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How Fidelity Manages Income and Real Return Strategies

Fidelity income and real return strategies are managed to meet three primary income needs: bond income from global sources, non-bond income from dividend-oriented securities, and real return from investments that have historically helped the buying power of income to outpace inflation.

Lead managers for each fund make asset allocation decisions that rely heavily on research-driven security selection by sub-portfolio managers, and a disciplined investment process that leverages Fidelity's global market perspective, proprietary credit research, and expertise in quantitative modeling and risk control.

The three Fidelity Strategic Funds invest in a defined mix of debt and/or equity issues selected for their historical performance and relatively low correlation to one another. Based on the intermediate and longer term market outlook, lead managers may modestly adjust each fund's allocation relative to its "neutral market" mix, which they expect to follow 30%–50% of the time. Maintaining a disciplined, informed allocation drawing on a combination of asset types with the potential to behave differently as market conditions change can potentially result in lower volatility over the long term, assuming the underperformance of one type of asset is offset by the outperformance of another.

Security selection is typically the primary source of performance for each fund. Sub-portfolio managers, researchers, and trading teams—all of whom are specialists in their individual markets—identify opportunities through their analysis of valuation and risk of securities and issuers.

Fidelity is one of the country's largest and most experienced institutional investors, with the independence and scale to focus extensive resources on fundamental research into the potential and creditworthiness of individual issuers. Each sub-portfolio manager is able to draw on tens of thousands of proprietary research notes generated annually by our bond, money market, equity, and asset allocation divisions to evaluate the full capital structure of each issuer—a degree of cross-pollination and familiarity with valuation and risk that few investment managers can offer.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.
All data as of 6/30/2011

Asset Allocation does not ensure a profit or guarantee against loss.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.)  Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

High yield/non-investment grade bonds involve greater price volatility and risk of default than investment grade bonds.

Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. Leverage can increase market exposure and magnify investment risk.

Non-diversified funds that focus on a relatively small number of issuers tend to be more volatile than diversified funds and the market as a whole.

Floating-rate loans generally are subject to restrictions on resale and they sometimes trade infrequently in the secondary market, and as a result may be more difficult to value, buy, or sell. A floating-rate loan might not be fully collateralized, which may cause the floating-rate loan to decline significantly in value.

Increases in real interest rates can cause the price of inflation-protected debt securities to decrease. REITs are affected by changes in real estate values or economic conditions, which can have a positive or negative effect on issuers in the real estate industry.

Stock values fluctuate in response to the activities of individual companies and general market and economic conditions.

Commodity-linked investments may be affected by overall commodities market movements and other factors that affect the value of a particular industry or commodity.