SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
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(Name of Registrant as Specified In Its Charter)
Fidelity Government Securities Fund
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant) Arthur S. Loring, Secretary
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
FIDELITY GOVERNMENT SECURITIES FUND
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of FIDELITY GOVERNMENT SECURITIES FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Fidelity Government Securities Fund (the fund), a series of
Fidelity Government Securities Fund, a single series trust (the trust),
will be held at the office of the trust, 82 Devonshire Street, Boston,
Massachusetts 02109 on November 19, 1997, at 1:15 p.m. The purpose of the
Meeting is to consider and act upon the following proposals, and to
transact such other business as may properly come before the Meeting or any
adjournments thereof.
1. To approve an amended management contract for the fund.
2. To approve an Agreement and Plan providing for the reorganization of the
fund from a separate series of one Massachusetts business trust to another.
3. To eliminate the fund's fundamental investment policy which limits its
security investments to U.S. Government securities whose interest is exempt
from state and local income tax.
4. To amend the fund's fundamental investment limitation concerning real
estate.
5. To adopt a new fundamental investment policy for the fund permitting the
fund to invest all of its assets in another open-end investment company
with substantially the same investment objective and policies.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
6. To amend the fund's fundamental investment limitation concerning the
issuance of senior securities.
7. To eliminate the fund's fundamental investment limitation concerning
short sales of securities.
8. To eliminate the fund's fundamental investment limitation concerning
margin purchases.
9. To amend the fund's fundamental investment limitation concerning
borrowing.
10. To amend the fund's fundamental investment limitation concerning
underwriting.
11. To amend the fund's fundamental investment limitation concerning the
concentration of its investments in a single industry.
12. To eliminate the fund's fundamental investment limitation concerning
investments in other investment companies.
13.To eliminate the fund's fundamental investment limitation concerning
investing in oil, gas, or other mineral exploration or development
programs.
14. To eliminate the fund's fundamental investment limitation concerning
purchasing warrants.
The Board of Trustees has fixed the close of business on September 22,
1997 as the record date for the determination of the shareholders of the
fund entitled to notice of, and to vote at, such Meeting and any
adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
September 22, 1997
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER
WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN
MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of assistance
to you and help avoid the time and expense involved in validating your vote
if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual signing.
This can be shown either in the form of the account registration itself or
by the individual executing the proxy card. For example:
REGISTRATION VALID
SIGNATURE
A. 1) ABC Corp. John Smith,
Treasurer
2) ABC Corp. John Smith,
Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY GOVERNMENT SECURITIES FUND
a series of
FIDELITY GOVERNMENT SECURITIES FUND
TO BE HELD ON NOVEMBER 19, 1997
This Proxy Statement is furnished in connection with a solicitation of
proxies made by, and on behalf of, the Board of Trustees of Fidelity
Government Securities Fund, a single series trust, (the trust) to be used
at the Special Meeting of Shareholders of Fidelity Government Securities
Fund (the fund) and at any adjournments thereof (the Meeting), to be held
on November 19, 1997 at 1:15 p.m. at 82 Devonshire Street, Boston,
Massachusetts 02109, the principal executive office of the trust and
Fidelity Management & Research Company (FMR), the fund's investment
adviser.
The purpose of the Meeting is set forth in the accompanying Notice. The
solicitation is made primarily by the mailing of this Proxy Statement and
the accompanying proxy card on or about September 22, 1997. Supplementary
solicitations may be made by mail, telephone, telegraph, facsimile, or by
personal interview by representatives of the trust. In addition, Management
Information Services Corp. (MIS) and D.F. King & Co. Inc. may be paid on a
per-call basis to solicit shareholders on behalf of the fund at an
anticipated cost of approximately $_____. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all solicitations
will be paid by the fund. The fund will reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of shares. The principal business address of Fidelity
Distributors Corporation, the fund's principal underwriter and distribution
agent, is 82 Devonshire Street, Boston, Massachusetts 02109.
If the enclosed proxy card is executed and returned, it may nevertheless
be revoked at any time prior to its use by written notification received by
the trust, by the execution of a later-dated proxy card, or by attending
the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and which are
not revoked, will be voted at the Meeting. Shares represented by such
proxies will be voted in accordance with the instructions thereon. If no
specification is made on a proxy card, it will be voted FOR the matters
specified on the proxy card. Only proxies that are voted will be counted
towards establishing a quorum. Broker non-votes are not considered voted
for this purpose. Shareholders should note that while votes to ABSTAIN will
count toward establishing a quorum, passage of any proposal being
considered at the Meeting will occur only if a sufficient number of votes
are cast FOR the proposal. Accordingly, votes to ABSTAIN and votes AGAINST
will have the same effect in determining whether the proposal is approved.
The fund may also arrange to have votes recorded by telephone. D.F. King &
Co. Inc. may be paid on a per call basis for vote-by-phone solicitations on
behalf of the fund at an anticipated cost of approximately $_____. The
expenses in connection with telephone voting will be paid by the fund. If
the fund records votes by telephone, it will use procedures designed to
authenticate shareholders' identities, to allow shareholders to authorize
the voting of their shares in accordance with their instructions, and to
confirm that their instructions have been properly recorded. Proxies voted
by telephone may be revoked at any time before they are voted in the same
manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present at
the Meeting, but sufficient votes to approve one or more of the proposed
items are not received, or if other matters arise requiring shareholder
attention, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of those
shares present at the Meeting or represented by proxy. When voting on a
proposed adjournment, the persons named as proxies will vote FOR the
proposed adjournment all shares that they are entitled to vote with respect
to each item, unless directed to vote AGAINST the item, in which case such
shares will be voted AGAINST the proposed adjournment with respect to that
item. A shareholder vote may be taken on one or more of the items in this
Proxy Statement prior to such adjournment if sufficient votes have been
received and it is otherwise appropriate.
On July 31, 1997, there were ________ shares of the fund issued and
outstanding. To the knowledge of the Trust, [no shareholder owned of
record or beneficially more than 5% of the outstanding voting shares of the
fund.]/[substantial (5% or more) record ownership of the fund on July 31,
1997 was as follows: ______ (__%). To the knowledge of the trust, no other
shareholder owned of record or beneficially more than 5% of the outstanding
shares of each fund on that date. Shareholders of record at the close of
business on September 22, 1997 will be entitled to vote at the Meeting.
Each such shareholder will be entitled to one vote for each share held on
that date.
FOR A FREE COPY OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1996 AND THE SEMIANNUAL REPORT FOR THE FISCAL PERIOD ENDING
MARCH 31, 1997, CALL 1-800-544-8888 OR WRITE TO FIDELITY DISTRIBUTORS
CORPORATION AT 82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109.
VOTE REQUIRED: APPROVAL OF PROPOSALS 1 THROUGH 14 REQUIRES THE AFFIRMATIVE
VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF THE FUND.
UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT), THE VOTE OF A
"MAJORITY OF THE OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE
OF THE LESSER OF (A) 67% OR MORE OF THE VOTING SECURITIES PRESENT AT THE
MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY PROXY OR (B)
MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE
NOT CONSIDERED "PRESENT" FOR THIS PURPOSE.
1. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR THE FUND.
The Board of Trustees, including the Trustees who are not "interested
persons" of the Trust or of FMR (the Independent Trustees), has approved,
and recommends that shareholders of the fund approve a proposal to adopt an
amended management contract with Fidelity Management & Research Company
(FMR) (the Amended Contract). The Amended Contract modifies the management
fee that FMR receives from the fund to provide for lower fees when FMR's
assets under management exceed certain levels. The Amended Contract also
includes a discussion of FMR's ability to use brokers and dealers to
execute portfolio transactions. THE AMENDED CONTRACT WILL RESULT IN A
MANAGEMENT FEE THAT IS THE SAME AS, OR LOWER THAN, THE FEE PAYABLE UNDER
THE PRESENT MANAGEMENT CONTRACT (THE PRESENT CONTRACT). (For information on
FMR, see the section entitled "Activities and Management of FMR" on page
__.)
PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the
Amended Contract, marked to indicate the proposed amendments, is supplied
as Exhibit 1 on page __ . Except for the modifications discussed above, it
is substantially identical to the Present Contract. (For a detailed
discussion of the fund's Present Contract, refer to the section entitled
"Present Management Contract" beginning on page __.) If approved by
shareholders, the Amended Contract will take effect on December 1, 1997
(or, if later, the first day of the month following approval) and will
remain in effect through June 30, 1998 and thereafter, but only as long as
its continuance is approved at least annually by (i) the vote, cast in
person at a meeting called for the purpose, of a majority of those Trustees
who are not "interested persons" of the trust or FMR (the Independent
Trustees) and (ii) the vote of either a majority of the Trustees or by the
vote of a majority of the outstanding shares of the fund. If the Amended
Contract is not approved, the Present Contract will continue in effect
through June 30, 1998, and thereafter only as long as its continuance is
approved at least annually by (i) the vote, cast in person at a meeting
called for the purpose, of a majority of the Independent Trustees and (ii)
the vote of either a majority of the Trustees or by the vote of a majority
of the outstanding shares of the fund.
The management fee is an annual percentage of the fund's average net
assets (the management fee rate), calculated and paid monthly. The
management fee rate is the sum of two components: a Group Fee Rate, which
varies according to assets under management by FMR, and a fixed Individual
Fund Fee Rate. The Amended Contract modifies the Group Fee Rate by
providing for lower fee rates if FMR's assets under management remain above
$120 billion.
MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon the
monthly average of the aggregate net assets of all registered investment
companies having management contracts with FMR (assets under management by
FMR). For example, as assets under management by FMR increase, the Group
Fee Rate declines. The Amended Contract would not change the group fee
calculation for assets under management by FMR of $120 billion or less.
Above $120 billion in assets under FMR's management, the Group Fee Rate
declines under both the Present Contract and the Amended Contact, but under
the Amended Contract, it declines faster. Group Fee Rates that are lower
than those contained in the fund's Present Contract have been voluntarily
implemented by FMR on January 1, 1992, November 1, 1993, August 1, 1994,
and January 1, 1996.
The Group Fee Rate is calculated according to a graduated schedule
providing for different rates for different levels of assets under
management by FMR. The rate at which the Group Fee Rate declines is
determined by fee "breakpoints" that provide for lower fee rates when
assets increase. The Amended Contract adds 12 new fee breakpoints for
assets under FMR's management above $120 billion as illustrated in the
following table. (For an explanation of how the Group Fee Rate is used to
calculate the management fee, see the section entitled "Present Management
Contract" beginning on page ___.)
GROUP FEE RATE BREAKPOINTS
PRESENT CONTRACT AMENDED CONTRACT
Average Group Present Average Group Amended
Assets Contract* Assets Contract
($ billions) ($ billions)
Over 84 .1500% 84 - 120 .1500%
120 - 156 .1450%
156 - 192 .1400%
192 - 228 .1350%
228 - 264 .1300%
264 - 300 .1275%
300 - 336 .1250%
336 - 372 .1225%
372 - 408 .1200%
408 - 444 .1175%
444 - 480 .1150%
480 - 516 .1125%
Over 516 .1100%
* Does not reflect voluntary adoption of extended group fee rate schedules
by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1,
1996.
The result at various levels of group net assets is illustrated by the
table below.
EFFECTIVE GROUP FEE RATES
Group Net Present Amended
Assets Contract* Contract
($ billions)
150 .1746% .1736%
200 .1685% .1652%
250 .1648% .1587%
300 .1623% .1536%
350 .1605% .1494%
400 .1592% .1459%
450 .1582% .1427%
500 .1574% .1399%
550 .1567% .1372%
* Does not reflect voluntary adoption of extended group fee rate schedules
by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1,
1996.
Assets under FMR's management for July 31,1997 were approximately $522
billion.
COMPARISON OF MANAGEMENT FEES. For July 1997, average assets under
management by FMR were $522 billion. The fund's management fee rate under
the Amended Contract would have been 0.44%, compared to 0.46% under the
Present Contract. The management fee rate will remain the same under both
the Present Contract and the Amended Contract until assets under FMR's
management exceed $120 billion, at which point the management fee rate
under the Amended Contract begins to decline relative to the Present
Contract.
The following chart compares the fund's management fee under the terms of
the Present Contract for the period ended July 31, 1997 to the management
fee the fund would have incurred if the Amended Contract had been in
effect.
Present Contract Amended Contract
Management Management Percentage
Fee* Fee Difference
$4,433,395 $4,279,069 (3.5%)
* Does not reflect voluntary adoption of extended group fee rate schedules
by FMR on January 1, 1992, November 1, 1993, August 1, 1994, and January 1,
1996.
TRANSACTIONS WITH BROKERS-DEALERS. The fund may execute portfolio
transactions with broker-dealers who provide research and execution
services to the fund or other accounts over which FMR or its affiliates
exercise investment discretion. The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided. If FMR grants investment management
authority to a sub-adviser pursuant to a Sub-advisory Agreement, the
sub-adviser is authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund and to its other clients, and conversely, such
research provided by broker-dealers who execute transaction orders on
behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the fund. The receipt of such research has not reduced FMR's
normal independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, 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 the
fund and 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.
