given by an
authorized person with respect to the transaction involved. Oral
instructions will be confirmed by tested telex, facsimile or in
writing in the manner set forth above. The Funds and Seller authorize
Repo Custodian to tape record any and all telephonic or other oral
instructions given to Repo Custodian. Proper instructions may relate
to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
10. Standard of Care.
(a) Repo Custodian shall be obligated to use reasonable care and
diligence in carrying out the provisions of this Agreement and the
Master Agreement and shall be liable to the Funds and/or Seller only
for direct damages resulting from the negligence or willful misconduct
of the Repo Custodian or its officers, employees or agents. The
parties hereby agree that Repo Custodian shall not be liable for
consequential, special or indirect damages, even if Repo Custodians
has been advised as to the possibility thereof. So long as and to the
extent that Repo Custodian exercises reasonable care and diligence and
acts without negligence, misfeasance or misconduct, Repo Custodian
shall not be liable to Seller or the Funds for (i) any action taken or
omitted in good faith in reliance upon proper instructions, (ii) any
action taken or omitted in good faith upon any notice, request,
certificate or other instrument reasonably believed by it to be
genuine and to be signed by the proper party or parties, (iii) any
delay or failure to act as may be required under this Agreement or
under the Master Agreement when such delay or failure is due to any
act of God or war, (iv) the actions or omissions of a Securities
System, (v) the title, validity or genuineness of any security
received, delivered or held by it pursuant to this Agreement or the
Master Agreement, (vi) the legality of the purchase or sale of any
Securities by or to the Participating Funds or Seller or the propriety
of the amount for which the same are purchased or sold (except to the
extent of Repo Custodian's obligations hereunder to determine whether
securities are Eligible Securities and to calculate the Market Value
of Securities and any Cash Collateral), (vii) the due authority of any
person listed on Schedule C to act on behalf of Custodian, Seller or
the Funds, as the case may be, with respect to this Agreement or
(viii) the errors of the Pricing Services, broker's brokers or broker
dealers set forth in Schedule B.
(b) Repo Custodian shall not be liable to Seller or the Funds for, or
considered to be the custodian of, any Eligible Securities or any
money to be used in a repurchase transaction, whether or not such
money is represented by any check, draft, or other instrument for the
payment of money, until the Eligible Securities have been delivered in
accordance with Paragraph 3 or until Repo Custodian actually receives
and collects such money on behalf of Seller or the Funds directly or
by the final crediting of the Seller Account or a Transaction Account
through the Securities System, except that this Paragraph 10(b) shall
not be deemed to limit the liability of Repo Custodian to Seller or
the Funds if the non-delivery of such Eligible Securities or the
failure to receive and collect such money results from the breach by
Repo Custodian of its obligations under this Agreement or the Master
Agreement.
(c) Repo Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or held by
it are such as properly may be held by the Participating Funds;
provided that notwithstanding anything to the contrary herein, Repo
Custodian shall be obligated to act in accordance with the guidelines
and proper instructions of the Participating Funds, or the Custodian
on behalf of the Participating Funds, with respect to the types of
Eligible Securities and the issuers of such Eligible Securities that
may be used in specific repurchase transactions.
(d) Repo Custodian promptly shall notify the Fund Agent and the
Custodian if Securities held by Repo Custodian are in default or if
payment on any Securities has been refused after due demand and
presentation and Repo Custodian shall take action to effect collection
of any such amounts upon the proper instructions of the Participating
Funds, or the Custodian on behalf of the Participating Funds, and
assurances satisfactory to it that it will be reimbursed for its costs
and expenses in connection with any such action.
(e) Repo Custodian shall have no duties, other than such duties as
are necessary to effectuate repurchase transactions in accordance with
this Agreement and the Master Agreement within the standard of care
set forth in Paragraph 10(a) above and in a commercially reasonable
manner.
11. Representations and Additional Covenants of Repo Custodian.
(a) Repo Custodian represents and warrants that (i) it is duly
authorized to execute and deliver this Agreement and to perform its
obligations hereunder and has taken all necessary action to authorize
such execution, delivery and performance, (ii) the execution, delivery
and performance of this Agreement do not and will not violate any
ordinance, declaration of trust, partnership agreement, articles of
incorporation, charter, rule or statute applicable to it or any
agreement by which it is bound or by which any of its assets are
affected, (iii) the person executing this Agreement on its behalf is
duly and properly authorized to do so, (iv) it has (and will maintain)
a copy of this Agreement and evidence of its authorization in its
official books and records, and (v) this Agreement has been executed
by one of its duly authorized officers at the level of Vice President
or higher.
(b) Repo Custodian further represents and warrants that (i) it has
not pledged, encumbered, hypothecated, transferred, disposed of, or
otherwise granted, any third party an interest in any Securities, (ii)
it does not have any security interest, lien or right of setoff in the
Securities, and (iii) it has not received notification from any third
party, in its capacity as Repo Custodian, custodian bank or clearing
bank, of any lien, claim, charge or encumbrance with respect to any
Securities that are the subject of such repurchase transaction. Repo
Custodian agrees that (i) it will not pledge, encumber, hypothecate,
transfer, dispose of, or otherwise grant, any third party an interest
in any Securities, (ii) it will not acquire any security interest,
lien or right of setoff in the Securities, and (iii) it will promptly
notify the Fund Agent, if, during the term of any outstanding
repurchase transaction, it is notified by any third party, in its
capacity as Repo Custodian, custodian bank or clearing bank, of the
Participating Funds or Seller, of the existence of any lien, claim,
charge or encumbrance with respect to any Securities that are the
subject of such repurchase transaction.
12. Indemnification.
(a) Notwithstanding the Participating Fund's obligation to the Repo
Custodian under Paragraph 12(b) below, so long as and to the extent
that Repo Custodian is in the exercise of reasonable care and
diligence and acts without negligence, misfeasance or misconduct,
Seller will indemnify Repo Custodian and hold it harmless against any
and all losses, claims, damages, liabilities or actions to which it
may become subject, and reimburse it for any expenses (including
attorneys' fees and expenses) incurred by it in connection therewith,
insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon or in any way related to this Agreement, the
Master Agreement or any transactions contemplated hereby or thereby or
effected hereunder or thereunder. Without limiting the generality of
the foregoing indemnification, Repo Custodian shall be indemnified by
Seller for all costs and expenses, including attorneys' fees, for its
successful defense against claims that Repo Custodian breached its
standard of care and was negligent or engaged in misfeasance or
misconduct.
(b) So long as and to the extent that Repo Custodian is in the
exercise of reasonable care and diligence and acts without negligence,
misconduct or misfeasance, the Participating Funds will indemnify Repo
Custodian and hold it harmless against any and all losses, claims,
damages, liabilities or actions to which it may become subject, and
reimburse it for any expenses (including attorneys' fees and expenses)
incurred by it in connection therewith, insofar as such losses,
claims, damages, liabilities or actions result from the negligence,
misconduct or misfeasance of the Participating Funds under this
Agreement.
13. Rights and Remedies. The rights and remedies conferred upon the
parties hereto shall be cumulative, and the exercise or waiver of any
thereof shall not preclude or inhibit the exercise of any additional
rights and remedies.