The fund has already been authorized by the Board of Trustees, consistent
with the federal securities laws and the rules and regulations of the
Securities and Exchange Commission, to place portfolio transactions through
broker-dealers who are affiliated with FMR and through broker-dealers who
provide research. The Amended Contract expressly recognizes this authority.
MATTERS CONSIDERED BY THE BOARD
The mutual funds for which the members of the Board of Trustees serve as
Trustees are referred to herein as the "Fidelity funds." The Board of
Trustees meets eleven times a year. The Board of Trustees, including the
Independent Trustees, believe that matters bearing on the appropriateness
of the fund's management fees are considered at most, if not all, of their
meetings. While the full Board of Trustees or the Independent Trustees, as
appropriate, act on all major matters, a significant portion of the
activities of the Board of Trustees (including certain of those described
herein) are conducted through committees. The Independent Trustees meet
frequently in executive session and are advised by independent legal
counsel selected by the Independent Trustees.
The proposal to present the Amended Contract to shareholders was approved
by the Board of Trustees of the fund, including the Independent Trustees on
June 19, 1997. The Board of Trustees considered and approved the
modifications to the Group Fee Rate schedule during the two-month periods
from November to December 1995, June to July 1994, September to October
1993, and November to December 1991. The Board of Trustees consider and
approve twice every year portfolio transactions with broker-dealers who
provide research services to the funds. The Board of Trustees received
materials relating to the Amended Contract in advance of the meeting at
which the Amended Contract was considered, and had the opportunity to ask
questions and request further information in connection with such
consideration.
INFORMATION RECEIVED BY THE INDEPENDENT TRUSTEES. In connection with their
monthly meetings Trustees receive materials specifically relating to the
Amended Contract. These materials include: (i) information on the
investment performance of the fund, a peer group of funds and an
appropriate index or combination of indices, (ii) sales and redemption data
in respect of the fund, (iii) the economic outlook and the general
investment outlook in the markets in which the fund invests, and (iv)
notable changes in the fund's investments. The Board of Trustees and the
Independent Trustees also consider periodically other material facts such
as (1) FMR's results and financial condition, (2) arrangements in respect
of the distribution of the fund's shares, (3) the procedures employed to
determine the value of the fund's assets, (4) the allocation of the fund's
brokerage, if any, including allocations to brokers affiliated with FMR,
(5) FMR's management of the relationships with the fund's custodian and
subcustodians, and (6) the resources devoted to and the record of
compliance with the fund's investment policies and restrictions and with
policies on personal securities transactions, (7) the nature, cost and
quality of non-investment management services provided by FMR and its
affiliates.
In response to questions raised by the Independent Trustees, additional
information was furnished by FMR including, among other items, information
on and analysis of (a) the overall organization of FMR, (b) the choice of
performance indices and benchmarks, (c) the composition of peer groups of
funds, (d) transfer agency and bookkeeping fees paid to affiliates of FMR,
(e) investment performance, (f) investment management staffing, (g) the
potential for achieving further economies of scale, (h) operating expenses
paid to third parties, and (i) the information furnished to investors,
including the fund's shareholders.
In considering the Amended Contract, the Board of Trustees and the
Independent Trustees did not identify any single factor as all-important or
controlling, and the following summary does not detail all the matters
considered. Matters considered by the Board of Trustees and the Independent
Trustees in connection with their approval of the Amended Contract include
the following:
INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the
Independent Trustees considered whether the fund has operated within its
investment objective and its record of compliance with its investment
restrictions. They also reviewed monthly the fund's investment performance
as well as the performance of a peer group of mutual funds, and the
performance of an appropriate index or combination of indices.
FMR'S PERSONNEL AND METHODS. The Board of Trustees and the Independent
Trustees annually review a report detailing the background of the fund's
portfolio manager, and the fund's investment objective and discipline. The
Independent Trustees have also had discussions with senior management of
FMR responsible for investment operations, and the senior management of
Fidelity's fixed income group. Among other things they considered the size,
education and experience of FMR's investment staff, its use of technology,
and FMR's approach to recruiting, training and retaining portfolio managers
and other research, advisory and management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the
Independent Trustees considered the nature, quality, cost and extent of
administrative and shareholder services performed by FMR and affiliated
companies, both under the Amended Contract and under separate agreements
covering transfer agency functions and pricing, bookkeeping and securities
lending services, if any. The Board of Trustees and the Independent
Trustees have also considered the nature and extent of FMR's supervision of
third party service providers, principally custodians and subcustodians.
EXPENSES. The Board of Trustees and the Independent Trustees considered the
fund's expense ratio and expense ratios of a peer group of funds. They also
considered the amount and nature of fees paid by shareholders.
PROFITABILITY. The Board of Trustees and the Independent Trustees
considered the level of FMR's profits in respect of the management of the
Fidelity funds, including the fund. This consideration included an
extensive review of FMR's methodology in allocating its costs to the
management of the fund. The Board of Trustees and the Independent Trustees
have concluded that the cost allocation methodology employed by FMR has a
reasonable basis and is appropriate in light of all of the circumstances.
They considered the profits realized by FMR in connection with the
operation of the fund and whether the amount of profit is a fair
entrepreneurial profit for the management of the fund. They also considered
the profits realized from non-fund businesses which may benefit from or be
related to the fund's business. The Board of Trustees and the Independent
Trustees also considered FMR's profit margins in comparison with available
industry data, both accounting for and ignoring market expenses.
ECONOMIES OF SCALE. The Board of Trustees and the Independent Trustees
considered whether there have been economies of scale in respect of the
management of the Fidelity funds, whether the Fidelity funds (including the
fund) have appropriately benefitted from any economies of scale, and
whether there is potential for realization of any further economies of
scale. The Board of Trustees and the Independent Trustees have concluded
that FMR's mutual fund business presents some limited opportunities to
realize economies of scale and that these economies are being shared
between fund shareholders and FMR in an appropriate manner. The Independent
Trustees have also concluded that the existing group fee structure should
be continued but determined that it would be appropriate to change the
group fee structure as proposed herein.
OTHER BENEFITS TO FMR. The Board of Trustees and the Independent Trustees
also considered the character and amount of fees paid by the fund and the
fund's shareholders for services provided by FMR and its affiliates,
including fees for services like transfer agency, fund accounting and
direct shareholder services. They also considered the allocation of fund
brokerage to brokers affiliated with FMR and the receipt of sales loads and
payments under Rule 12b-1 plans in respect of certain of the Fidelity
funds. The Board of Trustees and the Independent Trustees also considered
the revenues and profitability of FMR businesses other than its mutual fund
business, including FMR's retail brokerage, correspondent brokerage,
capital markets, trust, investment advisory, pension record keeping, credit
card, insurance, publishing, real estate, international research and
investment funds, and others. The Board of Trustees and the Independent
Trustees considered the intangible benefits that accrue to FMR and its
affiliates by virtue of their relationship with the fund.
OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the Independent
Trustees considered the benefit to shareholders of investing in a fund that
is part of a large family of funds offering a variety of investment
disciplines and providing for a large variety of fund and shareholder
services.
With regard to the section of the proposed contract describing the changes
to portfolio transactions, the Trustees considered the value of research
provided by the broker-dealers, the quality of the execution services
provided, and the level of commissions paid. While the fund does not
generally purchase securities through a broker-dealer by paying
commissions, the Board of Trustees determined that amending the management
contract to expressly recognize the authority of FMR to use affiliated
broker-dealers and broker-dealers who provide research services furthers
the goal of standardizing management contracts for Fidelity funds, and that
explicitly permitting all Fidelity funds to utilize certain broker-dealers
is beneficial to the fund.
CONCLUSION. Based on their evaluation of all material factors and assisted
by the advice of independent counsel, the Trustees concluded (i) that the
existing management fee structure is fair and reasonable and (ii) that the
proposed modifications to the management fee structure, that is the
reduction of the Group Fee Rate schedule and the addition of the discussion
of FMR's ability to use brokers and dealers to execute portfolio
transactions, are in the best interest of the fund's shareholders. The
Board of Trustees, including the Independent Trustees, voted to approve the
submission of the Amended Contract to shareholders of the fund and
recommends that shareholders of the fund vote FOR the Amended Contract. If
approved by shareholders, the Amended Contract will take effect on the
first day of the month following approval.
2. TO APPROVE AN AGREEMENT AND PLAN PROVIDING FOR THE REORGA-
NIZATION OF THE FUND FROM A SEPARATE SERIES OF ONE MASSACHUSETTS BUSINESS
TRUST TO ANOTHER.
The Board of Trustees have approved an Agreement and Plan of
Reorganization (the Plan of Reorganization) in the form attached to this
Proxy Statement as Exhibit 2. The Plan of Reorganization provides for a
reorganization of Fidelity Government Securities Fund (the Fund) from a
separate series of Fidelity Government Securities Fund (GSF), a
Massachusetts business trust, to a newly-established, separate series of
Fidelity Income Fund (the Trust), also a Massachusetts business trust (the
Reorganization).
The investment objective, policies, and limitations of the Fund will not
change except as approved by shareholders and as described in this proxy
statement. A separate series of the Trust will carry on the business of the
Fund following the Reorganization (the Series). The Series, which has not
yet commenced business operations, will have an investment objective,
policies, and limitations identical to those of the Fund (except as they
may be modified pursuant to a vote of the shareholders as proposed in this
proxy statement). Since both GSF and the Trust are Massachusetts business
trusts, organized under substantially similar Declarations of Trust, the
rights of the security holders of the Fund under state law and the
governing documents are expected to remain unchanged after the
Reorganization except with regard to shareholder voting rights as described
below), nor will the Reorganization affect the operation of the Fund in a
material manner. The same individuals serve as Trustees of both trusts
except that Robert M Gates, William O. McCoy, and Robert C. Pozen serve as
Trustees of Fidelity Income Fund. Both trusts are authorized to issue an
unlimited number of shares of beneficial interest, and each Declaration of
Trust permits the Trustees to create one or more additional series or
funds. Shareholder voting rights for the Fund are based on the number of
shares owned while shareholder voting rights for the Series will be based
on the total dollar interest in the Series. While the differences between
the shareholder voting rights would have no bearing on matters affecting
only one fund in a trust, on matters requiring trust-wide votes where all
funds in a trust are required to vote, dollar-based voting provides
shareholder voting power that is proportionate to their economic interest
whereas share-based voting may provide shareholders who own shares with a
lower net asset value than other funds in the trust with a disproportionate
ability to affect the vote relative to shareholders of the other funds in
the trust. After the reorganization, the voting rights of Fund shareholders
will change to reflect those of the Series. For more information regarding
voting rights of shareholders of the Fund, refer to the section of the
Fund's Statement of Additional Information called "Description of the
Trust." The Trust's fiscal year end is July 31, which is different than
that of GSF. The Trustees may change the fiscal year end of the Trust at
their discretion in the future.
FMR, the Fund's investment adviser, will be responsible for the investment
management of the Series, subject to the supervision of the Board of
Trustees, under a management contract identical to the contract in effect
between FMR and the Fund (the Present Management Contract) except as it may
be modified pursuant to a vote of the shareholders of the Fund as proposed
in this Proxy Statement.
The Fund's distribution agent, FDC, will distribute shares of the Series
under a General Distribution Agreement identical to the contract currently
in effect between FDC and the Fund.
REASON FOR THE PROPOSED REORGANIZATION. The Fund is presently organized as
a series of GSF, which has one series of shares or fund. The Board of
Trustees unanimously recommend conversion of the Fund to a separate series
of the Trust (i.e., into the Series) which will succeed to the business of
the Fund. Moving the Fund from GSF to the Trust will consolidate and
streamline the production and mailing of certain legal documents. THE
PROPOSED CHANGE WILL HAVE NO MATERIAL EFFECT ON SHAREHOLDERS OR THE
MANAGEMENT OF THE FUND.
However the proposed change would allow FMR to consolidate documents for
government bond funds for increased efficiency in producing and mailing
certain documents. In addition, a combined Prospectus will enhance the
discussion of the Fund by presenting it in the context of a full spectrum
of government bond fund choices.
The proposal to present the Plan of Reorganization to shareholders was
approved by the Board of Trustees of GSF, including all of the Trustees who
are not interested persons of FMR, on June 19, 1997. The Board of Trustees
recommends that Fund shareholders vote FOR the approval of the Plan of
Reorganization described below. Such a vote encompasses approval of the
conversion of the Fund to a separate series of the Trust; temporary waiver
of certain investment limitations of the Fund to permit the Reorganization
(see "Temporary Waiver of Investment Restrictions" on page _); and
authorization of GSF, as sole shareholder of the Series, to approve (i) a
Management Contract for the Series between the Trust and FMR, and (ii) the
Distribution and Service Plan under Rule 12b-1, identical to the contract
or Plan, as the case may be, in effect with the Fund immediately prior to
the Closing Date (including as the Management Contract may be modified
pursuant to a vote of shareholders of the fund as proposed in this Proxy
Statement). If shareholders of the Fund do not approve the Plan of
Reorganization, the Fund will continue to operate as a series of GSF.
SUMMARY OF THE PLAN OF REORGANIZATION. The following discussion summarizes
the important terms of the Plan of Reorganization. This summary is
qualified in its entirety by reference to the Plan of Reorganization
itself, which is attached as Exhibit 2 to this Proxy Statement.
On the Closing Date of the Reorganization (defined below), the Fund will
transfer all of its assets to the Series, a series of shares of the Trust
established for the purpose of effecting the Reorganization, in exchange
for the assumption by the Series of all of the liabilities of the Fund and
the issuance of shares of beneficial interest in the Series (Trust Series
Shares) equal to the number of Fund shares outstanding on the Closing Date.
Immediately thereafter, the Fund will distribute one Trust Series Share for
each Fund share (the Fund Shares) held by the shareholder on the Closing
Date to each Fund shareholder, in liquidation of such Fund Shares.
Immediately after this distribution of the Trust Series Shares, the Fund
will be terminated and, as soon as practicable thereafter, will be wound up
and liquidated. UPON COMPLETION OF THE REORGANIZATION, EACH FUND
SHAREHOLDER WILL BE THE OWNER OF FULL AND FRACTIONAL TRUST SERIES SHARES
EQUAL IN NUMBER, DENOMINATION, AND AGGREGATE NET ASSET VALUE TO HIS OR HER
FUND SHARES.
The Plan of Reorganization authorizes GSF as the then sole initial
shareholder of the Series to approve (i) a Management Contract with FMR for
the Series (the New Management Contract), and (ii) the Distribution and
Service Plan (the New Plan) under Rule 12b-1 with respect to the Series,
identical to the contract or Plan, as the case may be, in effect with the
Fund immediately prior to the Closing Date (including as the Management
Contract may be modified pursuant to a vote of shareholders of the fund as
proposed in this Proxy Statement).
The Trust's Board of Trustees will hold office without limit in time
except that (a) any Trustee may resign; (b) any Trustee may be removed by
written instrument signed by at least two-thirds of the number of Trustees
prior to removal; (c) any Trustee who requests to be retired by written
instrument signed by a majority of the other Trustees or who is unable to
serve due to physical or mental incapacity by reason of disease or
otherwise, death, or for any other reason, may be retired; and (d) a
Trustee may be removed at any Special Meeting of the shareholders by a vote
of two-thirds of the outstanding shares of the Trust. In case a vacancy
shall for any reason exist, the remaining Trustees will fill such vacancy
by appointing another Trustee, so long as, immediately after such
appointment, at least two-thirds of the Trustees have been elected by
shareholders. If, at any time, less than a majority of the Trustees holding
office has been elected by shareholders, the Trustees then in office will
promptly call a shareholders' meeting for the purpose of electing a Board
of Trustees. Otherwise, there will normally be no meeting of shareholders
for the purpose of electing Trustees.
The New Management Contract and the New Plan will take effect on the
Closing Date. The New Management Contract and the New Plan will continue in
force until June 30, 1998. Each agreement will continue in force thereafter
from year to year so long as its continuance is approved at least annually
(i) by the vote of a majority of the Trustees who are not "interested
persons" of the Trust, or FMR, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by vote of a majority of the
Trustees or by the vote of a majority of the outstanding shares of the
Series. The New Plan will continue in effect only if approved annually by a
vote of the Trustees and of those Trustees who are not interested persons,
cast in person at a meeting called for that purpose. The New Management
Contract will be terminable without penalty on sixty days' written notice
either by the Trust or FMR, as the case may be, and will terminate
automatically in the event of its assignment. The New Plan may be
terminable at any time, without the payment of any penalty, by a vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the fund.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Reorganization will become effective at the close of
business on November 29, 1997 (the Closing Date). However, the
Reorganization may become effective at such later date as the parties may
agree in writing.
The obligations of GSF and the Trust under the Plan of Reorganization are
subject to various conditions as stated therein. Notwithstanding the
approval of the Plan of Reorganization by Fund shareholders, the Plan of
Reorganization may be terminated or amended at any time prior to the
Reorganization by action of the Trustees to provide against unforeseen
events, if (1) there is a material breach by the other party of any
representation, warranty, or agreement contained in the Plan of
Reorganization to be performed at or prior to the Closing Date or (2) it
reasonably appears that a party will not or cannot meet a condition of the
Plan of Reorganization. Either trust may at any time waive compliance with
any of the covenants and conditions contained in, or may amend, the Plan of
Reorganization, provided that such waiver or amendment does not materially
adversely affect the interests of Fund shareholders.
CONTINUATION OF FUND SHAREHOLDER ACCOUNTS AND PLANS. The Trust's transfer
agent will establish an account for the Series' shareholders containing the
appropriate number and denominations of Trust Series Shares to be received
by each holder of Fund Shares under the Plan of Reorganization. Such
accounts will be identical in all material respects to the accounts
currently maintained by the Fund's transfer agent for the Fund's
shareholders. Fund shareholders who are receiving payment under a
withdrawal plan with respect to Fund Shares will retain the same rights and
privileges as to Trust Series Shares under the Plan of Reorganization.
Similarly, no further action will be necessary in order to continue any
automatic investment plan or retirement plan currently maintained by a Fund
shareholder with respect to Fund Shares.
EXPENSES. The Fund and the Series shall each be responsible for all of
their respective expenses of the Reorganization, estimated at $______ in
the aggregate.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS. Certain fundamental
investment restrictions of the Fund, which prohibit the Fund from acquiring
more than a stated percentage of ownership of another company, might be
construed as restricting the Fund's ability to carry out the
Reorganization. By approving the Plan of Reorganization, Fund shareholders
will be agreeing to waive, only for the purpose of the Reorganization,
those fundamental investment restrictions that could prohibit or otherwise
impede the transaction.
TAX CONSEQUENCES OF THE REORGANIZATION. Each trust has received an opinion
from their counsel, Kirkpatrick & Lockhart LLP, that the Reorganization
will constitute a tax-free reorganization within the meaning of Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended. Accordingly,
no gain or loss will be recognized for federal income tax purposes by the
Fund, the Series, or the Fund's shareholders upon (1) the transfer of the
Fund's assets in exchange solely for the Trust Series Shares and the
assumption by the Trust on behalf of the Series of the Fund's liabilities
or (2) the distribution of Trust Series Shares to the Fund's shareholders
in liquidation of their Fund Shares. The opinion further provides, among
other things, that (a) the basis for federal income tax purposes of the
Trust Series Shares to be received by each Fund shareholder will be the
same as that of his or her Fund Shares immediately prior to the
Reorganization; and (b) each Fund shareholder's holding period for his or
her Trust Series Shares will include the Fund shareholder's holding period
for his or her Fund Shares, provided that said Fund Shares were held as
capital assets on the date of the exchange.
CONCLUSION. The Board of Trustees has concluded that the proposed Plan of
Reorganization to convert the Fund into a separate series of a
Massachusetts business trust is in the best interest of the Fund's
shareholders. The Trustees recommend that the Fund's shareholders vote FOR
the approval of the Plan of Reorganization as described above. Such a vote
encompasses approval of the reorganization of the Fund to a separate series
of a Massachusetts business trust; temporary waiver of certain investment
limitations of the Fund to permit the Reorganization (see "Temporary Waiver
of Investment Restrictions" on page __); authorization of GSF, as sole
shareholder of the Series, to approve (i) a Management Contract for the
Series between the Trust and FMR, and (ii) a Distribution and Service Plan
under Rule 12b-1, identical to the contract or Plan, as the case may be, in
effect with the Fund immediately prior to the Closing Date (including as
the Management Contract may be modified pursuant to a vote of shareholders
of the fund as proposed in this Proxy Statement). If approved, the Plan of
Reorganization will take effect on the Closing Date. If the Plan of
Reorganization is not approved, the Fund will continue to operate as a fund
of GSF.
3. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY WHICH LIMITS ITS
SECURITY INVESTMENTS TO U.S. GOVERNMENT SECURITIES WHOSE INTEREST IS EXEMPT
FROM STATE AND LOCAL INCOME TAX.
Currently, the fund maintains a fundamental investment policy specifying
that the fund "limits its security investments to those U.S. Government
securities and interests in U.S. Government securities whose interest is
exempt from state and local income tax when held directly by taxpayers."
The Trustees recommend that shareholders of the fund vote to eliminate the
above fundamental investment policy.
The fund's current fundamental policy does not permit the fund to invest
in most U.S. agency securities such as Ginnie Maes and other mortgage
securities. The primary purpose of the proposal is to provide the fund with
increased flexibility to purchase additional U.S. agency securities. The
expanded ability to invest in U.S. agency securities is consistent with the
fund's current fundamental investment policy to invest "in securities
issued by the U.S. Government or issued by U.S. Government agencies or
instrumentalities, or in certain options and futures contracts," which will
remain the same and cannot be changed without shareholder approval.
If the proposal is approved by shareholders, the Trustees intend to adopt
a non-fundamental limitation that could be changed without a vote of
shareholders. The proposed non-fundamental limitation would limit the
fund's investments in mortgage securities to 40% of its net assets. This
non-fundamental policy is expected to become standard for Fidelity
Government bond funds. Mortgage securities are subject to prepayment risk.
Securities subject to prepayment risk generally offer less potential for
gains during a declining interest rate environment, and similar or greater
potential for loss in a rising interest rate environment. FMR will attempt
to balance the potential increased risks from investing in mortgage
securities or other agency securities with the potential gains available
from such securities. As of _______1997, __% of the fund is invested in
U.S. Treasury securities.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Board of Trustees recommends
voting FOR the proposal. Upon shareholder approval, the changes will become
effective when the disclosure is revised to reflect the changes. If the
proposal is not approved, the fund's current fundamental policy will remain
unchanged.
4. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING REAL
ESTATE.
The fund's fundamental investment limitation concerning real estate
currently states:
"The fund may not purchase or sell real estate, but this shall not prevent
the fund from investing in marketable securities issued by companies such
as real estate investment trusts which deal in real estate or interests
therein."
The Trustees recommend that shareholders of the fund vote to replace this
fundamental investment limitation with the following fundamental investment
limitation governing purchases and sales of real estate.
"The fund may not 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)."
The primary purpose of the proposed amendment is to clarify the types of
securities in which the fund is authorized to invest and to conform the
fund's fundamental real estate limitation to a limitation that is expected
to become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page __.) If the proposal is
approved, the new fundamental real estate limitation may not be changed
without the approval of shareholders.
Adoption of the proposed limitation concerning real estate is not expected
to significantly affect the way in which the fund is managed, the
investment performance of the fund, or the securities or instruments in
which the fund invests. However, to the extent that the fund invests to a
greater extent in real estate related securities, it will be subject to the
risks of the real estate market. This industry is sensitive to factors such
as changes in real estate values and property taxes, overbuilding,
variations in rental income, and interest rates. Performance could also be
affected by the structure, cash flow, and management skill of real estate
companies.
The fund does not expect to acquire real estate. However, the proposed
limitation would clarify several points. First, the proposed limitation
would make explicit that the fund may acquire a security or other
instrument that is secured by a mortgage or other right to foreclose on
real estate, in the event of a default. Second, the proposed limitation
would clarify the fact that the fund may invest without limitation in
securities issued or guaranteed by companies engaged in acquiring,
constructing, financing, developing, or operating real estate projects
(e.g., securities of issuers that develop various industrial, commercial,
or residential real estate projects such as factories, office buildings, or
apartments). Any investments in these securities or other instruments are,
of course, subject to the fund's investment objective and policies and to
other limitations regarding diversification and concentration in particular
industries. Also, the proposed limitation specifically permits the fund to
sell real estate acquired as a result of ownership of securities or other
instruments. However, in light of the types of securities in which the fund
regularly invests, FMR considers this to be a remote possibility. The
proposed limitation covers all types of real estate-related investments,
while the current limitation refers to "marketable" securities. Any
unmarketable investments will continue to be limited to 10% of net assets
by the fund's existing non-fundamental limitation.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
5. TO ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY FOR THE FUND PERMITTING THE
FUND TO INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY
WITH SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND POLICIES.
The Board of Trustees has approved, and recommends that shareholders of
the fund approve, the adoption of a new fundamental investment policy that
would permit the fund to invest all of its assets in another open-end
investment company with substantially the same investment objective and
policies ("Master Feeder Fund Structure"). The purpose of the Master Feeder
Fund Structure would be to achieve operational efficiencies by
consolidating portfolio management while maintaining different distribution
and servicing structures.
BACKGROUND. A number of mutual funds have developed so called
"master-feeder" fund structures under which several "feeder" funds invest
all of their assets in a single "master" fund. This proposal would add a
fundamental policy for the fund that permits a Master Feeder Fund
Structure.
REASON FOR THE PROPOSAL. FMR and the Board of Trustees continually review
methods of structuring mutual funds to take advantage of potential
efficiencies. While neither the Board nor FMR has determined that the fund
should invest in a Master Fund, the Trustees believe it could be in the
best interests of the fund to adopt such a structure at a future date.