14. Modification or Amendment. Except as otherwise provided in this
Paragraph 14, no modification, waiver or amendment of this Agreement
shall be binding unless in writing and executed by the parties hereto.
Schedule A, listing the Funds, may be amended from time to time to add
or delete Funds by the Funds (i) delivering an executed copy of an
addendum to Schedule A to Seller and Repo Custodian, and (ii)
amending Schedule A to the Master Agreement in accordance with the
provisions therein. The amendment of Schedule A as provided above
shall constitute appointment of Repo Custodian as a custodian for such
Fund. Schedule B may be amended from time to time by an instrument in
writing, or counterpart thereof, executed by Repo Custodian, Seller
and the Funds. Schedule C may be amended from time to time to change
an authorized person of: (i) the Funds, by written notice to Repo
Custodian and Seller by Ms. Sarah Zenoble or the Treasurer of the
Funds (or such persons who may be authorized from time to time in
writing by Ms. Zenoble or the President or Treasurer of Fidelity
Management and Research Company to trade on behalf of Fidelity's
taxable money market funds); (ii) Seller, by written notice to Repo
Custodian and the Funds by any Vice President of Seller; (iii) Repo
Custodian, by written notice to Seller, Custodian and the Funds by any
Vice President of Repo Custodian; and (iv) Custodian, by written
notice to Repo Custodian by any Vice President of Custodian. Schedule
D may be amended from time to time by any party hereto by delivery of
written notice to the other parties hereto. Repo Custodian shall
receive notice of any amendment to the Master Agreement at the address
set forth in Schedule D hereto; and, if such amendment would have a
material adverse effect on the rights of, or would materially increase
the obligations of Repo Custodian under this Agreement, any such
amendment shall also require the consent of Repo Custodian. Any such
amendment shall be deemed not to be material if Repo Custodian fails
to object in writing within 21 days after receipt of notice thereof.
No amendment to this Agreement shall affect the rights or obligations
of any Fund with respect to any outstanding repurchase transaction
entered into under this Agreement and the Master Agreement prior to
such amendment or with respect to any actions or omissions by any
party hereto prior to such amendment. In the event of conflict
between this Agreement and the Master Agreement, the Master Agreement
shall control.
15. Termination. This Agreement shall terminate forthwith upon
termination of the Master Agreement or may be terminated by any party
hereto on ten Valuation Days' written notice to the other parties;
provided, however, that any such termination shall not affect any
repurchase transaction then outstanding or any rights or obligations
under this Agreement or the Master Agreement with respect to any
actions or omissions of any party hereto prior to termination. In the
event of termination, Repo Custodian will deliver any Securities, Cash
Collateral or cash held by it or any agent to Custodian or to such
successor custodian or custodian or subcustodian as the Participating
Funds shall instruct.
16. Compensation. Seller agrees to pay Repo Custodian compensation
for the services to be rendered hereunder, based upon rates which
shall be agreed upon from time to time.
17. Notices. Except with respect to communications between Custodian
and the Funds which shall be governed by the custodian agreement or
subcustodian agreement between such parties, as the case may be, and
except as otherwise provided herein or as the parties to the Agreement
shall from time to time otherwise agree, all instructions, notices,
reports and other communications contemplated by this Agreement shall
be given to the party entitled to receive such notice at the telephone
number and address listed on Schedule D hereto.
18. Severability. If any provision of this Agreement is held to be
unenforceable as a matter of law, the other terms and provisions
hereof shall not be affected thereby and shall remain in full force
and effect.
19. Binding Nature. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and
assignees; provided that, no party hereto may assign this Agreement or
any of the rights or obligations hereunder without the prior written
consent of the other parties.
20. Headings. Section headings are for reference purposes only and
shall not be construed as a part of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one
instrument.
22. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
23. Limitation of Liability. Repo Custodian and Seller are hereby
expressly put on notice of the limitation of liability set forth in
the Declarations of Trust and in the Certificates and Agreements of
Limited Partnership of the Funds and agree that the obligations
assumed by any Fund hereunder shall be limited in all cases to a Fund
and its assets or, in the case of a series Fund, to the assets of that
series only, and neither Seller, Repo Custodian nor their respective
agents or assigns shall seek satisfaction of any such obligation from
the officers, agents, employees, directors, trustees, shareholders or
partners of any such Fund or series.
24. Rights and Obligations of Each Fund. The rights and obligations
set forth in this Agreement with respect to each repurchase
transaction shall accrue only to the Participating Funds in accordance
with their respective interests therein. No other Fund shall receive
any rights or have any liabilities arising from any action or inaction
of any Participating Fund under this Agreement with respect to such
repurchase transaction.
25. General Provisions. This Agreement supersedes any other
custodian agreement by and among Seller, the Funds, and Repo Custodian
concerning repurchase transactions effected through the Joint Trading
Account. It is understood and agreed that time is of the essence with
respect to the performance of each party's respective obligations
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
[Signature Lines Omitted]
SCHEDULE B
PRICING SOURCES
PRICING SERVICES
U.S. Government Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
GNMA - The Bond Buyer
FHLMC - The Bond Buyer
All other U.S. Government
and Agency Securities Interactive Data Services or Mellon Data
Services (or any other pricing service mutually agreed upon by Seller
and the Funds)
BROKERS' BROKERS AND BROKER DEALERS
U.S. Government Securities - Any Primary Dealer
GNMA - Any Primary Broker-Dealer's bid rate for such security
FHLMC - Any Primary Broker-Dealer's bid rate for such security
All other U.S. Government and Agency Securities - Any Primary
Broker-Dealer's bid rate for such security
Prices shall be as of the business day immediately preceding the date
of determination or the last quote available. The pricing services,
Brokers' Brokers and Broker Dealers may be changed from time to time
by agreement of all the parties.
SCHEDULE C
AUTHORIZED PERSONS
Repo Custodian
Anthony Isola
Raymond Stancil
William Mosca
Leonardo Nichols
Alan Mann
Allen B. Clark
Custodian
Ken Rindos
Kurt Woetzel
Seller
Gary F. Holloway
Konrad R. Kruger
Stephen M. Peet
Raymond E. Humiston
P. Michael Florio
Ben Carpenter
Blake S. Drexler
Derick B. Burgher
Lyn Kratovil
The Funds
Leland Barron
Wickliffe Curtis
Dorothy Egan
David Glocke
Katharyn Harlow
Timothy Huyck
Jon Jamen
Robert Litterst
Sam Silver
Burnell Stehman
Jeffrey St. Peters
Deborah Todd
John Todd
Joseph Torres
Richard Williams
SCHEDULE D
NOTICES
If to Custodian: Morgan Guaranty Trust Co. of New York
15 Broad Street, 16th Floor
New York, New York 10015
Telephone: (212) 483-4150
Attention: Ms. Kimberly Smith
or
The Bank of New York
One Wall Street, 4th Floor
New York, NY 10286
Telephone: (312) 635-4808
Attention: Claire Meskovic
With a copy to the Fund Agent
If to Repo Custodian: Chemical Bank
4 New York Plaza
21st Floor
New York, NY 10004-2477
Telephone: (212) 623-6446
Attention: Anthony Isola
If to Seller: Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Telephone: (203) 625-7909
Attention: Peter Sanchez
If to any of the Funds: FMR Texas Inc.