At present, certain of the fund's fundamental investment policies and
limitations would prevent the fund from investing all of its assets in
another investment company, and would require a vote of shareholders before
such a structure could be adopted. To avoid the costs associated with a
subsequent shareholder meeting, the Trustees recommend that shareholders
vote to permit the fund's assets to be invested in a single Master Fund,
without a further vote of shareholders. The Trustees will authorize such an
investment only if they determine that action to be in the best interests
of the fund and its shareholders and if, upon advice of counsel, they
determine that the investment will not have material adverse tax
consequences to the fund. If shareholders approve this proposal, certain
fundamental and non-fundamental policies and limitations of the fund that
currently prohibit investment in shares of one investment company would not
apply to permit the investment in a Master Fund managed by FMR or its
affiliates or successor. These policies include the fund's limitations on
concentration limit, diversification limit and underwriting limit.
DISCUSSION. FMR may manage a number of mutual funds with similar
investment objectives, policies, and limitations but with different
features and services (Comparable Funds). Were these Comparable Funds to
pool their assets, operational efficiencies could be achieved, offering the
opportunity to reduce costs. Similarly, FMR anticipates that a Master
Feeder Fund Structure would facilitate the introduction of new Fidelity
mutual funds, increasing the investment options available to shareholders.
The fund's method of operation and shareholder services would not be
materially affected by its investment in a Master Fund, except that the
assets of the fund would be managed as part of a larger pool. Were the fund
to invest all of its assets in a Master Fund, it would hold only a single
investment security, and the Master Fund would directly invest in
individual securities pursuant to its investment objective. The Master Fund
would be managed by FMR or an affiliate, such as FMR Texas, Inc. in the
case of a money market fund. The Trustees would retain the right to
withdraw the fund's investments from a Master Fund at any time and would do
so if the Master Fund's investment objective and policies were no longer
appropriate for the fund. The fund would then resume investing directly in
individual securities as it does currently. Whenever a Feeder Fund is asked
to vote at a shareholder meeting of the Master Fund, the Feeder Fund will
hold a meeting of its shareholders if required by applicable law or the
Feeder Fund's policies to vote on the matters to be considered at the
Master Fund shareholder meeting. The fund will cast its votes at the Master
Fund meeting in the same proportion as the fund's shareholders voted at
their meeting.
At present, the Trustees have not considered any specific proposal to
authorize pooling of assets. The Trustees will authorize investing the
fund's assets in a Master Fund only if they determine that pooling is in
the best interests of the fund and if, upon advice of counsel, they
determine that the investment will not have material adverse tax
consequences to the fund or its shareholders. In determining whether to
invest in a Master Fund, the Trustees will consider, among other things,
the opportunity to reduce costs and to achieve operational efficiencies.
The Trustees will not authorize investment in a Master Fund if doing so
would materially increase costs (including fees) to shareholders.
FMR may benefit from the use of a Master Feeder Fund Structure if overall
assets under management are increased (since FMR's fees are based on
assets). Also, FMR's expenses of providing investment and other services to
the fund may be reduced. If the fund's investment in a Master Fund were to
reduce FMR's expenses materially, the Trustees would consider whether a
reduction in FMR's management fee would be appropriate if and when a Master
Feeder Fund Structure is implemented.
PROPOSED FUNDAMENTAL POLICY. To allow the fund to invest in a Master Fund
at a future date, the Trustees recommend that the fund adopt the following
fundamental policy:
"The fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company managed by Fidelity Management & Research
Company or an affiliate or successor with substantially the same
fundamental investment objective, policies, and limitations as the fund."
If the proposal is adopted, the Trustees intend to adopt a non-fundamental
investment limitation for the fund which states:
"The 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."
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current
fundamental investment policies will remain unchanged with respect to
potential investment in Master Funds.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
The primary purpose of Proposals 6 through 14 is to revise several of the
fund's investment limitations to conform to limitations which are standard
for similar types of funds managed by FMR. The Board of Trustees asked FMR
to analyze the various fundamental and non-fundamental investment
limitations of the Fidelity funds, and, where practical and appropriate to
a fund's investment objective and policies, propose to shareholders
adoption of standard fundamental limitations and elimination of certain
other fundamental limitations. Generally, when fundamental limitations are
eliminated, Fidelity's standard non-fundamental limitations replace them.
By making these limitations non-fundamental, the Board of Trustees may
amend a limitation as they deem appropriate, without seeking shareholder
approval. The Board of Trustees would amend the limitations to respond, for
instance, to developments in the marketplace, or changes in federal or
state law. The costs of shareholder meetings called for these purposes are
generally borne by a fund and its shareholders.
It is not anticipated that these proposals will substantially affect the
way the fund is currently managed. However, FMR is presenting them to you
for your approval because FMR believes that increased standardization will
help to promote operational efficiencies and facilitate monitoring of
compliance with fundamental and non-fundamental investment limitations.
Although adoption of a new or revised limitation is not likely to have any
impact on the current investment techniques employed by the fund, it will
contribute to the overall objectives of standardization.
6. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
ISSUANCE OF SENIOR SECURITIES.
The fund's current fundamental investment limitation regarding the
issuance of senior securities states:
"The fund may not issue senior securities."
The Trustees recommend that shareholders vote to replace this limitation
with the following fundamental investment limitation governing the issuance
of senior securities:
"The fund may not issue senior securities, except as permitted under the
Investment Company Act of 1940."
The primary purpose of the proposal is to revise the fund's fundamental
senior securities limitation to conform to a limitation that is expected to
become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page _.) If the proposal is
approved, the new fundamental senior securities limitation cannot be
changed without the approval of shareholders.
Adoption of the proposed limitation on senior securities is not expected
to affect the way in which the fund is managed, the investment performance
of the fund, or the securities or instruments in which the fund invests.
However, the proposed limitation clarifies that the fund may issue senior
securities to the extent permitted under the 1940 Act.
Although the definition of a "senior security" involves complex statutory
and regulatory concepts, a senior security is generally thought of as an
obligation of a fund which has a claim to the fund's assets or earnings
that takes precedence over the claims of the fund's shareholders. The 1940
Act generally prohibits mutual funds from issuing senior securities;
however, mutual funds are permitted to engage in certain types of
transactions that might be considered "senior securities" as long as
certain conditions are satisfied. For example, a transaction which
obligates a fund to pay money at a future date (e.g., the purchase of
securities for settlement on a date that is further away than the normal
settlement period) may be considered a "senior security." A mutual fund,
however, is permitted to enter into this type of transaction if it
maintains a segregated account containing liquid securities in an amount
equal to its obligation to pay cash for the securities at a future date.
The fund utilizes transactions that may be considered "senior securities"
only in accordance with applicable regulatory requirements under the 1940
Act.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
7. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
SHORT SALES OF SECURITIES.
The Fund's current fundamental investment limitation on selling
securities short is as follows:
"The fund may not make short sales of securities; provided, however, that
the fund may purchase or sell futures contracts, and may make initial and
variation margin payments in connection with purchases or sales of futures
contracts or of options on futures contracts."
The Trustees recommend that shareholders of the fund vote to eliminate the
above fundamental investment limitation. If the proposal is approved by
shareholders, the Trustees intend to adopt a non-fundamental limitation
that could be changed without a vote of shareholders. The proposed
non-fundamental limitation is set forth below, with a brief analysis of the
substantive difference between it and the current limitation.
"The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short."
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. In
an investment technique known as a short sale "against the box," an
investor sells securities short while owning the same securities in the
same amount, or having the right to obtain equivalent securities. The
investor could have the right to obtain equivalent securities, for example,
through its ownership of warrants, options, or convertible bonds.
The proposed non-fundamental limitation would clarify that transactions in
futures contracts and options are not deemed to constitute selling
securities short.
The fund does not currently anticipate entering into any short sales other
than short sales against the box. If the proposal is approved, however, the
Board of Trustees would be able to change the proposed non-fundamental
limitation in the future, without a vote of shareholders subject to
appropriate disclosure to investors.
Elimination of the fund's fundamental limitation on short selling is
unlikely to affect the fund's investment techniques at this time. The Board
of Trustees believes that efforts to standardize the fund's investment
limitation will facilitate FMR's investment compliance efforts (see
"Adoption of Standardized Investment Limitations" on page __) and are in
the best interests of shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
8. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
MARGIN PURCHASES.
The fund's current fundamental investment limitation concerning purchasing
securities on margin is as follows:
"The fund may not purchase any securities on margin except for such
short-term credits as are necessary for the clearance of transactions;
provided, however, that the fund may purchase or sell futures contracts,
and may make initial and variation margin payments in connection with
purchases or sales of futures contracts or of options on futures
contracts."
The Trustees recommend that shareholders of the fund vote to eliminate the
above fundamental investment limitation. If the proposal is approved, the
Trustees intend to adopt a substantially identical non-fundamental
limitation for the fund that could be changed without the approval of
shareholders.
Margin purchases involve the purchase of securities with money borrowed
from a broker. "Margin" is the cash or eligible securities that the
borrower places with a broker as collateral against the loan. The fund's
current fundamental limitation prohibits the fund from purchasing
securities on margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions and for initial and variation
margin payments made in connection with the purchase and sale of futures
contracts and options on futures contracts. With these exceptions, mutual
funds are prohibited from entering into most types of margin purchases by
applicable SEC policies. The proposed non-fundamental limitation includes
these exceptions.
If the proposal is approved by shareholders, the Trustees intend to adopt
the following non-fundamental investment limitation, which would prohibit
margin purchases except as permitted under the conditions referred to
above:
"The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin."
Although elimination of the fund's fundamental limitation on margin
purchases is unlikely to affect the fund's investment techniques at this
time, in the event of a change in federal regulatory requirements, the fund
may alter its investment practices in the future. The Board of Trustees
believes that efforts to standardize investment limitations will facilitate
FMR's investment compliance efforts (see "Adoption of Standardized
Investment Limitations" on page __) and are in the best interests of
shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
9. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
BORROWING.
The fund's current fundamental investment limitation concerning borrowing
states:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the fund's total assets by reason
of decline in net assets will be reduced within 3 days to the extent
necessary to comply with the 33 1/3% limitation."
The Trustees recommend that shareholders of the fund vote to replace the
fund's current fundamental investment limitation with the following amended
fundamental investment limitation governing borrowing:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation."
The primary purpose of the proposal is to revise the fund's fundamental
borrowing limitation to conform to a limitation that is expected to become
standard for all funds managed by FMR. (See "Adoption of Standardized
Investment Limitations" on page __.) If the proposal is approved, the
amended fundamental borrowing limitation cannot be changed without the
approval of shareholders.
Adoption of the proposed fundamental limitation concerning borrowing is
not expected to affect the way in which the fund is managed, the investment
performance of the fund, or the securities or instruments in which the fund
invests. However, the proposed fundamental limitation would clarify two
points. First, under the proposed limitation, the fund must reduce
borrowings that come to exceed 33 1/3% of its total assets for any reason.
While under the current limitation, the fund must reduce borrowings that
come to exceed 33 1/3% of total assets only when there is a decline in net
assets. Second, the proposed limitation specifically defines "three days"
to exclude Sundays and holidays.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
10. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
UNDERWRITING.
The fund's current fundamental investment limitation concerning
underwriting states:
"The fund may not underwrite any issue of securities, except to the extent
that the fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 (i) in the disposition of restricted securities or
(ii) in connection with the purchase of government securities directly from
the issuer in accordance with the fund's investment objective, policies,
and limitations."
The Trustees recommend that shareholders of the fund vote to replace this
limitation with the following fundamental limitation governing
underwriting:
"The fund may not 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."
The primary purpose of the proposed amendment is to clarify the fund's
fundamental policy with respect to underwriting. The proposed limitation
maintains that the fund may not underwrite securities, but clarifies that
the fund may only be considered an underwriter, under federal securities
laws, in the disposition of restricted securities. The proposal also serves
to conform the fund's fundamental investment limitation concerning
underwriting to a limitation which is expected to become standard for all
funds managed by FMR. (See "Adoption of Standardized Investment
Limitations" on page __.) If the proposal is approved, the new limitation
may not be changed without the approval of shareholders.
Adoption of the proposed limitation concerning underwriting is not
expected to affect the way in which the fund is managed, the investment
performance of the fund, or the securities or instruments in which the fund
invests.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
11. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
CONCENTRATION OF ITS INVESTMENTS IN A SINGLE INDUSTRY.
The fund's current fundamental investment limitation concerning the
concentration of its investments within a single industry states:
"The fund may not purchase the securities of any issuer (other than
obligations issued or guaranteed as to principal and interest by the
Government of the United States or its agencies or instrumentalities, or
commitments to acquire such securities on a "when-issued" basis) if, as a
result thereof, more than 25% of the fund's total assets (taken at current
value) would be invested in the securities of one or more issuers having
their principal business activities in the same industry."
The Trustees recommend that shareholders of the fund vote to replace this
fundamental investment limitation with the following amended fundamental
investment limitation governing concentration:
"The fund may not 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."
The primary purpose of the proposal is to revise the fund's fundamental
concentration limitation to conform to a limitation which is expected to
become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page __.) If the proposal is
approved, the new fundamental concentration limitation could not be changed
without the approval of shareholders.
Adoption of the proposed amended limitation on concentration is not
expected to affect the way the fund is managed, the investment performance
of the fund, or the securities or instruments in which the fund invests.
[The fund will continue to invest in commitments to acquire securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities on a "when-issued basis."]
The proposed amended limitation is not substantially different from the
current policy and is not likely to have any impact on the investment
techniques employed by the fund.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
12. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENTS IN OTHER INVESTMENT COMPANIES.
The fund's current fundamental investment limitation concerning
investments in other investment companies states:
"The fund may not purchase securities of other investment companies except
in the open market where no commission except the ordinary broker's
commission is paid, or as a part of a merger or consolidation, and in no
event may investments in such securities exceed 10% of the total assets of
the fund. It may not purchase or retain securities issued by other open-end
investment companies."
The Trustees recommend that shareholders of the fund vote to eliminate the
above fundamental limitation.
The ability of mutual funds to invest in other investment companies is
restricted by the 1940 Act, and, until recently, by some state regulations.
The fund's fundamental restriction incorporates some of the 1940 Act
restrictions and the state regulations. The federal 1940 Act restrictions
will remain applicable to the fund whether or not they are recited in a
fundamental limitation. Because the state regulations are no longer
applicable and federal requirements apply whether or not the fund has a
fundamental policy, shareholder approval is sought to eliminate this
fundamental limitation. Elimination of the limitation would permit the fund
to purchase the securities of other investment companies to the extent
permitted under the 1940 Act, or an exemption granted by the SEC. Under the
1940 Act, a fund may purchase the securities of other investment companies
if immediately thereafter not more than (i) 3% of the total outstanding
voting stock of such company is owned by the fund, (ii) 5% of the fund's
total assets, taken at market value, would be invested in any one such
company, or (iii) 10% of the fund's total assets, taken at market value,
would be invested in such securities. In addition, a fund may not acquire
shares of a closed-end investment company if, immediately thereafter, the
fund, together with other investment companies having the same investment
adviser and companies controlled by such companies, would own more than 10%
of the total outstanding stock of such closed-end investment company. Under
certain conditions, investment in the securities of an investment company
that is part of the same group of investment companies is not subject to
the foregoing limits.
If the proposal is approved, the fund would also be able to enhance its
cash management by investing in the Central Funds. Pursuant to an order of
exemption granted by the SEC, the fund may invest up to 25% of total assets
in the Central Funds, which are non-publicly offered money market or
short-term bond funds managed by FMR or an affiliate of FMR. The Central
Funds do not currently pay investment advisory, management, or transfer
agent fees, but do pay minimal fees for services, such as custodian,
auditor, and Independent Trustee fees. FMR anticipates that the Central
Funds will benefit the fund by enhancing the efficiency of cash management
for the Fidelity funds and by providing increased short-term investment
opportunities. Furthermore, adoption of the proposal would allow the fund
to change its policies with respect to the purchase of securities of other
investment companies, if federal requirements change, without the cost of a
shareholder vote. In addition, the Board of Trustees believes that efforts
to standardize the fund's investment limitations will facilitate FMR's
investment compliance efforts. (See "Adoption of Standardized Investment
Limitations" on page __.) Elimination of the fundamental restriction is not
expected to have an impact on the fund's current investment practices,
except with respect to cash management as discussed above.
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved, the fund's current limitation will remain unchanged.
13. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTING IN OIL, GAS, OR OTHER MINERAL EXPLORATION OR DEVELOPMENT
PROGRAMS.
Currently, the fund maintains a fundamental investment limitation
specifying that the fund may not "invest in oil, gas, or other mineral
exploration or development programs." Investment in oil, gas, or other
mineral exploration programs is not prohibited under federal standards for
mutual funds but was prohibited by some state regulations. Because these
state law regulations are no longer applicable, the Trustees recommend that
shareholders of the fund vote to eliminate the above fundamental investment
limitation.
Elimination of the fundamental limitation will not change the fund's
fundamental investment objective or requirements. The fund's objective of
investing in securities issued by the U.S. Government or issued by U.S.
Government agencies or instrumentalities, prohibits investment in oil, gas
and other mineral exploration programs. As a result, elimination of the
fundamental restriction will have no impact on the fund's investment
practices. In addition, the Board of Trustees believes that efforts to
standardize the fund's investment limitation will facilitate FMR's
compliance efforts. (See "Adoption of Standardized Investment Limitations"
on page __.)
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
14. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
PURCHASING WARRANTS.
Currently, the fund maintains a fundamental investment limitation
specifying that the fund may not "purchase warrants, valued at the lower of
cost or market, in excess of 5% of the value of the fund's net assets."
Purchasing warrants in excess of 5% of the value of the fund's net assets
is not prohibited under federal standards for mutual funds but was
prohibited by some state regulations. Because these state law regulations
are no longer applicable, the Trustees recommend that shareholders of the
fund vote to eliminate the above fundamental investment limitation.
Eliminating of the fundamental limitation will not change the fund's
fundamental investment objective or requirements. The fund's objective of
investing in securities issued by the U.S. Government or issued by U.S.
Government agencies or instrumentalities, prohibits purchasing warrants. As
a result, elimination of the fundamental restriction will have no impact on
the fund's investment practices. In addition, the Board of Trustees
believes that efforts to standardize the fund's investment limitation will
facilitate FMR's compliance efforts. (See "Adoption of Standardized
Investment Limitations" on page __.)
CONCLUSION. The Board of Trustees has concluded that the proposal will
benefit the fund and its shareholders. The Trustees recommend voting FOR
the proposal. Upon shareholder approval, the changes will become effective
when the disclosure is revised to reflect the changes. If the proposal is
not approved by the shareholders of the fund, the fund's current limitation
will remain unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the
contrary will be voted on such matters in accordance with the judgment of
the persons therein designated.
PRESENT MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR 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. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments,
compensates all officers of the fund and all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include providing
facilities for maintaining the fund's organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters,
and other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees. Services provided by affiliates of FMR will continue under
the proposed management contract described in proposal 1.
In addition to the management fee payable to FMR, the fund pays transfer
agent and pricing and bookkeeping fees to Fidelity Service Company, Inc.
(FSC), an affiliate of FMR, its transfer, dividend disbursing, and
shareholder servicing agent. Although the fund's current management
contract provides that the fund will pay for typesetting, printing, and
mailing prospectuses, statements of additional information, notices, and
reports to shareholders, the trust, on behalf of the fund has entered into
a revised transfer agent agreement with FSC, pursuant to which FSC bears
the costs of providing these services to existing shareholders. Other
expenses paid by the fund include interest, taxes, brokerage commissions,
and the fund's proportionate share of insurance premiums and Investment
Company Institute dues. The fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the fund
may be a party, and any obligation it may have to indemnify its officers
and Trustees with respect to litigation.
Transfer agent fees and pricing and bookkeeping fees, including
reimbursement for out-of-pocket expenses, paid to FSC by the fund for
fiscal 1996 amounted to $2,524,241.
The fund also has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of the fund, which are continuously offered
at net asset value per share. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
FMR is the fund's manager pursuant to a management contract dated December
31, 1991, which was approved by Fidelity Government Securities Fund (a
limited partnership) on December 31, 1991, as the then sole shareholder of
the fund pursuant to an Agreement and Plan of Reorganization approved by
public shareholders of the limited partnership on November 13, 1991. The
fund was originally organized as a limited partnership in the State of
Nebraska on August 25, 1978. On December 31, 1991, the limited partnership
transferred all of its assets to the Massachusetts business trust.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and an
individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of
the registered investment companies with which FMR has management contracts
and is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels, which is the
result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $522 billion of group net assets
- - the approximate level for July 1997 - was .1387%, which is the weighted
average of the respective fee rates for each level of group net assets up
to $528 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE
RATES
Average Annualized Group Effective
Group Rate Net Annual
Assets Assets Fee Rate
$0 - 3 billion .3700% $ 0.5 .3700%
billion
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
Under the fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .1500% for average group
assets in excess of $84 billion. The group fee rate breakpoints shown above
for average group assets in excess of $120 billion and under $228 billion
were voluntarily adopted by FMR on January 1, 1992. The additional
breakpoints shown above for average group assets in excess of $228 billion
were voluntarily adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for average group assets
in excess of $156 billion and under $372 billion as shown in the schedule
below, pending shareholder approval of a new management contract reflecting
the revised schedule. The revised group fee rate schedule provides for
lower management fee rates as FMR's assets under management increase. The
revised group fee rate schedule was identical to the above schedule for
average group assets under $156 billion.
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $372 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and its extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of $156
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE
RATES
Average Group Annualized Group Net Effective
Assets Rate Assets Annual
Fee Rate
$120 - 156 billion .1450% $ 150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
372 - 408 .1200 325 .1514
408 - 444 .1175 350 .1494
444 - 480 .1150 375 .1476
480 - 516 .1125 400 .1459
Over 516 .1100 425 .1443
450 .1427
475 .1413
500 .1399
525 .1385
550 .1372
The individual fund fee rate is .30%. Based on the average group net
assets of the funds advised by FMR for July 1997, the annual management fee
rate would be calculated as follows:
Group Fee Rate Individual Fund Management Fee
Fee Rate Rate
.1387% + .30% = .4387%
One-twelfth of this annual rate is applied to the fund's net assets
averaged for the month, giving a dollar amount, which is the fee for that
month.
During fiscal 1996, FMR received $4,286,520 for its services as investment
adviser to the fund. This fee was equivalent to 0.45% of the average net
assets of the fund.
FMR may, from time to time, voluntarily reimburse all or a portion of the
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase the fund's total returns and yield and repayment of
the reimbursement by the fund will lower its total returns and yield.
ACTIVITIES AND MANAGEMENT OF FMR
FMR, a corporation organized in 1946, serves as investment adviser to a
number of investment companies. Information concerning the advisory fees,
net assets, and total expenses of funds with investment objectives similar
to Fidelity Government Securities Fund and advised by FMR is contained in
the Table of Average Net Assets and Expense Ratios in Exhibit 3 beginning
on page __.
FMR, its officers and directors, its affiliated companies, and the
Trustees, from time to time have transactions with various banks, including
the custodian banks for certain of the funds advised by FMR. Those
transactions that have occurred to date have included 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.
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board and
of the Executive Committee; Robert C. Pozen, President; and Peter S. Lynch,
Vice Chairman. With the exception of Robert C. Pozen, each of the
Directors is also a Trustee of the trust. Messrs. Johnson 3d, Pozen,
Burkhead, John H. Costello, Arthur S. Loring, Richard A. Silver, Leonard M.
Rush, Fred L. Henning, Jr., Dwight D. Churchill and Curt Hollingsworth are
currently officers of the trust and officers or employees of FMR or FMR
Corp. With the exception of Mr. Costello, Mr. Silver, Mr. Rush, and ______,
all of these persons hold or have options to acquire stock of FMR Corp. The
principal business address of each of the Directors of FMR is 82 Devonshire
Street, Boston, Massachusetts 02109.
All of the stock of FMR is owned by its parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. Members of Mr. Edward C. Johnson 3d's family are the
predominant owners of a class of shares of common stock, representing
approximately 49% of the voting power of FMR Corp., and, therefore, under
the 1940 Act may be deemed to form a controlling group with respect to FMR
Corp.
During the period October 1, 1996 through July 31, 1997, [the following
transactions/no transactions] were entered into by Trustees and nominees as
Trustee of the trust involving more than 1% of the voting common,
non-voting common and equivalent stock, or preferred stock of FMR Corp.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the fund's
management contract.
FMR may place agency transactions with National Financial Services
Corporation (NFSC) and Fidelity Brokerage Services (FBS), 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.
For fiscal year 1996 the fund paid no brokerage commissions to affiliated
brokers.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The trust does not hold annual shareholder meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent
shareholder meeting should send their written proposals to the Secretary of
the Trust, 82 Devonshire Street, Boston, Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the trust, in care of Fidelity Service Company, Inc.,
whether other persons are beneficial owners of shares for which proxies are
being solicited and, if so, the number of copies of the Proxy Statement and
Annual Reports you wish to receive in order to supply copies to the
beneficial owners of the respective shares.
EXHIBIT 1
The language to be added to the current contract is in ((double
parentheses)); the language to be deleted is set forth in [brackets].
FORM OF
MANAGEMENT CONTRACT
between
FIDELITY GOVERNMENT SECURITIES FUND
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT ((AMENDED and RESTATED)) as of [made] this [31st] ((__)) day of
[December 1991] ((___)) 1997, by and between Fidelity Government Securities
Fund, a Massachusetts business trust ((which may issue one or more series
of shares of beneficial interest)) (hereinafter called the "Fund"), on
behalf of its single existing series of shares of beneficial interest
(hereinafter called the "Portfolio"), and Fidelity Management & Research
Company, a Massachusetts corporation (hereinafter called the "Adviser")
((as set forth in its entirety below.))