400 East Las Colinas Blvd., CP9M
Irving, Texas 75039
Telephone: (214) 584-7800
Attention: Ms. Deborah R. Todd or
Mr. Samuel Silver
If to the Fund Agent: Fidelity Investments
[Name of Fund]
400 East Las Colinas Blvd., CP9E
Irving, Texas 75039
Telephone: (214) 584-4071
Attention: Mr. Mark Mufler
277262.c1
SCHEDULE 1
The following lists the additional counterparties to the Repo
Custodian Agreement for Joint Trading Account between Chemical Bank
and the Fidelity Funds:
Chase Securities, Inc.
CS First Boston Corp.
Dresdner Securities (U.S.A.), Inc.
HSBC Securities, Inc.
Lehman Government Securities, Inc.
Merrill Lynch Government Securities, Inc.
Paine Webber, Inc.
Salomon Brothers, Inc.
UBS Securities, Inc.
EXHIBIT 8(G)
Form of
JOINT TRADING ACCOUNT CUSTODY AGREEMENT
Between
THE BANK OF NEW YORK
and
FIDELITY FUNDS
Dated as of: ______________________
TABLE OF CONTENTS
Page
ARTICLE I - APPOINTMENT OF CUSTODIAN 2
ARTICLE II - POWERS AND DUTIES OF CUSTODIAN 2
Section 2.01. Establishment of Accounts 2
Section 2.02. Receipt of Funds 2
Section 2.03. Repurchase Transactions 2
Section 2.04. Other Transfers 4
Section 2.05. Custodian's Books and Records 5
Section 2.06. Reports by Independent Certified Public Accountants 5
Section 2.07. Securities System 6
Section 2.08. Collections 6
Section 2.09. Notices, Consents, Etc. 6
Section 2.10. Notice of Custodian's Inability to Perform 7
ARTICLE III - PROPER INSTRUCTIONS AND RELATED MATTERS 7
Section 3.01. Proper Instructions; Special Instruction 7
Section 3.02. Authorized Persons 8
Section 3.03. Investment Limitations 8
Section 3.04. Persons Having Access to Assets of the Funds 8
Section 3.05. Actions of Custodian Based on Proper Instructions and
Special
Instructions 9
ARTICLE IV - STANDARD OF CARE; INDEMNIFICATION 9
Section 4.02. Liability of Custodian for Actions of Securities Systems
9
Section 4.03. Indemnification 9
Section 4.04. Funds, Right to Proceed 10
ARTICLE V - COMPENSATION 11
Section 5.01. Compensation 11
Section 5.02. Waiver of Right of Set-Off 11
ARTICLE VI - TERMINATION 11
Section 6.01. Events of Termination 11
Section 6.02. Successor Custodian; Payment of Compensation 11
ARTICLE VII - MISCELLANEOUS 12
Section 7.01. Representative Capacity and Binding Obligation 12
Section 7.02. Entire Agreement 12
Section 7.03. Amendments 12
Section 7.04. Interpretation 12
Section 7.05. Captions 13
Section 7.06. Governing Law 13
Section 7.07. Notice and Confirmations 13
Section 7.08. Assignment 14
Section 7.09. Counterparts 14
Section 7.10. Confidentiality; Survival of Obligations 14
EXHIBIT 8(G)
Form of
JOINT TRADING ACCOUNT CUSTODY AGREEMENT
AGREEMENT dated as of __________________by and between The Bank of
New York (hereinafter referred to as the "Custodian") and each of the
entities listed on Schedules A-1, A-2, A-3 and A-4 hereto, acting on
behalf of itself or, (i) in the case of a series company, on behalf of
one or more of its portfolios or series listed on Schedule A-1 or A-2
hereto, (ii) in the case of the accounts listed on Schedule A-3
hereto, acting through Fidelity Management & Research Company, and
(iii) in the case of the commingled or individual accounts listed on
Schedule A-4 hereto, acting through Fidelity Management Trust Company
(collectively, the "Funds" and each, a "Fund").
W I T N E S S E T H
WHEREAS, each of the Funds desire to appoint the Custodian as its
custodian for the purpose of establishing and administering one or
more joint trading accounts or subaccounts thereof (individually, an
"Account" and collectively, the "Accounts") and holding cash and
securities for the Funds in connection with repurchase transactions
effected through the Accounts; and
WHEREAS, one or more of the Funds may, from time to time, enter into
one or more written repurchase agreements pursuant to which one or
more of the Funds agrees to purchase and resell, and the sellers named
in such agreements agree to sell and repurchase through the Accounts,
certain securities (collectively, the "Securities") (such repurchase
agreements being hereinafter referred to, collectively, as the
"Repurchase Agreements"); and
WHEREAS, each of the custodians identified in ScheduleB hereto (each,
a "Fund Custodian") serves as the primary custodian for one or more of
the Funds; and
WHEREAS, from time to time one or more of the Funds may arrange to
transfer cash or Securities from one or more Fund Custodians to the
Custodian or transfer cash or Securities from the Custodian to one or
more Fund Custodians, or in the case of Funds in which Custodian is
also Fund Custodian, such Fund may arrange for transfer of cash or
Securities between an Account and an account maintained by Custodian
in its capacity as Fund Custodian for such Fund, in each event in
connection with Repurchase Agreement transactions; and
WHEREAS, from time to time, such Funds may arrange to transfer cash
or securities from the Custodian to the seller in such Repurchase
Agreement transactions, or in the case in which Custodian is also the
clearing bank for such seller, such Funds may arrange for transfer of
cash or securities between an Account and an account maintained by
Custodian for such seller in its capacity as clearing bank, in each
event in connection with two-party Repurchase Agreement transactions;
and
WHEREAS, each of the custodians identified in Schedule C hereto
(each, a "Repo Custodian") serves as a third-party custodian of the
Funds for purposes of effecting third-party Repurchase Agreement
transactions; and
WHEREAS, from time to time one or more of the Funds may arrange to
transfer cash or Securities from the Custodian to one or more Repo
Custodians or transfer cash or Securities from one or more Repo
Custodians to the Custodian, or in the case in which Custodian is also
Repo Custodian, such Funds may arrange for transfer of cash or
securities between an Account and an account maintained for such Funds
in its capacity as Repo Custodian, in each event in connection with
third-party Repurchase Agreement transactions;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I - APPOINTMENT OF CUSTODIAN
Each of the Funds hereby employs and appoints the Custodian as its
custodian, subject to the terms and provisions of this Agreement.
ARTICLE II - POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and
duties, and only such powers and duties, as are set forth in this
Agreement.
Section 2.01. Establishment of Accounts. The Custodian shall
establish one or more Accounts as segregated joint trading accounts
for the Funds through which the Funds shall, from time to time, effect
Repurchase Agreement transactions.