((Required authorization and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby
consent, pursuant to Paragraph 6 of the existing Management Contract dated
December 31, 1991, to a modification of said Contract in the manner set
forth below. The Amended Management Contract shall, when executed by duly
authorized officers of the Fund and Adviser, take effect on December 1,
1997 or the first day of the month following approval.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the [Fund's] ((Portfolio's)) Prospectus or other governing
instruments, as amended from time to time, the Investment Company Act of
1940 and rules thereunder, as amended from time to time (the "1940 Act"),
and such other limitations as the [Fund] ((Portfolio)) may impose by notice
in writing to the Adviser. The Adviser shall also furnish for the use of
the [Fund] ((Portfolio)) office space and all necessary office facilities,
equipment and personnel for servicing the investments of the [Fund]
((Portfolio)); and shall pay the salaries and fees of all officers of the
Fund, of all Trustees of the Fund who are "interested persons" of the Fund
or of the Adviser and of all personnel of the Fund or the Adviser
performing services relating to research, statistical and investment
activities. The Adviser is authorized, in its discretion and without prior
consultation with the [Fund] ((Portfolio)), to buy, sell, lend and
otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the [Fund] ((Portfolio)). The investment policies
and all other actions of the [Fund] ((Portfolio)) are and shall at all
times be subject to the control and direction of the Fund's Board of
Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the [Fund] ((Portfolio)), including but not limited to: (i)
providing the [Fund] ((Portfolio)) with office space, equipment and
facilities (which may be its own) for maintaining its organization; (ii) on
behalf of the [Fund] ((Portfolio,)) supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and dealers,
insurers and other persons in any capacity deemed to be necessary or
desirable; (iii) preparing all general shareholder communications,
including shareholder reports; (iv) conducting shareholder relations; (v)
maintaining the Fund's existence and its records; (vi) during such times as
shares are publicly offered, maintaining the registration and qualification
of the Portfolio's shares under federal and state law; and (vii)
investigating the development of and developing and implementing, if
appropriate, management and shareholder services designed to enhance the
value or convenience of the [Fund] ((Portfolio)) as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) ((The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the
other accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.))
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the [Fund] ((Portfolio)).
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a [group fee] ((Group Fee)) [rate] and
an [individual fund fee] ((Individual Fund Fee)) [rate].
(a) Group Fee Rate. The [group fee rate] ((Group Fee Rate)) shall be
based upon the monthly average of the net assets of the registered
investment companies having Advisory and Service or Management Contracts
with the Adviser (computed in the manner set forth in the [charter of each
investment company] ((fund's Declaration of Trust or other organizational
document)) determined as of the close of business on each business day
throughout the month. The [group fee rate] ((Group Fee Rate)) shall be
determined on a cumulative basis pursuant to the following schedule:
Average Net Assets Annualized Fee Rate (for each level)
[Up to] 0 - $ 3 billion .3700%
3 - 6 .3400
6 - 9 .3100
9 - 12 .2800
12 - 15 .2500
15 - 18 .2200
18 - 21 .2000
21 - 24 .1900
24 - 30 .1800
30 - 36 .1750
36 - 42 .1700
42 - 48 .1650
48 - 66 .1600
66 - 84 .1550
[Over - 84] [.150]
((84 - 120)) ((.1500))
((120 - 156)) ((.1450))
((156 - 192)) ((.1400))
((192 - 228)) ((.1350))
((228 - 264)) ((.1300))
((264 - 300)) ((.1275))
((300 - 336)) ((.1250))
((336 - 372)) ((.1225))
((372 - 408)) ((.1200))
((408 - 444)) ((.1175))
((444 - 480)) ((.1150))
((480 - 516)) ((.1125))
((Over 516)) ((.1100))
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
0.30%.
The sum of the [group fee rate] ((Group Fee Rate)), calculated as
described above to the nearest millionth, ((and)) the [individual fund fee
rate] ((Individual Fund Fee Rate)) shall constitute the [annual management
fee rate] ((Annual Management Fee Rate.)) One-twelfth of the [annual
management fee] ((Annual Management Fee Rate)) shall be applied to the
average of the net assets of the [Fund] ((Portfolio)) (computed in the
manner set forth in the ((Fund's)) Declaration of Trust [of the Fund] ((or
other organizational document)) determined as of the close of [each]
business [day] ((on each business day)) throughout the month.
(c) ((In case of termination of this Contract during any month, the fee
for that month shall be reduced proportionately on the basis of the number
of business days during which it is in effect, and the fee computed upon
the average net assets for the business days it is so in effect for that
month.))
4. It is understood that the [Fund] ((Portfolio)) will pay all its
expenses, which expenses payable by the [Fund] ((Portfolio)) shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Fund's Trustees
other than those who are "interested persons" of the Fund or the Adviser;
(iv) legal and audit expenses; (v) custodian, registrar and transfer agent
fees and expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and [its] ((the Portfolio's)) shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the [Fund] ((Portfolio)); (viii) all other expenses incidental to
holding meetings of the [Fund's] ((Portfolio's)) shareholders, including
proxy solicitations therefore; (ix) a pro rata share, based on relative net
assets of the [Fund] ((Portfolio)) and other registered investment
companies having Advisory and Service or Management Contracts with the
Adviser, of 50% of insurance premiums for fidelity and other coverage; (x)
its proportionate share of association membership dues; (xi) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xii) expenses of printing and mailing
Prospectuses and Statements of Additional Information and supplements
thereto sent to existing shareholders; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions,
suits or proceedings to which the Portfolio is a party and the legal
obligation which the [Fund] ((Portfolio)) may have to indemnify the Fund's
Trustees and officers with respect thereto.
5. The services of the Adviser to the [Fund] ((Portfolio)) are not to be
deemed exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the [Fund] ((Portfolio)) hereunder.
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Adviser, the Adviser shall not be subject to liability to the [Fund]
((Portfolio)) or to any shareholder of the [Fund] ((Portfolio)) for any act
or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or sale of any security or other investment instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until [May 31,
1992] ((June 30, 1998)) and indefinitely thereafter, but only so long as
the continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the [Fund] ((Portfolio)).
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the [Fund] ((Portfolio)).
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the [Fund] ((Portfolio)) by vote of a majority of
the outstanding voting securities ((of the Portfolio)). This Contract
shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust ((or
other organizational document)) and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
[Fund] ((Portfolio)) and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the [Fund] ((Portfolio)) or any other Portfolios of the
Fund. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. ((The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.))
8. ((This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving effect
to the choice of laws provisions thereof.))
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, ((and
their respective seals to be hereunto affixed)), all as of the date written
above.
[SIGNATURE LINES OMITTED]
EXHIBIT 2
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of
the 19th day of June 1997 by and between Fidelity Government Securities
Fund (the Fund), a separate series of Fidelity Government Securities Fund
(GSF) and Fidelity Income Fund (the Trust), each a business trust duly
formed under the laws of the Commonwealth of Massachusetts.
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the Code). The reorganization will
comprise: (a) the transfer of all of the assets of the Fund to a series of
the Trust (the Series) solely in exchange for shares of beneficial interest
in the Series (the Trust Series Shares) and the assumption by the Series of
the Fund's liabilities; and (b) the constructive distribution of such Trust
Series Shares by the Fund to its shareholders (Fund Shareholder) in
complete liquidation and termination of the Fund in exchange for all of the
Fund's outstanding shares (Fund Shares). The Fund shall receive shares of
the Series equal to the number of Fund Shares on the Closing Date (as
defined below). Immediately thereafter, the Fund shall then distribute to
each Fund Shareholder one Trust Series Share for each Fund Share held by
the shareholder on the Closing Date. The foregoing transactions are
referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE FUND
GSF on behalf of the Fund represents and warrants as follows:
(a) The Fund is a series of GSF, a business trust duly formed, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to own all of its properties and assets and
to carry out its obligations under this Agreement. It has all necessary
federal, state, and local authorizations to carry out its business as now
being conducted and to carry out this Agreement;
(b) The Fund is duly registered as an open-end management investment
company under the Investment Company Act of 1940 (the 1940 Act), as
amended, or is a series of a registrant and such registration is in full
force and effect;
(c) The Fund is not in, and the execution, delivery and performance of
this Agreement will not result in, violation of any provision of the
Declaration of Trust or the Fund's Bylaws, or, to the Fund's knowledge, of
any agreement, indenture, instrument, contract, lease or other undertaking
to which the Fund is a party or by which the Fund is bound or result in the
acceleration of any obligation or the imposition of any penalty under any
agreement, judgment or decree to which the Fund is a party or is bound;
(d) The Fund has no material contracts or other commitments (other than
this Agreement) that will not be terminated without liability to the Fund
on or prior to the Closing Date;
(e) To the Fund's knowledge, no material legal, administrative, or other
proceeding or investigation of, or before, any court or governmental body
presently is pending or threatened against the Fund or any of its
properties or assets which assert liability on the part of the Fund, except
as previously disclosed in writing to the Trust. The Fund knows of no facts
that might form the basis for the institution of such proceedings;
(f) The Fund has filed or will file all federal and state tax returns
which, to the knowledge of the Fund's officers, are required to be filed by
the Fund and has paid or will pay all federal and state taxes shown to be
due on said returns or provision shall have been made for the payment
thereof, and, to the best of the Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to
such returns;
(g) All of the issued and outstanding shares of the Fund are, and at the
Closing Date will be, duly and validly issued and outstanding and fully
paid and nonassessable as a matter of Massachusetts law (except as
disclosed in the Fund's Statement of Additional Information), and have been
offered for sale in conformity with all applicable federal securities laws.
All of the issued and outstanding shares of the Fund will, at the Closing
Date, be held by the persons and in the amounts as certified in accordance
with the provisions of this Agreement;
(h) The information to be furnished by the Fund for use in applications
for orders, registration statements, proxy materials and other documents
which may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete and shall comply in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto;
(i) At both the Valuation Time (as defined in Section 4) and the Closing
Date (as defined in Section 6), the Fund will have the full right, power,
and authority to sell, assign, transfer, and deliver its portfolio
securities and any other assets of the Fund to be transferred to the Series
pursuant to this Agreement. At the Closing Date, subject only to the
delivery of the Fund's portfolio securities and any such other assets as
contemplated by this Agreement, the Series will acquire the Fund's
portfolio securities and any such other assets subject to no encumbrances,
liens, or security interests (except for those that may arise in the
ordinary course and are disclosed to the Series) and without any
restrictions upon the transfer thereof;
(j) The execution, delivery, and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of the Fund, and this Agreement constitutes a valid and
binding obligation of the Fund enforceable in accordance with its terms,
subject to shareholder approval;
(k) To the best of the knowledge of the Fund's management, there is no
plan or intention by the Fund's shareholders to sell, exchange or otherwise
dispose of any of the Trust Series Shares to be received in the
Reorganization;
(l) The Fund shares are widely held and may be purchased and redeemed upon
request;
(m) No consideration other than Trust Series Shares will be issued in
exchange for the Fund Shares in the Reorganization;
(n) Immediately following consummation of the Reorganization, the Fund
Shareholders will own all of the Trust Series Shares and will own such
shares solely by reason of their ownership of the Fund Shares immediately
prior to the Reorganization;
(o) Immediately following the consummation of the Reorganization, the
Trust will hold on behalf of the Series the same assets and be subject to
the same liabilities that the Fund held or was subject to immediately prior
thereto, except for assets used to pay expenses incurred in connection with
the Reorganization. Assets used to pay expenses and all distributions
(except for distributions and redemptions arising in the ordinary course of
the Fund's business as an open-end investment company) made by the Fund
immediately preceding the Reorganization will, in the aggregate, constitute
less than __% of the net assets of the Fund;
(p) At the time of the Reorganization, the Fund will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Fund;
(q) There is no intercompany indebtedness between the Series and the Fund
that was issued, acquired or that will be settled at a discount;
(r) The Fund's liabilities to be assumed by the Series in the
Reorganization were incurred by the Fund in the ordinary course of its
business and are associated with the assets to be transferred;
(s) The Fund's shareholders each will pay their own expenses, if any,
incurred in connection with the Reorganization;
(t) The fair market value of the Fund's assets to be transferred by the
Fund to the Series will equal or exceed the Fund's liabilities to be
assumed by the Series plus the liabilities to which the transferred assets
are subject;
(u) The Fund is a regulated investment company as defined in Section 851
of the Internal Revenue Code of 1986, as amended;
(v) At the time of the Reorganization, the Fund is not under the
jurisdiction of a court in a proceeding under Title 11 of the United States
Code or similar case within the meaning of Section 368(a)(3)(A) of the
Code;
(w) To the Fund's knowledge, no consent, approval, authorization, or order
of any court or governmental authority is required for the consummation by
the Fund of the transactions contemplated by this Agreement, except such as
have been obtained under the Securities Act of 1933 (the 1933 Act), the
Securities Exchange Act of 1934 (the 1934 Act), and the 1940 Act;
(x) The Fund has no known liabilities of a material nature, contingent or
otherwise, other than those shown as belonging to it on its statement of
assets and liabilities as of March 31, 1997 and those incurred in the
ordinary course of the Fund's business as an investment company since March
31, 1997; and
(y) The Fund will be liquidated immediately after the Reorganization.
2. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants as follows:
(a) The Trust is a business trust duly formed, validly existing, and in
good standing under the laws of the Commonwealth of Massachusetts. It has
all necessary federal, state, and local authorizations to carry out its
business as now being conducted and to carry out this Agreement;
(b) The Trust is duly registered as an open-end management investment
company under the 1940 Act, and the Series is a duly established and
designated series of the Trust;
(c) The Trust is not in, and the execution, delivery and performance of
this Agreement will not result in, violation of any provision of the
Declaration of Trust or the Trust's Bylaws, or, to the Trust's knowledge,
of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Trust is a party or by which the Trust is bound or
result in the acceleration of any obligation or the imposition of any
penalty under any agreement, judgment or decree to which the Trust is a
party or is bound;
(d) To the Trust's knowledge, no material legal, administrative, or other
proceeding or investigation of, or before, any court or governmental body
presently is pending or threatened against the Trust or any of its
properties or assets which assert liability on the part of the Trust,
except as previously disclosed in writing to the Trust. The Trust knows of
no facts that might form the basis for the institution of such proceedings;
(e) The Trust intends for the Series to be a regulated investment company,
under Section 851 of the Code;
(f) Prior to the Closing Date, there shall be no issued and outstanding
Trust Series Shares or any other securities issued by the Series (except
for the one share that may be issued to FMR); Trust Series Shares issued in
connection with the transactions contemplated herein will be, duly and
validly issued and outstanding, fully paid and non-assessable under
Massachusetts law on the Closing Date;
(g) The execution, delivery, and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of the Trust, and, upon its proper execution, this
Agreement will constitute a valid and binding obligation of the Trust
enforceable against the Series in accordance with its terms;
(h) The Trust Series Shares at the Closing will have been duly authorized
and, when so issued and delivered, will be duly and validly issued shares
of the Series, fully paid and non-assessable under Massachusetts law except
that under Massachusetts law, shareholders of a Massachusetts business
trust, under certain circumstances, may be held personally liable for
obligations of the Trust;
(i) The fair market value of the Trust Series Shares to be received by the
Fund Shareholders will be equal to the fair market value of their Fund
Shares constructively surrendered in exchange therefor;
(j) The Trust has no plan or intention on behalf of the Series to issue
additional Trust Series Shares following the Reorganization except for
issuance of shares arising in the ordinary course of the business of the
Series as the series of an open-end investment company;
(k) The Trust has no plan or intention to reacquire the Trust Series
Shares issued to the Fund Shareholders pursuant to the Reorganization other
than through redemptions arising in the ordinary course of the business of
the Series as a series of an open-end investment company;
(l) Following the Reorganization, the Trust, on behalf of the Series, will
continue the Fund's historic business;
(m) The Trust has no plan or intention to sell or otherwise dispose of any
of the Fund's assets to be acquired by the Series in the Reorganization,
except for dispositions made in the ordinary course of its business and
dispositions necessary to maintain the status of the Series as a regulated
investment company under Section 851 of the Code;
(n) The information to be furnished by the Trust with respect to the
Series for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and shall
comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(o) The Trust, on behalf of the Series, shall use all reasonable efforts
to obtain the approvals and authorizations required by the 1933 Act and the
1940 Act as it may deem appropriate in order to operate after the Closing
Date; and
(p) To the Trust's knowledge, no consent, approval, authorization, or
order of any court or governmental authority is required for the
consummation by the Series of the transactions contemplated by this
Agreement, except such as have been obtained under the 1933 Act, the 1934
Act, and the 1940 Act.
3. REORGANIZATION
(a) Subject to the requisite approval of the shareholders of the Fund and
to the other terms and conditions contained herein, the Fund agrees to
assign, convey, transfer, and deliver to the Series established by the
Trust solely for the purpose of acquiring all of the assets of the Fund,
which Series has not issued any Trust Series Shares (except for one share
that may be issued to FMR) or commenced operations, on the Closing Date all
of the assets of the Fund of any kind and nature existing on the Closing
Date. The Series agrees in exchange therefore (1) to assume all of the
Fund's liabilities existing on or after the Closing Date, whether or not
determinable on the Closing Date, and (2) to issue and deliver to the Fund
the number of full and fractional Trust Series Shares equal to the value
and number of full and fractional shares of the Fund outstanding at the
time of the closing, as described in paragraph 6, on the Closing Date
provided for in Section 6(a).
(b) The assets of the Fund to be acquired by the Series and allocated
thereto shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by the Fund, and any
deferred or prepaid expenses shown as an asset on the books of the Fund on
the Closing Date. The Fund will pay or cause to be paid to the Series any
dividend or interest payments received by it on or after the Closing Date
with respect to the assets transferred to the Series hereunder, and the
Series will retain any dividend or interest payments received by it after
the Valuation Time (as defined in Section 4) with respect to the assets
transferred hereunder without regard to the payment date thereof.
(c) Immediately upon delivery to the Fund of the Trust Series Shares, the
individual Trustees of GSF or any officer duly authorized by them, on GSF's
behalf as the then sole shareholder of the Series, shall (1) approve (i) a
Management Contract between the Trust on behalf of the Series and FMR, (ii)
a Distribution and Service Plan under Rule 12b-1 under the 1940 Act between
the Trust on behalf of the Series and Fidelity Distributors Corporation
(FDC) substantively identical to the plan and contracts currently in effect
with the Fund immediately prior to the closing date (as defined below),
except as to the parties to such plan or contract, and (iii) the
independent accountants who currently serve in that capacity for the Fund,
and (iv) the adoption of revised fundamental policies described in
Proposals 4 through 14 of the Proxy Statement. The Management Contract may
be modified pursuant to a vote of shareholders of the fund, as proposed in
this Proxy Statement.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), the Fund will
constructively distribute the Trust Series Shares pro rata in proportion to
their respective shares of beneficial interest in the Fund to Fund
Shareholders of record determined as of the Valuation Time on the Closing
Date in accordance with the Fund's Declaration of Trust, in liquidation of
such Fund. Such distribution will be accomplished by the Fund's transfer
agent opening accounts on the share records of the Series in the names of
such Fund Shareholders and transferring the Trust Series Shares thereto.
Each Fund Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place)
Trust Series Shares due that shareholder. All outstanding Fund Shares,
including any represented by certificates, shall simultaneously be canceled
on the Fund's share transfer records. The Series shall not issue
certificates representing Trust Series Shares in connection with such
distribution.
(e) Immediately after the distribution of the Trust Series Shares as set
forth in Section 3(d), the Fund shall be liquidated and terminated and any
such further actions shall be taken in connection therewith as required by
applicable law.
(f) Any transfer taxes payable upon issuance of Trust Series Shares in a
name other than that of the registered holder on the Fund's books of the
Fund Shares constructively exchanged for the Trust Series Shares shall be
paid by the person to whom such Trust Series Shares are to be issued, as a
condition of such transfer.
(g) Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the date on which it is
liquidated.
4. VALUATION
(a) The valuation time shall be 4:00 p.m. Eastern time on the Closing Date
(the Valuation Time).
(b) The value of the Fund's net assets to be acquired by the Series
hereunder shall be the net asset value computed as of the Valuation Time,
using the valuation procedures set forth in the Fund's then current
Prospectus and Statement of Additional Information.
(c) The number, value, and denomination of full and fractional Trust
Series Shares to be issued in exchange for the Fund's net assets shall be
equal to the number, value, and denomination of full and fractional Fund
Shares outstanding on the Closing Date.
(d) All computations pursuant to this Section shall be made by FSC, a
division of FMR Corp., in accordance with its regular practice as pricing
agent for the Fund.
5. FEES; EXPENSES
(a) The Trust and the Fund each represent that there is no person who
dealt with it who by reason of such dealings is entitled to any broker's or
finder's fees or commissions arising out of the transactions contemplated
hereby.
(b) The Fund shall be responsible for all expenses, fees and other
charges, subject to FMR's voluntary expense limitation (2.5% of average net
assets).
6. CLOSING DATE
(a) The transfer of the Fund's assets in exchange for the assumption by
the Series of the Fund's liabilities and the issuance of Trust Series
Shares, as described above, together with related acts necessary to
consummate the same, (the Closing), unless otherwise provided herein, shall
occur at the principal office of GSF and the Trust, 82 Devonshire Street,
Boston, Massachusetts, on November 29, 1997, or at such other place or date
as the parties may agree in writing (the Closing Date). All acts taking
place at the Closing shall be deemed to take place simultaneously as of the
Valuation Time or at such other time and/or place as the parties may agree.
(b) In the event that, on the Closing Date: (i) any of the markets for
securities held by the Fund are closed to trading, or (ii) trading thereon
is restricted, or (iii) trading or reporting of trading on said markets or
elsewhere is disrupted, all so that accurate appraisal of the total net
asset value of the Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when such trading
shall have been fully resumed and reporting shall have been restored, or
such other date as the parties may agree.
(c) The Fund shall deliver at the Closing a certificate of an authorized
officer stating that it has notified The Bank of New York, as custodian for
the Fund, of the Fund's reorganization to a series of the Trust.
(d) Fidelity Service Company, Inc. as transfer agent for the Fund, shall
deliver at the Closing a certificate as to the conversion on its books and
records of each Fund Shareholder account to an account as a holder of Trust
Series Shares. The Trust shall issue and deliver a confirmation to the Fund
evidencing the Trust Series Shares to be credited on the Closing Date or
provide evidence satisfactory to the Fund that such Trust Series Shares
have been credited to the Fund's account on the books of the Trust. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, stock certificates, receipts or other documents as such other
party or its counsel may reasonably request.
7. SHAREHOLDER MEETING AND TERMINATION OF THE FUND
(a) The Fund agrees to call a meeting of its shareholders (the
Shareholder's Meeting) to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions
contemplated hereby.
(b) The Fund agrees that as soon as reasonably practicable after
distribution of the Trust Series Shares, the Fund shall be liquidated and
terminated as a series of GSF pursuant to its Declaration of Trust, any
further actions shall be taken in connection therewith as required by
applicable law, and on and after the Closing Date the Fund shall not
conduct any business except in connection with its liquidation and
termination.
8. CONDITIONS TO OBLIGATIONS OF THE TRUST
The obligations of the Trust hereunder shall be subject to the following
conditions:
(a) That the Fund furnishes to the Trust a statement, dated as of the
Closing Date, signed by an officer of GSF, certifying that as of the
Valuation Time and the Closing Date all representations and warranties of
the Fund made in this Agreement are true and correct in all material
respects and that the Fund has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such dates;
(b) That the Fund furnishes the Trust with copies of the resolutions,
certified by an officer of GSF, evidencing the adoption of this Agreement
and the approval of the transactions contemplated herein by the requisite
vote of the holders of the outstanding shares of beneficial interest of the
Fund;
(c) That the Fund shall deliver to the Trust at the Closing a statement of
its assets and liabilities, together with a certificate as to the aggregate
asset value of the Fund's portfolio securities, all as of the Valuation
Time, certified on the Fund's behalf by its Treasurer or Assistant
Treasurer;
(d) That the Fund's custodian shall deliver to the Trust a certificate
identifying the assets of the Fund held by such custodian as of the
Valuation Time on the Closing Date and stating that at the Valuation Time:
(i) the assets held by the custodian will be transferred to the Series;
(ii) the Fund's assets have been duly endorsed in proper form for transfer
in such condition as to constitute good delivery thereof; and (iii) to the
best of the custodian's knowledge, all necessary taxes in conjunction with
the delivery of the assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has
been made;
(e) That the Fund's transfer agent shall deliver to the Trust at the
Closing a certificate setting forth the number of shares of the Fund
outstanding as of the Valuation Time and the name and address of each
holder of record of any such shares and the number of shares held of record
by each such shareholder;
(f) That the Fund calls a Shareholder's Meeting to consider and act upon
this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby;
(g) That the Fund delivers to the Trust a certificate of an officer of
GSF, dated the Closing Date, that there has been no material adverse change
in the Fund's financial position since September 30, 1997, other than
changes in the market value of its portfolio securities, or changes due to
net redemptions of its shares, dividends paid, or losses from operations;
and
(h) That all of the issued and outstanding shares of beneficial interest
of the Fund shall have been offered for sale and sold in conformity with
all applicable state securities laws and, to the extent that any audit of
the records of the Fund or its transfer agent by the Trust or its agents
shall have revealed otherwise, the Fund shall have taken all actions that
in the opinion of the Trust are necessary to remedy any prior failure on
the part of the Fund to have offered for sale and sold such shares in
conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF THE FUND
The obligations of the Fund hereunder shall be subject to the following
conditions:
(a) That the Trust shall have executed and delivered to the Fund an
Assumption of Liabilities, certified by an officer of the Trust, dated as
of the Closing Date pursuant to which Trust on behalf of the Series will
assume all of the liabilities of the Fund existing at the Valuation Time in
connection with the transactions contemplated by this Agreement;
(b) That the Trust furnishes to the Fund a statement, dated as of the
Closing Date, signed by an officer of Trust, certifying that as of the
Valuation Time and the Closing Date all representations and warranties of
the Series made in this Agreement are true and correct in all material
respects, and the Trust has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
such dates; and
(c) That the Fund shall have received an opinion of Kirkpatrick & Lockhart
LLP, counsel to the Fund and the Trust, to the effect that the Trust Series
Shares are duly authorized and upon delivery to the Fund as provided in
this Agreement will be validly issued and will be fully paid and
nonassessable under Massachusetts law.