Section 2.02. Receipt of Funds. The Custodian shall, from time to
time, receive funds for or on behalf of the Funds and shall hold such
funds in safekeeping. Upon receipt of Proper Instructions, the
Custodian shall credit funds so received to one or more Accounts
designated in such Proper Instructions. Promptly after receipt of
such funds from the Fund Custodian or a Repo Custodian or promptly
following the transfer to an Account from any account maintained by
Custodian in its capacity as Fund Custodian, or as Repo Custodian, the
Custodian shall provide written confirmation of such receipt to the
Fund Custodian or Repo Custodian, when and as applicable, and of such
receipt or transfer to the Fund Agent designated in Section 7.07(b)
hereof (the "Fund Agent"). The Custodian shall designate on its books
and records the funds allocable to each Account and the identity of
each Fund participating in such Account.
Section 2.03. Repurchase Transactions. The Funds may, from time to
time, enter into Repurchase Agreement transactions. In connection
with each such Repurchase Agreement transaction, unless otherwise
specifically directed by Special Instructions, the Custodian shall
take the following actions:
(a) Purchase of Securities. Upon receipt of Proper Instructions, the
Custodian shall pay for and receive Securities and any cash
denominated in U.S. Dollars which is serving as collateral ("Cash
Collateral"), provided that payment therefor shall be made by the
Custodian only against prior or simultaneous receipt of the Securities
and any Cash Collateral in the manner prescribed in subsection 2.03(b)
below. Except as provided in Section2.04 hereof, in no event shall
the Custodian deliver funds from an Account for the purchase of
Securities and any Cash Collateral prior to receipt of the Securities
and any Cash Collateral by the Custodian or a Securities System (as
hereinafter defined). The Custodian is not under any obligation to
make credit available to the Funds to complete transactions hereunder.
Promptly after the transfer of funds and receipt of Securities and any
Cash Collateral, the Custodian shall provide a confirmation to the
Fund Agent, setting forth (i) the Securities and any Cash Collateral
which the Custodian has received pursuant to the Repurchase Agreement
transaction, (ii) the amount of funds transferred from the applicable
Account, and (iii) any security or transaction identification numbers
reasonably requested by the Fund Agent.
(b) Receipt and Holding of Securities. In connection with each
Repurchase Agreement transaction, the Custodian shall receive and hold
the Securities as follows: (i) in the case of certificated securities,
by physical receipt of the certificates or other instruments
representing such Securities and by physical segregation of such
certificates or instruments from other assets of the Custodian in a
manner indicating that such Securities belong to specified Funds; and
(ii) in the case of Securities held in book-entry form by a Securities
System (as hereinafter defined), by appropriate transfer and
registration of such Securities to a customer only account of the
Custodian on the book-entry records of the Securities System, and by
appropriate entry on the books and records of the Custodian
identifying such Securities as belonging to specified Funds.
(c) Sale of Securities. Upon receipt of Proper Instructions, the
Custodian shall make delivery of Securities and any Cash Collateral
held in or credited to an Account against prior or simultaneous
payment for such Securities in immediately available funds in the form
of: (i) cash, bank credit, or bank wire transfer received by the
Custodian; or (ii) credit to the customer only account of the
Custodian with a Securities System. Notwithstanding the foregoing,
the Custodian shall make delivery of Securities held in physical form
in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for
such Securities; provided that the Custodian shall have taken all
actions possible to ensure prompt collection of the payment for, or
the return of such Securities by the broker or its clearing agent.
Promptly after the transfer of Securities and any Cash Collateral and
the receipt of funds, the Custodian shall provide a confirmation to
the Fund Agent, setting forth the amount of funds received by the
Custodian or a Securities System for credit to the applicable Account.
(d) Additional Functions. Upon receipt of Proper Instructions, the
Custodian shall take all such other actions as specified in such
Proper Instructions and as shall be reasonable or necessary with
respect to Repurchase Agreement transactions and the Securities and
funds transferred and received pursuant to such transactions,
including, without limitation, all such actions as shall be prescribed
in the event of a default under a Repurchase Agreement.
(e) Nondiscretionary Functions. The Custodian shall attend to all
non-discretionary details in connection with the purchase, sale,
transfer or other dealings with Securities or other assets of the
Funds held by the Custodian.
(f) In the event that the Custodian is directed by Proper
Instructions to make any payment or transfer of funds on behalf of a
Fund for which there would be, at the close of business on the date of
such payment or transfer, insufficient funds held by the Custodian on
behalf of such Fund, the Custodian may, in its discretion, provide an
overdraft ("Overdraft") to the Fund, in an amount sufficient to allow
the completion of such payment or transfer. Any Overdraft provided
hereunder: (a) shall be payable on the next Business Day, unless
otherwise agreed by the Fund and the Custodian; and (b) shall accrue
interest form the date of the Overdraft to the date of payment in full
by the Fund at a rate agreed upon in writing, from time to time, by
the Custodian and the Fund. The Custodian and the Funds acknowledge
that the purpose of such Overdrafts is to temporarily finance the
purchase or sale of securities for prompt delivery in accordance with
the terms hereof, or to meet emergency expenses not reasonably
foreseeable by a particular Fund. The Funds hereby agree that the
Custodian shall have a continuing lien and security interest in and to
all Securities whose purchase is financed by Custodian and which are
in Custodian's possession or in the possession or control of any third
party acting on Custodian's behalf and the proceeds thereof. In this
regard, Custodian shall be entitled to all the rights and remedies of
a pledgee under common law and a secured party under the New York
Uniform Commercial Code and any other applicable laws or regulations
as then in effect.
Section 2.04. Other Transfers.
(a) In addition to transfers of funds and Securities referred to in
Section 2.03, the Custodian shall transfer funds and Securities held
in an Account: (a) upon receipt of Proper Instructions, to (i)any
Fund Custodian, or (ii)any other account maintained for any Fund by
the Custodian in its capacity as a Fund Custodian, (iii)any Repo
Custodian or (iv) any other account maintained for any Fund by the
Custodian in its capacity as a Repo Custodian; or (b) upon receipt of
Special Instructions, and subject to Section 3.04 hereof, to any other
person or entity designated in such Special Instructions.
(b) Determination of Fund Custodian Daily Net Amount. On each
banking day, based upon daily transaction information provided to the
Custodian by the Funds, Custodian shall determine: (i) the amount of
cash due to be transferred on such day by each Fund Custodian to the
Custodian in connection with all Repurchase Agreement transactions in
which the date fixed for the repurchase and resale of Securities is
the banking day next following the date on which the sale and purchase
of such Securities takes place (each, an "Overnight Repo Transaction")
to be effected through the Accounts in such day; and (ii) the amount
of cash due to be transferred on such day by Custodian to such Fund
Custodian in connection with all outstanding Overnight Repo
Transactions previously effected through the Accounts (the difference
between (i) and (ii) with respect to each Fund Custodian being
referred to as the "Fund Custodian Daily Net Amount"). On each
banking day, Custodian shall notify each Fund Custodian of the
foregoing determination and, unless otherwise directed in accordance
with Proper Instructions, Custodian shall (i) instruct such Fund
Custodian to transfer cash to the Custodian equal to the Fund
Custodian Daily Net Amount (if the Fund Custodian Daily Net Amount is
positive) or (ii) transfer to such Fund Custodian cash equal to the
Fund Custodian Daily Net Amount (if the Fund Custodian Daily Net
Amount is negative).
(c) Determination of Repo Custodian Daily Net Amount. On each
banking day, based upon daily transaction information provided to the
Custodian by the Funds and each Repo Custodian, Custodian shall
determine: (i) the amount of cash due to be transferred on such day
by each Repo Custodian on behalf of the Funds to all counterparties in
connection with all third-party Overnight Repo Transactions to be
effected through the Accounts on such day; and (ii) the amount of cash
due to be transferred on such day by each Repo Custodian on behalf of
all counterparties to the Funds in connection with all outstanding
third-party Overnight Repo Transactions previously effected through
the Accounts (the difference between (i) and (ii) with respect to each
Repo Custodian being referred to as the "Repo Custodian Daily Net
Amount"). On each banking day, Custodian shall notify the Funds of
the foregoing determinations and, unless otherwise directed in
accordance with Proper Instructions, Custodian shall (i) transfer to
each Repo Custodian cash equal to the Repo Custodian Daily Net Amount
(if the Repo Custodian Daily Net Amount is positive) or (ii) instruct
each Repo Custodian to transfer to the Custodian cash equal to the
Repo Custodian Daily Net Amount (if the Repo Custodian Daily Net
Amount is negative).
Section 2.05. Custodian's Books and Records. The Custodian shall
provide any assistance reasonably requested by the Funds in the
preparation of reports to shareholders of the Funds and others, audits
of accounts, and other ministerial matters of like nature. The
Custodian shall maintain complete and accurate records with respect to
cash and Securities held for the benefit of the Funds as required by
the rules and regulations of the Securities and Exchange Commission
applicable to investment companies registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
including: (a) journals or other records of original entry containing
a detailed and itemized daily record of all receipts and deliveries of
securities (including certificate and transaction identification
numbers, if any), and all receipts and disbursements of cash; (b)
ledgers or other records reflecting Securities in transfer, and
Securities in physical possession; and (c) cancelled checks and bank
records related thereto. The Custodian shall keep such other books
and records of the Funds relating to repurchase transactions effected
through the Accounts as the Funds shall reasonably request. Such
books and records maintained by the Custodian shall reflect at all
times the identity of each Fund participating in each Account and the
aggregate amount of the Securities and any Cash Collateral held by the
Custodian on behalf of the Funds in such Account pursuant to this
Agreement. All such books and records maintained by the Custodian
shall be maintained in a form acceptable to the Funds and in
compliance with the rules and regulations of the Securities and
Exchange Commission, including, but not limited to, books and records
required to be maintained by Section 31(a) of the Investment Company
Act and the rules from time to time adopted thereunder. All books and
records maintained by the Custodian relating to the Accounts shall at
all times be the property of the Funds and shall be available during
normal business hours for inspection and use by the Funds and their
agents, including, without limitation, their independent certified
public accountants. Notwithstanding the preceding sentence, the Funds
shall not take any actions or cause Custodian to take any actions
which would cause, either directly or indirectly, the Custodian to
violate any applicable laws, regulations, rules or orders.
Section 2.06. Reports by Independent Certified Public Accountants.
At the request of the Funds, the Custodian shall deliver to the Funds
such annual reports and other interim reports prepared by the
independent certified public accountants of the Custodian with respect
to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding
Securities, including Securities deposited and/or maintained in a
Securities System. Such reports, which shall be of sufficient scope
and in sufficient detail as may reasonably be required by the Funds
and as may reasonably by obtained by the Custodian, shall provide
reasonable assurance to the Funds that the procedures employed by the
independent certified public accountants are reasonably designed to
detect any material inadequacies with respect to the matters discussed
in the report, shall state in detail the material inadequacies
disclosed by such examination, and, if no such inadequacies exist,
shall so state.
Section 2.07. Securities System. As used herein the term "Securities
System" shall mean each of the following: (a) the Depository Trust
Company; (b) the Participants Trust Company; (c) any book-entry system
as provided in (i) Subpart0 of Treasury Circular No. 300, 31CFR
306.115, (ii) SubpartB of Treasury Circular Public Debt Series No.
27-76, 31CFR 350.2, or (iii) the book-entry regulations of federal
agencies substantially in the form of 31CFR 306.115; or (d) any
domestic clearing agency registered with the Securities and Exchange
Commission under Section17A of the Securities Exchange Act of 1934, as
amended (or as may otherwise be authorized by the Securities and
Exchange Commission to serve in the capacity of depository or clearing
agent for the securities or other assets of investment companies)
which acts as a securities depository and the use of which has been
approved in Special Instructions. Use of a Securities System by the
Custodian shall be in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, if any,
and subject to the following provisions:
(A) The Custodian may deposit and/or maintain Securities held
hereunder in a Securities System, provided that such Securities are
represented in an account of the Custodian in the Securities System
which account shall not contain any assets of the Custodian other than
assets held as a fiduciary, custodian, or otherwise for customers.
(B) The Custodian shall, if requested by the Funds, provide the Funds
with all reports obtained by the Custodian with respect to the
Securities System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the Securities
System.
(C) Upon receipt of Special Instructions, the Custodian shall
terminate the use hereunder of any Securities System (except for the
federal book-entry system) as promptly as practicable and shall take
all actions reasonably practicable to safeguard the Securities and
other assets of the Funds maintained with such Securities System.
Section 2.08. Collections. The Custodian shall (a) collect, receive
and deposit in the applicable Account all income and other payments
with respect to Securities held by the Custodian hereunder; (b)
endorse and deliver any instruments required to effect such
collection; and (c) execute ownership and other certificates and
affidavits for all federal, state and foreign tax purposes in
connection with receipt of income or other payments with respect to
Securities, or in connection with the transfer of Securities.
Section 2.09. Notices, Consents, Etc. The Custodian shall deliver to
the Funds, in the most expeditious manner practicable, all notices,
consents or announcements affecting or relating to Securities held by
the Custodian on behalf of the Funds that are received by the
Custodian, and, upon receipt of Proper Instructions, the Custodian
shall execute and deliver such consents or other authorizations as may
be required.
Section 2.10. Notice of Custodian's Inability to Perform. The
Custodian shall promptly notify the Funds in writing by facsimile
transmission or such other manner as the Funds may designate, if, for
any reason: (a) the Custodian determines that it is unable to perform
any of its duties or obligations hereunder or its duties or
obligations with respect to any repurchase transaction; or (b) the
Custodian reasonably foresees that it will be unable to perform any
such duties or obligations.
ARTICLE III - PROPER INSTRUCTIONS AND RELATED MATTERS
Section 3.01. Proper Instructions; Special Instruction.
(a) Proper Instructions. As used herein, the term "Proper
Instructions" shall mean: (i) a tested telex, a written (including,
without limitation, facsimile transmission) request, direction,
instruction or certification signed or initialed by one or more
Authorized Persons (as hereinafter defined); (ii) a telephonic or
other oral communication by one or more Authorized Persons; or (iii) a
communication effected directly between electromechanical or
electronic devices or systems (including, without limitation,
computers) by one or more Authorized Persons; provided, however, that
communications of the types described in clauses (ii) and (iii) above
purporting to be given by an Authorized Person shall be considered
Proper Instructions only if the Custodian reasonably believes such
communications to have been given by an Authorized Person with respect
to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Funds by tested telex or in
writing in the manner set forth in clause(i) above, but the lack of
such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions prior to the
Custodian's receipt of such confirmation. Each of the Funds and the
Custodian is hereby authorized to record any and all telephonic or
other oral instructions communicated to the Custodian. Proper
Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing
instructions.