9. CONDITIONS TO OBLIGATIONS OF THE FUND AND THE TRUST
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of beneficial interest of the Fund;
(b) That all consents of other parties and all other consents, orders, and
permits of federal, state, and local regulatory authorities (including
those of the Commission and of state blue sky and securities authorities,
including "no action" positions of such federal or state authorities)
deemed necessary by the Trust or the Fund to permit consummation, in all
material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order, or permit
would not involve a risk of a material adverse effect on the assets or
properties of the Trust or the Fund, provided that either party hereto may
for itself waive any of such conditions;
(c) That all proceedings taken by either the Fund or the Series in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to
it and its counsel, Kirkpatrick & Lockhart LLP;
(d) That the Trust shall have taken all necessary action so that the
Series shall be a series of a registered open-end investment company under
the 1940 Act immediately after the closing.
(e) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement;
(f) That the Trust and the Fund shall have received an opinion of
Kirkpatrick & Lockhart LLP satisfactory to the Trust and the Fund that for
federal income tax purposes:
(i) The Reorganization will be a reorganization under Section
368(a)(1)(F) of the Code, and the Fund and the Series will each be parties
to the Reorganization under section 368(b) of the Code;
(ii) No gain or loss will be recognized by the Fund upon the transfer of
all of its assets to the Series in exchange solely for the Trust Series
Shares and the assumption of the Fund's liabilities followed by the
distribution of those the Trust Series Shares to the shareholders of the
Fund in liquidation of the Fund;
(iii) No gain or loss will be recognized by the Series on the receipt of
the Fund's assets in exchange solely for the the Trust Series Shares and
the assumption of the Fund's liabilities;
(iv) The basis of the Fund's assets in the hands of the Series will be
the same as the basis of such assets in the Fund's hands immediately prior
to the Reorganization;
(v) The Series' holding period in the assets to be received from the Fund
will include the Fund's holding period in such assets;
(vi) A Fund Shareholder will recognize no gain or loss on the exchange of
his or her shares of beneficial interest in the Fund for the Trust Series
Shares in the Reorganization;
(vii) A Fund Shareholder's basis in the Trust Series Shares to be
received by him or her will be the same as his or her basis in the Fund
Shares exchanged therefor;
(viii) A Fund Shareholder's holding period for his or her Trust Series
Shares will include the holding period of the Fund Shares exchanged,
provided that those Fund Shares were held as capital assets on the date of
the Reorganization.
Notwithstanding anything herein to the contrary, neither the Fund nor the
Trust may waive the conditions set forth in this subsection 10(f).
11. COVENANTS OF THE FUND AND THE TRUST
(a) The Fund covenants to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that such
ordinary course of business will include the payment of customary dividends
and distributions.
(b) The Fund covenants that the Trust Series Shares are not being acquired
for the purpose of making any distribution thereof, other than in
accordance with the terms of this Agreement.
(c) The Fund covenants that it will assist the Trust in obtaining such
information as the Trust reasonably requests concerning the beneficial
ownership of Fund Shares.
(d) The Fund covenants that its liquidation and termination will be
effected in the manner provided in its Declaration of Trust in accordance
with applicable law and, after the Closing Date, the Fund will not conduct
any business except in connection with its liquidation and termination.
12. TERMINATION; WAIVER
(a) The Trust and the Fund may terminate this Agreement by mutual
agreement. In addition, either the Trust or the Fund may at its option
terminate this Agreement at or prior to the Closing Date because:
(i) Of a material breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date;
or
(ii) A condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
(b) In the event of any such termination, there shall be no liability for
damages on the part of the Trust or the Fund, or their respective Trustees
or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES
(a). This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter hereof,
constitutes the only understanding with respect to such subject matter, may
not be changed except by a letter of agreement signed by each party hereto
and shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of the Series or the Fund;
provided, however, that following the shareholders' meeting called by the
Fund pursuant to Section 7 of this Agreement, no such amendment may have
the effect of changing the provisions for determining the number of the
Series Shares to be received by the Fund shareholders under this Agreement
to the detriment of such shareholders without their further approval.
(c) Either Fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on the
interests of such Fund's shareholders.
The representations, warranties, and covenants contained in the Agreement,
or in any document delivered pursuant hereto or in connection herewith,
shall survive the consummation of the transactions contemplated hereunder.
14. DECLARATIONS OF TRUST
A copy of the Declaration of Trust of the Trust and GSF, as restated, is
on file with the Secretary of State of the Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on behalf of
the Trustees of the Trust and GSF as trustees and not individually and that
the obligations of the Fund and the Series under this instrument are not
binding upon any of such Fund's or Trust's Trustees, officers, or
shareholders individually but are binding only upon the assets and property
of such Fund or Series. The Fund and the Trust each agrees that its
obligations hereunder apply only to such Fund and the Series, respectively,
and not to its shareholders individually or to the Trustees of such Fund or
Series.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
of any rights or obligations hereunder shall be made by any party without
the written consent of the other party. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give any person, firm,
or corporation other than the parties hereto and their respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer.
[SIGNATURE LINES OMITTED]
EXHIBIT 3
[TABLE WILL BE UPDATED IN A SUBSEQUENT FILING]
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS (A)
<TABLE>
<CAPTION>
INVESTMENT FISCAL AVERAGE RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
<S> <C> <C> <C> <C>
TAXABLE BOND
The North Carolina Capital Management Trust:
Term Portfolio 6/30/96 $ 63.5 0.38%
Advisor Mortgage Securities:
Class A ((hollow diamond)) 7/31/97** 0.1 0.45
Class T ((hollow diamond)) 7/31/97** 0.2 0.45
Class B ((hollow diamond)) 7/31/97** 0.1 0.45
Institutional Class ((hollow diamond)) 7/31/97** 0.6 0.45
Initial Class 7/31/96 470.6 0.45
Ginnie Mae ((pound)) 7/31/96 790.3 0.45
Spartan Limited Maturity Government ((pound)) 7/31/96 799.0 0.63*
Target Timeline Funds: ((pound))
1999 7/31/96** 8.6 -(dagger)*
2001 7/31/96** 7.3 -(dagger)*
2003 7/31/96** 9.6 -(dagger)*
Spartan Ginnie Mae 8/31/96 436.4 0.63*
Government Securities 9/30/96 960.0 0.45
Short-Intermediate Government 9/30/96 129.3 0.45
Spartan Investment Grade Bond ((pound)) 9/30/96 305.8 0.65
Spartan Short-Term Bond ((pound)) 9/30/96 429.5 0.65
Advisor Government Investment:
Class A 10/31/96** 0.2 0.45
Class T 10/31/96 229.1 0.45
Class B 10/31/96 14.9 0.45
Institutional Class 10/31/96 24.6 0.45
Advisor High Yield: ((pound))
Class A 10/31/96** 1.9 0.60
Class T 10/31/96 1,446.6 0.60
Class B 10/31/96 249.2 0.60
Institutional Class 10/31/96 15.5 0.60
Advisor Short Fixed Income: ((pound))
Class A 10/31/96** 0.1 0.45
Class T 10/31/96 483.2 0.45
Institutional Class 10/31/96 10.5 0.45
Advisor Intermediate Bond: ((pound))
Class A 11/30/96** 0.4 0.45
Class T 11/30/96 254.8 0.45
Class B 11/30/96 18.2 0.45
Institutional Class 11/30/96 214.9 0.45
Institutional Short-Intermediate Government 11/30/96 341.6 0.42*
Real Estate High Income 11/30/96 76.3 0.75
Advisor Emerging Markets Income: ((rex-all))
Class A 12/31/96** 0.3 0.69
Class T 12/31/96 55.3 0.69
Class B 12/31/96 13.1 0.69
Institutional Class 12/31/96 1.9 0.69
Advisor Strategic Income: ((rex-all))
Class A 12/31/96** $ 0.3 0.59%
Class T 12/31/96 74.3 0.59
Class B 12/31/96 30.4 0.59
Institutional Class 12/31/96 3.1 0.59
Global Bond ((sigma)) 12/31/96 146.4 0.70
New Markets Income ((rex-all)) 12/31/96 221.9 0.69
Real Estate High Income II 12/31/96** 29.3 0.74(dagger)
Variable Insurance Products Fund:
High Income ((pound)) 12/31/96 1,248.1 0.59
Variable Insurance Products Fund II:
Investment Grade Bond 12/31/96 203.1 0.45
Variable Insurance Products Fund III:
Government Investment 12/31/96 17.9 0.44
High Yield ((pound)) 12/31/96 67.0 0.59
U.S. Bond Index 2/28/97 515.2 0.03*
Capital & Income ((pound)) 4/30/97 2,173.2 0.61
Intermediate Bond ((pound)) 4/30/97 3,007.7 0.44
Investment Grade Bond ((pound)) 4/30/97 1,418.2 0.44
Short-Term Bond ((pound)) 4/30/97 986.3 0.44
Spartan Government Income 4/30/97 275.3 0.60*
Spartan High Income ((pound)) 4/30/97 1,634.2 0.80
Spartan Short-Intermediate Government 4/30/97 73.0 0.65
</TABLE>
(a) All fund data are as of the fiscal year end noted in the chart or as of
April 30, 1997, if fiscal year end figures are not yet available.
(b) Average net assets are computed on the basis of average net assets of
each fund at the close of business on each business day throughout its
fiscal period.
(c) Reflects reductions for any expense reimbursement paid by or due from
FMR pursuant to voluntary or state expense limitations. Funds so affected
are indicated by an (*).
(dagger) Annualized
** Less than a complete fiscal year
((rex-all)) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: Fidelity Management
& Research (U.K.) Inc. (FMR U.K.), Fidelity Management & Research (Far
East) Inc. (FMR Far East), Fidelity Investments Japan Ltd. (FIJ), Fidelity
International Investment Advisors (FIIA), and Fidelity International
Investment Advisors (U.K.) Limited (FIIAL U.K.), with respect to the fund.
((sigma)) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: FMR U.K., FMR Far
East, FIIA, and FIIAL U.K., with respect to the fund.
((pound)) Fidelity Management & Research Company has entered into
sub-advisory agreements with FMR U.K. and FMR Far East, with respect to the
fund.
((hollow diamond)) The ratio of net advisory fees to average net assets
paid to FMR represents the amount as of the prior fiscal year end. Updated
ratios will be presented for each class of shares of the fund when the next
fiscal year end figures are available.
_____________ cusip #316172105/fund #054
Vote this proxy card TODAY! Your prompt response will
save Fidelity Government Securities Fund the expense of additional
mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
FIDELITY GOVERNMENT SECURITIES FUND: FIDELITY GOVERNMENT SECURITIES FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and Ralph F. Cox or any one or more of them,
attorneys, with full power of substitution, to vote all shares of Fidelity
Government Securities Fund which the undersigned is entitled to vote at the
Special Meeting of Shareholders of the fund to be held at the office of the
trust at 82 Devonshire St., Boston, MA 02109, on November 19, 1997 at
1:15p.m. and at any adjournments thereof. All powers may be exercised by a
majority of said proxy holders or substitutes voting or acting or, if only
one votes and acts, then by that one. This Proxy shall be voted on the
proposals described in the Proxy Statement as specified on the reverse
side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
CUSIP #316172105/FUND #054
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
__________________________________________________________________________
___________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To approve an amended management contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
fund.
2. To approve an Agreement and Plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
reorganization of the fund from a separate series of one
Massachusetts business trust to another.
3. To eliminate the fund's fundamental investment policy FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
which limits its security investments to U.S.
Government securities whose interest is exempt from
state and local income tax.
4. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
limitation concerning real estate.
5. To adopt a new fundamental investment policy for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
fund permitting the fund to invest all of its assets in
another open-end investment company with
substantially the same investment objective and
policies.
6. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
limitation concerning the issuance of senior securities.
7. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 7.
limitation concerning short sales of securities.
8. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
limitation concerning margin purchases.
9. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 9.
limitation concerning borrowing.
10. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 10.
limitation concerning underwriting.
11. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 11.
limitation concerning the concentration of its
investments in a single industry.
12. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 12.
limitation concerning investments in other investment
companies.
13. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 13.
limitation concerning investing in oil, gas, or other
mineral exploration or development programs.
14. To eliminate the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
limitation concerning purchasing warrants.
</TABLE>
GOV-PXC-0997 CUSIP #316172105/FUND #054