(b) Special Instructions. As used herein, the term "Special
Instructions" shall mean Proper Instructions countersigned or
confirmed in writing by, in the case of the entities listed in
Schedules A-1 or A-2 hereto, the Treasurer or any Assistant Treasurer
of the Funds or any other person designated in writing by the
Treasurer of the Funds, and in the case of each of the entities listed
on Schedules A-3 or A-4, by the officer who is a signatory to this
Agreement on behalf of such entity or any other person designated in
writing by such officer or an officer of such entity of higher
authority, which countersignature or written confirmation shall be (i)
included on the same instrument containing the Proper Instructions or
on a separate instrument relating thereto, and (ii) delivered by hand,
by facsimile transmission, or in such other manner as the parties
hereto may agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, telecopy or telex number
agreed upon from time to time by the Custodian and the Funds.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the
Funds shall deliver to the Custodian, duly certified as appropriate by
the Treasurer or any Assistant Treasurer of the Funds or by a
Secretary or Assistant Secretary of the Funds, and in the case of each
of the entities listed on Schedules A-3 or A-4, by the officer who is
a signatory to this Agreement on behalf of such entity or any other
person designated in writing by such officer or an officer of higher
authority, a certificate setting forth (a) the names, signatures and
scope of authority of all persons authorized to give Proper
Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Funds (collectively, the
"Authorized Persons," and individually, an "Authorized Person"), and
(b) the names and signatures of those persons authorized to issue
Special Instructions. Such certificate may be accepted and relied
upon by the Custodian as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary.
Upon delivery of a certificate which deletes the name of a person
previously authorized to give Proper Instructions or to issue Special
Instructions, such person shall no longer be considered an Authorized
Person or authorized to issue Special Instructions, as applicable.
Section 3.03. Investment Limitations. In performing its duties
hereunder the Custodian may assume, unless and until it receives
special Instructions to the contrary (a "Contrary Notice"), that
Proper Instructions received by it are not in conflict with or in any
way contrary to any investment or other limitation applicable to any
of the Funds. The Custodian shall in no event be liable to the Funds
and shall be indemnified by the Funds for any loss, damage or expense
to the Custodian arising out of any violation of any investment or
other limitation to which any Fund is subject, except to the extent
that such loss, damage or expense: (i) relates to a violation of any
investment or other limitation of a Fund occurring after receipt by
the Custodian of a Contrary Notice; or (ii) arises from a breach of
this Agreement by the Custodian.
Section 3.04. Persons Having Access to Assets of the Funds. No
Authorized Person, Trustee, officer, employee or agent of the Funds
(other than the Custodian) shall have physical access to the assets of
the Funds held by the Custodian, or shall be authorized or permitted
to withdraw any such assets for delivery to an account of such person,
nor shall the Custodian deliver any such assets to any such person;
provided, however, that nothing in this Section 3.04 shall prohibit:
(a) any Authorized Person from giving Proper Instructions, or the
persons described in Section 3.01(b) from issuing Special
Instructions, so long as such action does not result in delivery of or
access to assets of the Funds prohibited by this Section 3.04; or (b)
the Funds' independent certified public accountants from examining or
reviewing the assets of the Funds held by the Custodian.
Section 3.05. Actions of Custodian Based on Proper Instructions and
Special Instructions. Subject to the provisions of Section 4.01
hereof, the Custodian shall not be responsible for the title, validity
or genuineness of any property, or evidence of title thereof, received
by it or delivered by it pursuant to this Agreement.
ARTICLE IV - STANDARD OF CARE; INDEMNIFICATION
Section 4.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise
reasonable care and diligence in carrying out all of its duties and
obligations under this Agreement, and shall be liable to the Funds for
all loss, damage and expense incurred or suffered by the Funds,
resulting from the failure of the Custodian to exercise such
reasonable care and diligence or from any other breach by the
Custodian of the terms of this Agreement.
(b) Acts of God, Etc. In no event shall the Custodian incur
liability hereunder if the Custodian is prevented, forbidden or
delayed from performing, or omits to perform, any act or thing which
this Agreement provides shall be performed or omitted to be performed
by reason of: (i) any provision of any present or future law or
regulation or order of the United States of America, or any state
thereof, or of any foreign country, or political subdivision thereof
or of any court of competent jurisdiction; or (ii) any act of God or
war; unless, in each case, such delay or nonperformance is caused by
(A) the negligence, misfeasance or misconduct of the Custodian, or (B)
a malfunction or failure of equipment maintained or operated by the
Custodian other than a malfunction or failure caused by events beyond
the Custodian's control and which could not reasonably be anticipated
and/or prevented by the Custodian.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Funds, the
Custodian shall use all commercially reasonable efforts and shall take
all reasonable steps under the circumstances to mitigate the effects
of such event and to avoid continuing harm to the Funds.
Section 4.02. Liability of Custodian for Actions of Securities
Systems. Notwithstanding the provisions of Section4.01 to the
contrary, the Custodian shall not be liable to the Funds for any loss,
damage or expense resulting from the use by the Custodian of a
Securities System, unless such loss, damage or expense is caused by,
or results from, negligence, misfeasance or misconduct of the
Custodian. In the case of loss, damage or expense resulting from use
of a Securities System by the Custodian, the Custodian shall take all
reasonable steps to enforce such rights as it may have against the
Securities System to protect the interest of the Funds.
Section 4.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set
forth in this Agreement, the Funds severally agree to indemnify and
hold harmless the Custodian from all claims and liabilities (including
reasonable attorneys' fees) incurred or assessed against the Custodian
for actions taken in reliance upon Proper Instructions or Special
Instructions; provided, however, that such indemnity shall not apply
to claims and liabilities occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian, or any other
breach of this Agreement by the Custodian. In addition, the Funds
severally agree to indemnify the Custodian against any liability
incurred by the Custodian by reason of taxes assessed to the
Custodian, or other costs, liability or expenses incurred by the
Custodian, resulting directly or indirectly solely from the fact that
securities and other property of the Funds is registered in the name
of the Custodian; provided, however, in no event shall such
indemnification be applicable to income, franchise or similar taxes
which may be imposed or applied against the Custodian or charges
imposed by a Federal Reserve Bank with respect to intra-day overdrafts
unless separately agreed to by the Funds.
(b) Extent of Liability. Notwithstanding anything to the contrary
contained herein, with respect to the indemnification obligations of
the Funds provided in this Section4.03, each Fund shall be: (i)
severally, and not jointly and severally, liable with each of the
other Funds; and (ii) liable only for its pro rata share of such
liabilities, determined with reference to such Fund's proportionate
interest in the aggregate of assets held by the Custodian in the
Account with respect to which such liability relates at the time such
liability was incurred, as reflected on the books and records of the
Funds.
(c) Notice of Litigation, Right to Prosecute, Etc. The Custodian
shall promptly notify the Funds in writing of the commencement of any
litigation or proceeding brought against the Custodian in respect of
which indemnity may be sought against the Funds pursuant to this
Section4.03. The Funds shall be entitled to participate in any such
litigation or proceeding and, after written notice from the Funds to
the Custodian, the Funds may assume the defense of such litigation or
proceeding with counsel of their choice at their own expense. The
Custodian shall not consent to the entry of any judgment or enter into
any settlement in any such litigation or proceeding without providing
the Funds with adequate notice of any such settlement or judgment, and
without the Funds' prior written consent. The Custodian shall submit
written evidence to the Funds with respect to any cost or expense for
which it seeks indemnification in such form and detail as the Funds
may reasonably request.
Section 4.04. Funds, Right to Proceed. Notwithstanding anything to
the contrary contained herein, the Funds shall have, at their election
upon reasonable notice to the Custodian, the right to enforce, to the
extent permitted by any applicable agreement and applicable law, the
Custodian's rights against any Securities System or other person for
loss, damage or expense caused the Custodian or the Funds by such
Securities System or other person, and shall be entitled to enforce
the rights of the Custodian with respect to.any claim against such
Securities System or other person which the Custodian may have as a
consequence of any such loss, damage or expense if and to the extent
that the Custodian or any Fund has not been made whole for any such
loss, damage or expense.
ARTICLE V - COMPENSATION
Section 5.01. Compensation. The Custodian shall be compensated for
its services hereunder in an amount, and at such times, as may be
agreed upon, from time to time, by the Custodian and the Funds. Each
Fund shall be severally, and not jointly, liable with the other Funds
only for its pro rata share of such compensation, determined with
reference to such Fund's proportionate interest in each Repurchase
Agreement transaction to which such compensation relates.
Section 5.02. Waiver of Right of Set-Off. The Custodian hereby
waives and relinquishes all contractual and common law rights of
set-off to which it may now or hereafter be or become entitled with
respect to any obligations of the Funds to the Custodian arising under
this Agreement.
ARTICLE VI - TERMINATION
Section 6.01. Events of Termination. This Agreement shall continue
in full force and effect until the first to occur of: (a) termination
by the Custodian or the Funds by an instrument in writing delivered to
the other party, such termination to take effect not sooner than
ninety (90) days after the date of such delivery; or (b) termination
by the Funds by written notice delivered to the Custodian, based upon
the Funds' determination that there is a reasonable basis to conclude
that the Custodian is insolvent or that the financial condition of the
Custodian is deteriorating in any material respect, in which case
termination shall take effect upon the Custodians receipt of such
notice or at such later time as the Funds shall designate; provided,
however, that this Agreement may be terminated as to one or more Funds
(but less than all Funds) by delivery of an amended Schedule A-1, A-2,
A-3 or A-4 pursuant to Section7.03 hereof. The execution and delivery
of an amended Schedule A-1, A-2, A-3 or A-4 which deletes one or more
Funds shall constitute a termination of this Agreement only with
respect to such deleted Fund(s).
Section 6.02. Successor Custodian; Payment of Compensation. Each of
the Funds may identify a successor custodian to which the cash,
Securities and other assets of such Fund shall, upon termination of
this Agreement, be delivered; provided that in the case of the
termination of this Agreement with respect to any of the Funds, such
Fund or Funds shall direct the Custodian to transfer the assets of
such Fund or Funds held by the Custodian pursuant to Proper
Instructions. The Custodian agrees to cooperate with the Funds in the
execution of documents and performance or all other actions necessary
or desirable in order to substitute the successor custodian for the
Custodian under this Agreement. In the event of termination, each
Fund shall make payment of such Fund's applicable share of unpaid
compensation within a reasonable time following termination and
delivery of a statement to the Funds setting forth such fees. The
termination of this Agreement with respect to any of the Funds shall
be governed by the provisions of this ArticleVI as to notice, payments
and delivery of securities and other assets, and shall not affect the
obligations of the parties hereunder with respect to the other Funds
set forth in Schedule A-1, A-2, A-3 or A-4 as amended from time to
time.
ARTICLE VII - MISCELLANEOUS
Section 7.01. Representative Capacity and Binding Obligation. A COPY
OF THE DECLARATION OF TRUST OR OTHER ORGANIZATIONAL DOCUMENTS OF EACH
FUND IS ON FILE WITH THE SECRETARY OF THE STATE OF EACH FUND'S
FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT
EXECUTED ON BEHALF OF THE TRUSTEES OF ANY FUND AS INDIVIDUALS, AND THE
OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE
SHAREHOLDERS, TRUSTEES, DIRECTORS, PARTNERS, OFFICERS, EMPLOYEES OR
AGENTS OF ANY FUND INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS
AND PROPERTY OF THE FUNDS, AND IN THE CASE OF SERIES COMPANIES, SUCH
FUNDS' RESPECTIVE PORTFOLIOS OR SERIES.
THE CUSTODIAN AGREES THAT NO SHAREHOLDER, TRUSTEE, DIRECTOR, PARTNER,
OFFICER, EMPLOYEE OR AGENT OF ANY FUND MAY BE HELD PERSONALLY LIABLE
OR RESPONSIBLE FOR ANY OBLIGATIONS OF THE FUNDS ARISING OUT OF THIS
AGREEMENT. WITH RESPECT TO OBLIGATIONS OF EACH FUND ARISING OUT OF
THIS AGREEMENT, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR SATISFACTION
OF ANY CLAIM SOLELY TO THE ASSETS AND PROPERTY OF THE FUND TO WHICH
SUCH OBLIGATION RELATES AS THOUGH EACH FUND HAD SEPARATELY CONTRACTED
WITH THE CUSTODIAN BY SEPARATE WRITTEN INSTRUMENT."
Section 7.02. Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the parties hereto with respect
to the subject matter hereof.
Section 7.03. Amendments. No provision of this Agreement may be
amended except by a statement in writing signed by the party against
which enforcement of the amendment is sought; provided, however,
Schedule A-1, A-2, A-3 or A-4 listing the Funds which are parties
hereto, Schedule B listing the Fund Custodians and Schedule C listing
the Repo Custodians may be amended from time to time to add or delete
one or more Funds, Fund Custodians or Repo Custodians, as the case may
be, by the Funds' delivery of an amended Schedule A-1, A-2, A-3 or
A-4, Schedule B or Schedule C to the Custodian. The deletion of one
or more Funds from Schedule A-1, A-2, A-3 or A-4 shall have the effect
of terminating this Agreement as to such Fund(s), but shall not affect
this Agreement with respect to any other Fund.
Section 7.04. Interpretation. In connection with the operation of
this Agreement, the Custodian, and the Funds may agree in writing from
time to time on such provisions interpretative of or in addition to
the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
Section 7.05. Captions. Headings contained in this Agreement, which
are included as convenient references only, shall have no bearing upon
the interpretation of the terms of the Agreement or the obligations of
the parties hereto.
Section 7.06. Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL
BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 7.07. Notice and Confirmations.
(a) Except as provided in Section 7.07(b) below and except in the
case of Proper Instructions or Special Instructions, notices and other
writings contemplated by this Agreement shall be delivered by hand or
by facsimile transmission (provided that in the case of delivery by
facsimile transmission, notice shall also be mailed postage prepaid)
to the parties at the following addresses:
(i) If to the Funds:
FMR Texas Inc.
400 East Las Colinas Blvd., CP9M
Irving, Texas 75039
Telephone: (214) 584-7800
Attention: Ms. Deborah Todd or
Mr. Samuel Silver
(ii) If to the Custodian:
The Bank of New York
One Wall Street
Fourth Floor
New York, NY 10286
Attn: Claire Meskovic
Telephone: (212) 635-4808
Telefax: (212) 635-4828
(b) The Custodian may provide the confirmations required by Sections
2.02 and 2.03 of this Agreement by making the information available in
the form of a communication directly between electromechanical or
electrical devices or systems (including, without limitation,
computers) (or in such other manner as the parties hereto may agree in
writing) to the following Fund Agent:
Fidelity Accounting and Custody
Domestic Securities Operations
400 East Las Colinas Blvd., CP9E
Irving, Texas 75039
Telephone: (214) 506-4071
Attention: Mr. Mark Mufler
The address and telephone number of the Funds, the Fund Agent and the
Custodian and the identity of the Fund Agent specified in this Section
7.07 may be changed by written notice of the Funds to Custodian or
Custodian to the Funds, as the case may be. All written notices which
are required or provided to be given hereunder shall be effective upon
actual receipt by the entity to which such notice is given.
Section 7.08. Assignment. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided that, no party hereto may assign this
Agreement or any of its rights or obligations hereunder without the
prior written consent of each of the other parties.
Section 7.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
This Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties.
Section 7.10. Confidentiality; Survival of Obligations. The parties
hereto agree that they shall each shall treat confidentially the terms
and conditions of this Agreement and all information provided by each
party to the others regarding its business and operations. All
confidential information provided by a party hereto shall be used by
any other party hereto solely for the purpose of rendering services
pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided
or thereafter becomes publicly available other than through a breach
of this Agreement, or that is required to be disclosed by any bank
examiner of the Custodian, any auditor of the parties hereto or by
judicial or administrative process or otherwise by applicable law or
regulation. The provisions of this Section 7.10 and Sections3.03,
4.01, 4.02, 4.03, 4.04, 4.05, 7.01 and 7.06 shall survive any
termination of this Agreement, provided that in the event of
termination the Custodian agrees that it shall transfer and return
Securities and other assets held by the Custodian for the benefit of
the Funds as the Funds direct pursuant to Proper Instructions.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and behalf on the day and year first above
written.
[Signature Lines Omitted]
SCHEDULE B
TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT
BETWEEN THE BANK OF NEW YORK AND
FIDELITY FUNDS DATED AS OF MAY 11, 1995
The following is a list of the Fund Custodians of the Funds:
The Bank of New York
Morgan Guaranty Trust Company
Brown Brothers Harriman & Co.
First Union National Bank Charlotte
Chase Manhattan Bank, N.A.
State Street Bank and Trust Company
SCHEDULE C
TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT
BETWEEN THE BANK OF NEW YORK AND
FIDELITY FUNDS DATED AS OF MAY 11, 1995
The following is a list of Repo Custodians of the Funds:
The Bank of New York
Chemical Bank
Morgan Guaranty Trust Company
EXHIBIT 8(G)
Form of
FIRST AMENDMENT TO
JOINT TRADING ACCOUNT CUSTODY AGREEMENT
BETWEEN
THE BANK OF NEW YORK
AND
FIDELITY FUNDS
FIRST AMENDMENT TO JOINT TRADING ACCOUNT CUSTODY AGREEMENT BETWEEN
THE BANK OF NEW YORK AND FIDELITY FUNDS, dated as of________________,
by and between THE BANK OF NEW YORK ("Custodian") and each of the
entities listed on Schedules A-1, A-2, A-3 and A-4 hereto on behalf of
itself or, (i) in the case of a series company, on behalf of one or
more of its portfolios or series listed on SchedulesA-1 or A-2 hereto,
(ii) in the case of the accounts listed on Schedule A-3 hereto, acting
through Fidelity Management & Research Company, and (iii)in the case
of the commingled or individual accounts listed on Schedule A-4
hereto, acting through Fidelity Management Trust Company
(collectively, the "Funds" and each, a "Fund").
WITNESSETH
WHEREAS, Custodian and certain of the Funds have entered into that
certain Joint Trading Account Custody Agreement between The Bank of
New York and Fidelity Funds, dated as of ______________ (the
"Agreement"), pursuant to which the Funds have appointed the Custodian
as its custodian for the purpose of establishing and administering one
or more joint trading accounts or subaccounts thereof (individually,
an "Account" and collectively, the "Accounts") and holding cash and
securities for the Funds in connection with repurchase transactions
effected through the Accounts; and
WHEREAS, Seller and the Funds desire to amend the Agreement as set
forth below.
NOW, THEREFORE, in consideration of the premises and mutual promises
and covenants contained herein, the parties hereto agree as follows.
Unless otherwise defined herein or the context otherwise requires,
terms used in this Amendment, including the preamble and recitals,
have the meanings provided in the Agreement.
The Agreement is hereby amended by deleting Paragraph2.03(f) in its
entirety and substituting the following in lieu thereof:
"(f) Overdraft. In the event that the Custodian is directed by
Proper Instructions to make any payment or transfer of funds on behalf
of a Fund for which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the
Custodian on behalf of such Fund, the Custodian may, in its
discretion, provide an overdraft ("Overdraft") to the Fund (such Fund
being referred to herein as an "Overdraft Fund"), in an amount
sufficient to allow the completion of such payment or transfer. Any
Overdraft provided hereunder: (a) shall be payable on the next
Business Day, unless otherwise agreed by the Overdraft Fund and the
Custodian; and (b) shall accrue interest from the date of the
Overdraft to the date of payment in full by the Overdraft Fund at a
rate agreed upon in writing, from time to time, by the Custodian and
the Overdraft Fund. The Custodian and the Funds acknowledge that the
purpose of such Overdrafts is to temporarily finance the purchase or
sale of securities for prompt delivery in accordance with the terms
hereof. The Custodian hereby agrees to notify each Overdraft Fund by
3:00 p.m., New York time, of the amount of any Overdraft. Provided
that Custodian has given the notice required by this subparagraph (f),
the Funds hereby agree that, as security for the Overdraft of an
Overdraft Fund, the Custodian shall have a continuing lien and
security interest in and to all interest of such Overdraft Fund in
Securities whose purchase is financed by Custodian and which are in
Custodian's possession or in the possession or control of any third
party acting on Custodian's behalf and the proceeds thereof. In this
regard, Custodian shall be entitled to all the rights and remedies of
a pledgee under common law and a secured party under the New York
Uniform Commercial Code and any other applicable laws or regulations
as then in effect."
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed and delivered under seal by their duly authorized officers.
[Signature Lines Omitted]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectus and Statement of Additional Information in Post-Effective
Amendment No. 20 to the Registration Statement on Form N-1A of
Fidelity Aberdeen Street Trust, of our report dated May 8, 1998 on the
financial statements and financial highlights included in the March
31, 1998 Annual Report to Shareholders of Fidelity Freedom Income
Fund, Fidelity Freedom 2000 Fund, Fidelity Freedom 2010 Fund, Fidelity
Freedom 2020 Fund, and Fidelity Freedom 2030 Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Auditor" in the
Statement of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 19, 1998
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